UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended: December 31, 20102011
oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File Number:333-161795 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 | | |
One Grand Central PlaceMoria 30 Avenue, Haifa, Israel 34572
60 E 42nd Street, Suite 5310
New York, NY 10165
(Address of principal executive office)
Issuer's telephone number: 888-333-8075
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: NoneCommon Stock, $0.00001 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oNo x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes x oNo ox
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 xNo o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes xNo o
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer, large accelerated filer or smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller Reporting Company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes oNo x
As of April 4, 2011, theThe market value of our common stock held by non-affiliates was approximately $27,262,143$3,058,732 which is computed using the closing price on thatas of the last business day of $0.42the registrant’s most recently completed second quarter of $0.10 per share.
As of April 4, 2011, 64,809,8655, 2012, 34,248,585 shares of common stock, $.00001 par value per share, of the registrant were outstanding.
Documents incorporated by reference: None
FOR THE FISCAL YEAR ENDED DECEMBER 31, 20102011
INDEX
| | | | Page |
| PART I | | | |
| ITEM 1. | | BUSINESS | 5 |
| ITEM 1A. | | RISK FACTORS | 9 |
| ITEM 1B. | | UNRESOLVED STAFF COMMENTS | 1615 |
| ITEM 2. | | PROPERTIES | 1615 |
| ITEM 3. | | LEGAL PROCEEDINGS | 1615 |
| ITEM 4. | | (REMOVED AND RESERVED)MINE SAFETY DISCLOSURES | 1615 |
| PART II | | | |
| ITEM 5. | | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 1715 |
| ITEM 6. | | SELECTED FINANCIAL DATA | 19 |
| ITEM 7. | | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 19 |
| ITEM 7A. | | QUANITATIVEQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 26 |
| ITEM 8. | | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 26 |
| ITEM 9. | | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 26 |
| ITEM 9A. | | CONTROLS AND PROCEDURES | 2728 |
| ITEM 9A(T). | | CONTROLS AND PROCEDURES | 2728 |
| ITEM 9B. | | OTHER INFORMATION | 2728 |
| PART III | | | |
| ITEM 10. | | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 28 |
| ITEM 11. | | EXECUTIVE COMPENSATION | 3031 |
| ITEM 12. | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 3233 |
| ITEM 13. | | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE | 3233 |
| ITEM 14. | | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 3334 |
| ITEM 15. | | EXHIBITS | 3435 |
| | SIGNATURES | 36 |
| | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | F-1 |
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In this annual report, references to “Forex,” “FXIT,” “the Company,” “we,” “us,” and “our” refer to Forex International Trading Corp.
Except for the historical information contained herein, some of the statements in this report contain forward-looking statements that involve risks and uncertainties. These statements are found in the sections entitled "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures about Market Risk." They include statements concerning: our business strategy; expectations of market and customer response; liquidity and capital expenditures; future sources of revenues; expansion of our proposed product line; and trends in industry activity generally. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or "continue" or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to our ability to successfully develop and market our products to customers; our ability to generate customer demand for our products in our target markets; the development of our target markets and market opportunities; our ability to manufacture suitable products at a competitive cost; market pricing for our products and for competing products; the extent of increasing competition; technological developments in our target markets and the development of alternate, competing technologies in them; and sales of shares by existing shareholders. 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. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
ITEM 1. BUSINESS
General
Forex International Trading Corp.Corp and its subsidiaries and/or variable interests (“Forex”, “FXIT”, or the “Company”), a Nevada corporation, is principally engaged in offering foreign currency market trading to non-US resident clients, professionals and retail clients over its web-based trading systems.
Shares in the Company are listed for tradingThe Company’s common stock trade on the Over the Counter Bulletin Board listings (OTCBB:(OTCQB & OTCBB: FXIT). The Company’s headquarters and operating offices are located in New York, NY.at 30 Moria Avenue, Haifa Israel 34572. The CUSIP number for the Company is 34631J104 and the ISIA number offor FXIT is – US34631J1043.
Overview and developments since inception to date:Material Events
The Company was incorporated on July 22, 2009 as a development stage company under the laws of the State of Nevada as “Forex International Trading Corp”.Nevada. On September 9, 2009 the Company filed a Form S-1RegistrationS-1 Registration Statement for registration of securities under the Securities Act of 1933 with the SEC, which became effective on or around March 5, 2010.
On April 19, 2010, the Company entered into a Software Licensing Agreement with Triple 8 Limited (“Triple 8”) which wasis a currency trading platform organized under the laws of Cyprus. The agreement dated April 12, 2010 whereby the Company licensed Triple 8’s proprietary trading software (the “Software”) for the purpose of developing a Forex Trading Platform and introducing prospective clients (“End Users”). Triple 8 created a website for the Company, which will be funded by the Company at a cost of $50,000 (the “Setup Fee”). Upon the Company and Triple 8 generating $100,000 in revenue under the agreement, the Company will be reimbursed 50% of the Setup Fee ($25,000). The Company will receive 30% of the net profit generated from End Users which will be increased to 50% in the event that the monthly volume generated by the Company is in excess of $250 million. Triple 8 created a website for the Company under the domain www.4xint.comwhich is blocked for US and Canadian clients. The Company maintains a corporate website under the domain www.forex-international-trading.com.
On November 17, 2010, the Company entered into a Share Exchange Agreement (the “APH Agreement”) with a third party foreign company A.P. Holdings Limited (“APH”) pursuant to which the Company agreed to acquire 17,924 ordinary shares of Triple 8 (“Triple 8” or “Asset” or “Operation Unit”). The securities acquired from APH represented approximately 45% of the issued and outstanding securities of the Triple 8. Pursuant to the APH Agreement, in consideration for the securities of Triple 8 the Company agreed to issue 36,000,000 shares of common stock of the Company as well as a 6% Convertible Note in the principal amount of $1,200,000 due February 15, 2011 (the “APH Note”). On December 30, 2010, the Company and APH entered into an amendment to the APH Agreement whereby the number of shares to be delivered by the Company was reduced from 36,000,000 to 25,000,000. Furthermore, on December 30, 2010, in order to expedite the transaction and avoid further dilution of the existing shareholders, Medirad Inc. and Rasel Ltd., both shareholders of the Company, have agreed to return an aggregate of 70,000,000 shares of common stock to the Company for cancellation upon closing of the APH Agreement. The above transaction closed on December 30, 2010.
On April 5, 2011, the Company entered into a Share Exchange Agreement with a third party foreign company H.A.M. Group Limited (“HAM”) pursuant to which it acquired 1,996 ordinary shares of Triple 8 from HAM representing approximately 5% of the issued and outstanding ordinary shares of Triple 8. After taking into account the effect of this Agreement with HAM, the Company owned approximately 49.9% of Triple 8. In consideration of the shares, the Company issued HAM 12,000 shares of Series A Preferred Stock (“HAM Stocks”) and a 6% Convertible Debenture due June 30, 2011 for the amount of $600,000 (the “HAM Note”). The Series A Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 4,000,000 shares of common stock. Furthermore, the Series A Preferred Stock votes on an as-converted basis multiplied by three and carries standard anti-dilution rights. The Series A Preferred Stock does not carry preferential liquidation rights.
On April 5, 2011, the Company and APH, which owned 33,000,000 shares of common stock and a 6% Convertible Debenture in the amount of $1,000,000, entered into an agreement whereby APH agreed to extend the maturity date of the APH Note from February 15, 2011 to June 30, 2011. The Company agreed to return the 33,000,000 shares of common stock held by APH to treasury and issue APH 100,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 33,333,333 shares of common stock. Furthermore, the Series A Preferred Stock votes on an as-converted basis multiplied by three and carries standard anti-dilution rights. The Series A Preferred Stock does not carry preferential liquidation rights (“APH Stocks”).
As previously disclosed in the Company’s Quarterly Report for the quarters ended September 30, 2011 and June 30, 2011, the HAM Note and the APH Note were in default and the parties were negotiating a further extension of the maturity date of the HAM Note and the APH Note. The APH Note was assigned to a third party. On September 29, 2011, the Company received a formal notice of default from the holders of the HAM Note and the APH Note demanding payment of the notes and advising that they intend to take immediate legal action against the Company. As a result of the default, the holder of the APH Note was entitled to demand the delivery of shares of Triple 8 held by the Company as consideration for the cancellation of the APH Note and the return of shares of common and preferred shares, which the Company used to pay for the acquisition. In order to avoid costly litigation and the potential detrimental impact of a judgment to the Company as a result of two defaults, the Company agreed to enter into that certain Annulment of Share Purchase Agreement with Triple 8, APH, HAM and 888 Markets (Jersey) Limited dated December 6, 2011 (the "Annulment") whereby, as a result of the parties agreement to unwind the ownership interest in Triple 8, Triple 8 has agreed to pay the Company $2,001,000 over time with the initial payment of $732,000 within three days of the Annulment, $68,214 in January 2012, $73,214 per month from February 2012 through October 2012 and final payment of $541,860 in November 2012 (the "Triple Payments"). If Triple 8 fails to make any of the Triple Payments for a period of 60 days, and then Triple 8 will transfer 17,924 ordinary shares of Triple 8 (representing approximately 44.9% of Triple) to the Company and Triple 8 will not be entitled to have the previous Triple 8 Payments returned. On December 7, 2011, the Annulment closed and the Company received from Triple cash in the amount of $670,000 and additional amount of approximately $62,000 from Paragonex Limited. As such, the effective date of closing by all parties set to be December 7, 2011.
In order to expedite the closing of the Annulment, the Company, APH, HAM and Cordellia d.o.o., a Croatian company ("CDOO"), third party which is not affiliated with the Company entered into a Settlement and Foreclosure Agreement (the "Settlement Agreement"), whereby the Company provided CDOO, as the assignee of HAM and APH, with the ability to foreclose on all shares of Triple 8 held by the Company in consideration of the termination of the APH Note and the HAM Note, which were in default, and the issuance of a new promissory note in the name of CDOO in the principal amount of $1,000,000 (the "CDOO Note"). The CDOO note bears interest at the rate of ten percent (10%) per annum and is due and payable in full on November 30, 2012. In the event that Triple 8 fails to make the Triple Payments, then the amount payable under the CDOO Note shall be reduced by half of the amount of the missed payment. In addition, APH and HAM have also agreed to return to the Company for cancellation all of the APH Stock and all of the HAM Stock and APH, HAM and CDOO have provided a full release of the Company. As a result of the cancellation of the APH Stocks and the HAM Stocks, APH and HAM no longer own securities in the Company.
On January 18, 2011, Mrs. Liat Franco was appointed by the Company to serve as the Secretary of the Company. On March 4, 2011, the Company entered into an Employment Agreement (the “Employment Agreement”) with Liat Franco whereby the Company will employ Ms. Franco as its Secretary for a term of one year (the “Term”). For her services during the Term as Secretary, the Company issued Ms. Franco 15,000 shares of common stock of the Company, which will have a restrictive legend under the Securities Act of 1933, as amended. In the event that the Term of the Employment Agreement is extended, then the number of shares of common stock will be determined by dividing $6,000 by the market price on the first trading day of the Term. On November 15, 2011, Liat Franco was appointed by the Company to serve as the Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a director of the Company.
On February 23, 2011, the Company entered into a Securities Purchase Agreement with a third party, Wheatley Asset Management LLC organized under the jurisdiction of New York (“Wheatley”), pursuant to which the Company to acquire fifty percent (50%) of the issued and outstanding membership interest of Wheatley (the “Wheatley Interest”) on a fully diluted basis. In consideration for the Wheatley Interest, the Company agreed to issue and sell to Wheatley 1,125,000 shares of common stock of the Company. Prior to that, on December 18, 2010, the Company entered into a Securities Purchase Agreement with Forex New York City, LLCaffiliated corporation to Wheatley (“Forex NYC”) pursuant to which the Company acquired twenty percent (20%) of the issued and outstanding equity of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the FNYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of common stock of the Company. On February 23, 2011, the Company entered into an additional Securities Purchase Agreement with Forex NYC, pursuant to which the Company acquiredagreed to acquire an additional thirty percent (30%) of the issued and outstanding membership interest of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the additional FNYC Interest, the Company issuedagreed to issue and soldsell to Forex NYC 675,000 shares of common stock of the Company. Forex NYC is a limited liability company organized under the laws of the State of New York with headquarters located at One Grand Central Place. Forex NYC is a based Forex investment training facility.
On November 17, 2010, the Company entered into a Share Exchange Agreement (the “APH Agreement”) with AP Holdings Limited (“APH”) pursuant to which the Company agreed to acquire 17,924 ordinary shares of Triple 8 Limited, a corporation organized under the laws of Cyprus, engaged in the business of operating a Forex trading platform (“Triple”). The securities acquired from APH represent approximately 45% of the issued and outstanding securities of Triple. Pursuant to the APH Agreement, in consideration for the securities of Triple, the Company agreed to issue 36,000,000 shares of common stock of the Company as well as a 6% Convertible Note (Conversion Price set to be $0.20 per share) in the principal amount of $1,200,000 due February 15,July 2011, (the “APH Note”). On December 30, 2010, the Company and APH entered into an amendment to the APH Agreement wherebyForex NYC and Wheatley parties unwound the number ofabove transactions. Forex NYC returned their 1,000,000 shares to be delivered by the Company was reduced from 36,000,000 to 25,000,000. Further, on December 30, 2010, in order to expedite the transaction and avoid further dilution of the existing shareholders, Medirad Inc. and Rasel Ltd., shareholders of the Company, have agreed to return an aggregate of 70,000,000 shares of common stock to the Company for cancellation upon closing of the APH Agreement. The above transaction closed on December 30, 2010 with an effective date of October 1, 2010. The Company defaulted on its note payable to APH in connection with acquisition of Triple. The note was due on February 15, 2011.cancellation.
On April 5,December 13, 2011, the Company and AP Holdings Limited (“APH”loaned Fortune Market Media Inc. (the “FTMK”), which currently owns 33,000,000 shares $150,000. In consideration of common stock and a 6% Convertible Debenture insuch loan, the amount of $1,000,000 (the “APH Note”) entered into an agreement whereby APH agreed to extend the maturity date of the APH Note from February 15, 2011 to June 30, 2011. Further, APH agreed that its right to return 16,000,000 shares of common stockBorrower issued to the Company in consideration of 20% ofa promissory note which bears interest at 12% per annum and matures on February 13, 2012 secured by the issued and outstanding securities of Triple is of no force and effect.an existing public company (the “Public Company”). In consideration of the above, the Companyaddition, FTMK agreed to return the 33,000,000 shares of common stock held by APH to treasury and issue APHtransfer 100,000 shares of Series A Preferred Stock. The Series A Preferred Stockthe Public Company to the Company. On February 13, 2012, FTMK defaulted on the loan. As of March 31, 2012, the Company has received $10,000 as a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 33,333,333 shares of common stock. Further,partial repayment under the Series A Preferred Stock votes on an as converted basis multiplied by three and carries standard anti-dilution rights. note issued to FTMK.
On April 5,December 28, 2011, the Company and Mladen Poropat,formed Direct JV Investments Inc., a shareholder of the Company, entered into an agreement whereby the parties agreed to convert the $200,000 6% Convertible Debenture,Nevada corporation, which was in default and was assigned by APH to Mr. Poropat, into 2,500,000 shares of common stock.
On February 23, 2011, the Company entered intois a Securities Purchase Agreement with Wheatley Asset Management, LLC (“Wheatley”), pursuant to which the Company acquired fifty percent (50%) of the issued and outstanding membership interest of Wheatley (the “Wheatley Interest”) on a fully diluted basis. In consideration for the Wheatley Interest, the Company issued and sold to Wheatley 1,125,000 shares of common stockwholly owned subsidiary of the Company. Wheatley is a limited liability company organized underFor the lawsperiod December 28 to December 31, 2011, Direct JV was inactive and had no assets or liabilities as of the State of New York with headquarters located at One Grand Central Place. Wheatley is an NFA Registered Introducing Broker (IB), Forex Firm and Commodity Trading Adviser (CTA).December 31, 2011.
As part of finalizing the Wheatley and Forex NYC acquisitions, on February 24, 2011 the Company entered into consulting agreement for M&A activities with Cross Point Capital Advisors (“Cross Point”). The Company paid Cross Point a consulting fee of $150,000 in cash plus retainer of $9,500 per month for the next 18 months commencing on April 1, 2011 for bringing the Company M&A-related opportunities, and for structuring and advising the Company on those opportunities.| · | Effective January 2, 2012, Erik Klinger was appointed by the Company to serve as the Chief Financial Officer and a Director of the Company. Mr. Klinger’s principal objectives will be to assist in the deployment of the Corporation’s assets, management and oversight of the Corporation’s financial statements and filings with the Securities and Exchange Commission and to perform due diligence on proposed acquisition targets, if any. Since his appointment in January 2012, a company controlled by Mr. Klinger has received monthly compensation of s $3,500 for a part-time arrangement.. |
On April 5, 2011, the Company entered into a Share Exchange Agreement with H.A.M. Group Limited (“HAM”) pursuant to which it acquired 1,996 ordinary shares of Triple from HAM representing 5% of the issued and outstanding ordinary shares of Triple. The Company presently owns approximately 50% of Triple. In consideration of the shares, the Company issued HAM 12,000 shares of Series A Preferred Stock and a 6% Convertible Debenture due June 30, 2011 (the “HAM Note”). The Series A Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 4,000,000 shares of common stock. Further, the Series A Preferred Stock votes on an as converted basis multiplied by three and carries standard anti-dilution rights. The Series A Preferred Stock does not carry preferential liquidation rights. The HAM Note is convertible into shares of common stock at a conversion price of $0.20 per share.
Operations
Our company through our partial ownership interest in our affiliates, offers online brokerage services in financial instruments using our Forex trading platform to non-US based customers.platform. Forex's targeted customer base for brokerage services includes active individual, professional and institutional traders. Customers are entitled to open accounts directly with Triple 8’s8 subsidiaries or affiliatesaffiliate through our web site. We also provide a `demo' trading system and an e-learning center that may be accessed by registering on the website. We intendalso seek to develop, market and operatedeploy our resources to achieve a software system that delivers foreign exchangereasonable financial return. Before closing the Annulment during 2011, our company, through our partial ownership interest in our affiliates, offered online brokerage services to the public through the Internet. We will offer an electronicin financial instruments using our Forex trading platform which seamlessly integrates strategyto non-US based customers.
To date, the Company has two websites: the corporate website, www.forex-international-trading.com, and the trading tools, historicalplatform, (under the affiliate licensing agreement) www.4xint.com. Both websites are currently under construction, examination and streaming real-time market data, and direct-access order-routing and execution. We allow our clients to be directly, through Triple 8 subsidiaries or their affiliates, connected to market prices. Under our method, clients are able to trade at market prices at fixed trading commissions.
constant development so modifications may apply. The Company has blocked the ability of potential subscribers in the United States and Canada from engaging in any transactions. This restriction will be lifted once the Company has obtained the required licenses. As a result of the acquisition of our interests in Wheatley, we can start to solicit US clients as long as we refer them to a licensed liquidity provider, which we have commenced developing through Wheatley.
Forex's targeted customer base (on a white label basis for Triple 8) for brokerage services includes active individual, professional and institutional traders. The entirety of the Company’s customer through Triple 8 subsidiaries or affiliate base is outside of the United States and Canada. In connection with the acquisition of interests at Forex NYC, the Company incorporated the offerings provided by Forex NYC under www.forexnewyorkcity.com into our website. Per the acquisition of Wheatley interests the Company is working to incorporate Wheatley website into our corporate website. Wheatley stand alone website is operating under www. wheatleyassetmanagement.com.
Competition
The market for online forex brokerage services is intensely competitive and is rapidly evolving, and there appears to be substantial consolidation in the industry of online forex brokerage services, Internet-based real-time market data services, and trading analysis software tools. We believe that, due to the current and anticipated rapid growth of the market for integrated trading tools, real-time market data and online brokerage services, competition, as well as consolidation, will substantially increase and intensify in the future. We believe our ability to compete will depend upon many factors both within and outside our control, including, but not limited to: pricing; the timing and market acceptance of new products and services and enhancements developed by us and our competitors; technological developments; product content; our ability to design and support efficient, materially error-free Internet-based systems; market conditions, such as volatility in currency fluctuations, stock prices, inflation and recession; product and service functionality; data availability; ease of use; reliability; customer service and support; and sales and marketing efforts.
We will face direct competition from several publicly-traded and privately-held companies, including principally online brokerage firms, and providers of direct-access order execution services. Our competitors will include many foreign exchange online brokerage firms currently active in the United States and Europe. Many online brokerage firms currently offer direct-access service.
Many of our existing and potential competitors, which willmay include online discount and traditional brokerage firms, and financial institutions that are focusing more closely on online services, including direct-access services for active traders, have longer operating histories, significantly greater financial, technical and marketing resources, greater name recognition and a larger installed customer base than we will. Furthermore, there is the risk that larger financial institutions which offer online brokerage services as only one of many financial services may decide to use extremely low pricing rates in the foreign currency market to acquire and accumulate customer accounts and assets to derive interest income and income from their other financial services. Though we do plan to offer other financial services; such pricing techniques, should they become common in our industry, could have a material, adverse effect on our results of operations, financial condition and business model.
Generally, competitors may be able to respond more quickly to new or emerging technologies or changes in customer requirements or to devote greater resources to the development, promotion and sale of their products and services than we will. There can be no assurance that our potential competitors will not develop products and services comparable or superior to those that will be developed and offered by us or adapt more quickly than us to new technologies, evolving industry trends or changing customer requirements, or that we will be able to timely and adequately complete the implementation, and appropriately maintain and enhance the operation, of our business model. Increased competition could result in price reductions, reduced margins, failure to obtain any significant market share, or loss of market share, any of which could materially adversely affect our business, financial condition and results of operations. There can be no assurance that we will be able to compete successfully against current or future competitors, or that competitive pressures faced by us will not have a material adverse effect on our business, financial condition and results of operations.
Corporate Headquarters
Our executive, administrative and operating offices are located at One Grand Central Place, 60 E 42nd Street, Suite 5310 New York, New York.
Corporate Headquarters
Our executive, administrative and operating offices are located at 30 Moria Avenue, Haifa Israel 34572
Government Regulation
Our proposed business and industry are highly regulated. In the United States (where the Company currently does not operate), regulatory bodies are charged with safeguarding the integrity of the forex and other financial markets and with protecting the interest of customers participating in those markets. In recent years, the financial services industry in the United States has been subject to increasing regulatory oversight. The regulatory bodies that regulate our business and industry in the United States have proposed and may consider additional legislative and regulatory initiatives and may adopt new or revised regulations that may affect the way in which we conduct our business. Prior to commencing operations in the United States, we will be required to register as a Futures Commission Merchant (FCM) and Forex Dealer Merchant (FDM) and/or Introducing Broker (IB) with the Commodity Futures Trading Commission and as a member of the National Futures Association, which serves as its designated self regulatory examining authority. The Company initially registered through its former Chief Executive Officer (“CEO”) as an Introducing Broker. In order to be accepted as an Introducing Broker, the Company’s CEO filed an application with the Commodity Futures Trading Commission and paid a nominal fee. The Commodity Futures Trading Commission evaluated the application and determined that the Company’s CEO is eligible. Prior to obtaining the required registrations in the United States or other applicable jurisdiction, we will block any traffic from the United States and will not allow any trading by US citizens. Upon being accepted as an Introductory Broker, we will be required to comply with various ongoing compliance issues including maintaining and having available for inspection books and records that support and explain all aspects of our commodity futures business. These records must be maintained in an orderly fashion at our main business. All required books and records must be kept for five years and readily accessible for the most recent two years. Additionally, we will have continuing responsibility to have the necessary policies and procedures in place to diligently supervise our employees and agents. We expect that we will be audited at various times to ensure that we are complyingmaintaining our compliance with the foregoing. Given the acquisition of the Wheatley Interests, all US trading operations will occur via the Wheatley website; as such, the Company is not hosting any trading activities for US clients directly on its website.
Upon commencing operations in the United States, if at all, we also will be regulated by governmental bodies and/or self-regulatory organizations in jurisdictions outside of the United States in which we operate. For example, assuming that we operate in each of these jurisdictions, of which there is no guarantee, we will be regulated by the Financial Services Authority in the United Kingdom, the Monetary Authority of Singapore in Singapore, the Australian Securities and Investments Commission in Australia and the Securities and Futures Commission in Hong Kong, assuming we operate in these jurisdictions. We have not commenced the process to register in any of these countries. Many of the regulations we will be governed by are intended to protect the public, our customers and the integrity of the markets. These regulators and self-regulatory organizations regulate the conduct of our business in many ways and conduct regular examinations to monitor our compliance with these regulations. Among other things, we will be subject to laws, rules and regulations that cover all aspects of the Forex business, including:
• sales methods;
• trading practices;
• use and safekeeping of customers’ funds and securities;
• capital structure;
• anti-money laundering;
• record-keeping; and
• conduct of directors, officers and employees.
For trading by customers in jurisdictions outside the United States, we intend to conduct a regulatory review of our trading operations in all jurisdictions we deem material to ensure compliance with local laws.
Registered FCMs and FDMs traditionally have been subject to a variety of rules that require that they know their customers and monitor their customers’ transactions for suspicious financial activities. With the passage of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the Patriot Act, FCMs, FDMs and IBs are now subject to even more stringent requirements. As required by the Patriot Act, prior to commencing operations in the United States, we will establish comprehensive anti-money laundering and customer identification procedures, designated an anti-money laundering compliance officer, train our employees and conducted an independent audit of our program. Our customer identification procedures will include both a documentary and a non- documentary review and analysis of the potential customer. Our documentary review requires the collection and confirmation of multiple forms of identification and other documentary evidence from each prospective customer in order to validate such prospective customer’s identity.
FXIT's mode of operation and profitability may be directly affected by:
| · | changes in rules promulgated by the Commodity Futures Trading Commission, the National Futures Association, the Board of Governors of the Federal Reserve System, the FSA, the various stock and futures exchanges and other self-regulatory organizations; and |
| · | changes in the interpretation or enforcement of existing rules and laws, particularly any changes focused on online brokerage firms that target an active trader customer base. |
Governmental concern is focused in two basic areas: that the customer has sufficient trading experience and has sufficient risk capital to engage in active trading. The Company will require customers to maintain a $500 opening balance to open an account. We believe the Company's minimum suitability requirements, as well as the extensive user education documentation and tutorials offered on its Web site, are consistent with the rules and regulations concerning active trading.
It is possible that other agencies will attempt to regulate our planned domestic online and other electronic service activities with rules that may include compliance requirements relating to record keeping, data processing, other operation methods, privacy, pricing, content and quality of goods and services as the market for online commerce evolves. Because of the growth in the electronic commerce market, Congress had held hearings on whether to regulate providers of services and transactions in the electronic commerce market. As a result, federal or state authorities could enact laws, rules or regulations, not only with respect to online brokerage services, but other online services we provide or may in the future provide. Such laws, rules and regulations, if and when enacted, could have a material adverse effect on our business, financial condition, results of operations and prospects. In addition, since our company's activities and customer base are international, regulatory developments in other countries, including those of which we are unaware, could have an effect on our company and its operations.
EmployeesOfficer and Directors
As of November 15, 2011: Darren Dunckel, William Glass, Stewart Reich and Liat Franco comprisecomprised the officers and directors of the Company. Following the resignation of Mr. Dunckel, Mr. William Glass and Ms.Mr. Stewart Reich on November 15, 2011, Mrs. Franco arewas the only employeesofficer of the Company.Company through year end December 2011. As of the date of this filing. Triple 8filing, the Company has 66 employees.two officers: Mrs. Franco (our CEO, President and Director) and Mr. Erik Klinger (our CFO and Director).
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item 1A. Risk Factors. Despite the fact that we are not being a requirement,required to provide risk factors, we consider the following factors to be risks to our continued growth and development:
We will be required to raise additional capital in order to implement significantany growth plans.
Our working capital is positive and will allow conducting our business in the next twelveeight months. In order to achieve substantialincrease our minimal presence in the markets we will have to borrow funds from Moshe J. Schnapp’s contacts, and unrelated third parties, and the receipt of proceeds from the sale of our product range.range of which there is no guarantee. If adequate funds are not available, we may not be able to fund our expansion, take advantage of acquisition opportunities, develop or enhance products or services, respond to competitive pressures or maintain our public filings. Such inability could have a material adverse effect on our business, results of operations and financial condition.
We may need and be unable to obtain additional funding on satisfactory terms, which could dilute our shareholders or impose burdensome financial restrictions on our business.
Unforeseeable circumstances may occur which could compel us to seek additional funds..funds. Furthermore, future events, including the problems, delays, expenses and other difficulties frequently encountered by start-up companies may lead to cost increases that could make the net proceeds of this offering insufficient to fund our proposed business plan. Thus, the proceeds of the offering may be insufficient to accomplish our objectives and we may have to borrow or otherwise raise additional funds to accomplish such objectives. We may seek additional sources of capital, including an additional offering of our equity securities, an offering of debt securities or obtaining financing through a bank or other entity. This may not be available on a timely basis, in sufficient amounts or on terms acceptable to us. Our inability to raise additional equity capital or borrow funds required to affect our business plan, may have a material adverse effect on our financial condition and future prospects. Additionally, to the extent that further funding ultimately proves to be available, both debt and equity financing involve risks. Debt financing may require us to pay significant amounts of interest and principal payments, reducing the resources available to us to expand our existing businesses. Some types of equity financing may be highly dilative to our stockholders' interest in our assets and earnings. Any debt financing or other financing of securities senior to common stock will likely include financial and other covenants that will restrict our flexibility.
We will have inadequate capital to pay significant additional expenses we expect to incur as a public company and, as a result, we will be required to raise additional capital further diluting investors that participated in prior offerings.
We are a reporting company subject to the requirements of section 15(d) of the Exchange Act. In order to comply with such reporting requirements, we will incur additional administrative expenses including substantial legal and accounting expenses. We expect such fees to be approximately $50,000 per year. As a result, we will be required to raise additional debt or equity financing, of which there is no guarantee that such financing will be available or available on acceptable terms. To date, Rasel Ltd., a shareholder of the company, has loaned the company $125,000 ($130,547 including interest accrued to year end) and onOn January 5, 2011, the Company closed a private placement memorandum and issued 3,655,635 restricted shares to accredited investors at an aggregate purchase price of $520,000.$548,345 and is due net proceeds of approximately $1,000,000 in connection with the annulment. If we are required to raise additional funds or do not deploy our capital in the appropriate manner and if we raise such proceeds in the form of equity, our shareholders will be further diluted.
Our success will be dependent on attracting key and other personnel, particularly in the areas of management, technical services and customer support.
We believe that our success will depend on the continued efforts of Darren Dunckelmanagement for the development of our platform.platform and to pursue financial transactions to earn a return on capital. Such experience will be important to the establishment of our business. The loss of Darren Dunckel during this early stage could disrupt and negatively affect our business and operations. Our success also depends on having highly trained technical and customer support personnel.
We may have difficulty attracting and employing members to our senior management team and sufficient technical and customer support personnel to keep up with our growth needs. This shortage could limit our ability to increase sales and to sell services. Competition for personnel is intense. If we cannot hire suitable personnel to meet our growth needs, our business and operations will be negatively affected.
Our success will be dependent upon our receipt and maintenance of regulatory approvals in the major customer markets around the world.
We believe that our success, in large part, depends upon our ability to receive and obtain regulatory approval in the major markets around the world. For example, if we are to market our services in the United States, we will be required to obtain the approval of the Commodities Futures Trading Commission and the National Futures Association. Until we obtain the required registrations from each jurisdiction, we will not be able to generate customers or revenue in such jurisdiction. As a result, if we do not obtain the required registrations, we will not be able to generate revenues and we will not be able to implement our operations in any meaningful way.
Many of the regulations we will be governed by are intended to protect the public, our customers and the integrity of the markets. If we are successful in registering in any jurisdiction, these regulators and self-regulatory organizations regulate the conduct of our business in many ways and conduct regular examinations to monitor our compliance with these regulations. Among other things, we will be subject to laws, rules and regulations that cover all aspects of the Forex business, including:
• sales methods;
• trading practices;
• use and safekeeping of customers’ funds and securities;
• capital structure;
• anti-money laundering;
• record-keeping; and
• conduct of directors, officers and employees.
If the regulators determine that we breached or violated any rule, law or regulation, we may be subject to sanctions, fines or revocation of our registration in such jurisdiction, which will have a negative impact on our operations and may require that we cease operations assuming that we have developed operations.
Fluctuations in our quarterly results may adversely affect our stock price.
Our quarterly operating results will likely vary. Our operating results will likely fall below the expectations of securities analysts or investors in some future quarter or quarters. Our failure to meet these expectations would likely adversely affect the market price of our common stock. Our quarterly operating results may vary depending on a number of factors, including:
| · | Unexpected cost in developing our software to be utilized in our platform; |
| · | demand of buyers and sellers to use and transact business on our platform; |
| · | actions taken by our competitors, including new product introductions, fee schedules, pricing policies and enhancements; |
| · | cash flow problems that may occur; |
| · | the quality and success of, and potential continuous changes in, sales or marketing strategies assuming that we successfully develop our platform; |
| · | the timing, completion, cost and effect of our development and launch of a planned Forex trading platform; |
| · | the size and frequency of any trading errors for which we ultimately suffer the economic burden, in whole or in part; |
| · | changes in demand for our products and services due to the rapid pace in which new technology is offered to customers in our industry; |
| costs or adverse financial consequences that may occur with respect to regulatory compliance or other regulatory issues, particularly relating to laws, rules or regulations that may be enacted with a focus on the active trader market; and |
| · | general economic and market factors that affect active trading, including changes in the securities and financial markets. |
Our industry is intensely competitive, which will make it difficult to attract and retain customers.
The markets for online forex brokerage services and Internet-based trading tools, and real-time market data services is intensely competitive and rapidly evolving, and there has been substantial consolidation of those three products and services occurring in the industry. We believe that competition from large online brokerage firms and smaller brokerage firms focused on active traders, as well as consolidation, will substantially increase and intensify in the future. Competition may be further intensified by the size of the active trader market. We believe our ability to compete will depend upon many factors both within and outside our control. These include: price pressure; the timing and market acceptance of new products and services and enhancements developed by us and our competitors; the development and support of efficient, materially error-free Internet-based systems; product and service functionality; data availability and cost; clearing costs; ease of use; reliability; customer service and support; and sales and marketing decisions and efforts.
There is no guarantee that we will adequately be able to protect our properties and software licenses which may have a negative impact on our operations.
While we will seek to protect our technology that we will develop, it will not be possible for us to detect all possible infringements of our software, text, designs and other works of authorship. Also, copyright protection does not extend to functional features of software and will not be effective to prevent third parties from duplicating any of our future-developed software's capabilities through engineering research and development. In addition, our technology and intellectual property may receive limited or no protection in some countries, and the global nature of the Internet makes it impossible to control the ultimate destination of our work.
If our future-developed software is found to infringe on the copyrights or patents of a third party, the third party or a court or other administrative body could require us to pay royalties for past use and for continued use, or to modify or replace the software to avoid infringement. We cannot assure you that we would be able to modify or replace this software.
Any of these claims, with or without merit, could subject us to costly litigation, divert our technical and management personnel and materially and adversely affect our business and operations.
There is no guarantee that we will adequately be able to protect trademarks and service marks which may have a negative impact on our operations.
Proprietary rights are important to our success and our competitive position. Our actions may be inadequate to protect any trademarks and other proprietary rights or to prevent others from claiming violations of their trademarks and other proprietary rights. We may not be able to protect our domain names for our websites as trademarks because those names may be too generic or perceived as describing a product or service or its attributes rather than serving a trademark function.
If we are unable to protect our proprietary rights in trademarks, service marks and other indications of origin, competitors will be able to use names and marks that are identical to ours or sufficiently similar to ours to cause confusion among potential customers. This confusion may result in the diversion of business to our competitors, the loss of customers and the degradation of our reputation. Litigation against those who infringe upon our service marks, trademarks and similar rights may be expensive. Because of the difficulty in proving damages in trademark litigation, it may be very difficult to recover damages.
Except for a search for the name Forex International Trading Corp., we have not conducted searches to determine whether our service marks, trademarks and similar items may infringe on the rights of third parties. Despite having searched a mark, there may be a successful assertion of claims of trademark or service mark infringement. If a third party successfully asserts claims of trademark, service mark or other infringement, the third party or a court or other administrative body may require us to change our service marks, trademarks, company names, the design of our sites and materials and our Internet domain name (web address), as well as to pay damages for any infringement. A change in service marks, trademarks, company names, the design of our sites and materials and Internet domain names may cause difficulties for our customers in locating us or cause them to fail to connect our new names and marks with our prior names and marks, resulting in loss of business.
The nature of our business may result in potential liability to customers which would have a negative impact upon our results of operations.
Many aspects of the forex brokerage business, including online trading services, involve substantial risks of liability. In recent years there has been an increasing incidence of litigation involving the securities brokerage industry, including class action and other suits that generally seek substantial damages, including in some cases punitive damages. In particular, our future proprietary order routing technology will be designed to automatically locate, with immediacy, the best available price in completing execution of a trade triggered by programmed market entry and exit rules. There are risks that the electronic communications and other systems upon which these products and services rely, and will continue to rely, or our products and services themselves, as a result of flaws or other imperfections in their designs or performance, may operate too slowly, fail or cause confusion or uncertainty to the user. Major failures of this kind may affect all customers who are online simultaneously. Any such litigation could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may not be able to make future acquisitions and new strategic alliances, and, even if we do, such acquisitions and alliances may disrupt or otherwise negatively affect our business.
Our business plan contemplates that we may make acquisitions in complementary companies, technologies and assets. Future acquisitions are subject to the following risks:
| · | we may not be able to agree on the terms of the acquisition or alliance, such as the amount or price of our acquired interest; |
| · | acquisitions and alliances may cause a disruption in our ongoing business, distract a relatively new management team and make it difficult to implement or maintain our systems, controls and procedures; |
| · | we may acquire companies or make strategic alliances in markets in which we have little experience; |
| · | we may not be able successfully to integrate the services, products and personnel of any acquisition or new alliance into our operations; |
| · | we may be required to incur debt or issue equity securities to pay for acquisitions, which may be dilutive to existing shareholders, or we may not be able to finance the acquisitions at all; and |
| · | our acquisitions and strategic alliances may not be successful, and we may lose our entire investment. |
In addition, we will face competition from other parties, including large public and private companies, venture capital firms, and other companies, in our search for suitable acquisitions and alliances. Many of the companies we will compete with for acquisitions have substantially greater name recognition and financial resources than we have, which may limit our opportunity to acquire interests in new companies, technologies and assets or create strategic alliances. Even if we are able to find suitable acquisition candidates or develop acceptable strategic alliances, doing so may require more time and expense than we expect because of intense competition.
The international nature of our business will add additional complexity and risks to our business.
The nature of the foreign currency business will bring us into contact with different countries and markets. We hope to continue to expand further in international markets. Our international business may be subject to a variety of risks, including:
• market risk or loss of uncovered transactions;
• governmental regulation and political instability;
• collecting international accounts receivable and income;
• the imposition of barriers to trade and taxes; and
• difficulties associated with enforcing contractual obligations and intellectual property rights.
These factors may have a negative effect on any future international operations and may adversely affect our business and operations. We may not be able to compete effectively with other providers of e-commerce services.
Concerns regarding security of transactions and transmitting confidential information over the Internet may adversely affect our business.
We believe that concern regarding the security of confidential information transmitted over the Internet, including, for example, business requirements, credit card numbers and other forms of payment methods, prevents many potential customers from engaging in online trading. If we do not add sufficient security features to future product releases, our services may not gain market acceptance or we may face additional legal exposure.
Despite the measures we plan to take in the areas of encryption and password or other authentication software devices, our future infrastructure, like others, will be potentially vulnerable to physical or electronic break-ins, computer viruses, hackers or similar problems caused by employees, customers or other Internet users. If a person circumvents our security measures, that person could misappropriate proprietary information or cause interruptions in our operations. Security breaches that result in access to confidential information could damage our reputation and expose us to a risk of loss or liability. These risks may require us to make significant investments and efforts to protect against or remedy security breaches, which would increase the costs of maintaining our websites.
Our e-commerce capability depends on real-time accurate product information.
We may be responsible for loading information into our database and categorizing the information for trading purposes. This process entails a number of risks, including dependence on our suppliers both to provide us in a timely manner with accurate, complete and current information and to update this information promptly when it changes. If our suppliers do not provide us in a timely manner with accurate, complete and current information, our database may be less useful to our customers and users and may expose us to liability. We cannot guarantee that the information available in our database will always be accurate, complete and current or comply with governmental regulations either due to third-party or internal errors. This could expose us to liability or result in decreased acceptance of our products and services, which could have a material and adverse affect on our business and operations. We are aware of cases in which the data provided to us by third parties has not been consistently accurate and, as a result of which, we have experienced customer dissatisfaction and lawsuits by customers. In addition, our contracts with the third-party data suppliers must be renewed on a regular basis and the costs for such information may increase, with our company having little or no negotiating influence in such a situation.
Our market is characterized by rapid technological change, and we may not be able to keep up with such change in a cost-effective way.
Our market is characterized by rapid technological change and frequent new product announcements. Significant technological changes could render eventually our future-developed technology obsolete. If we are unable to respond successfully to these developments or do not respond in a cost-effective way, our business and operations will suffer. To be successful, we must adapt to our rapidly changing market by continually improving the responsiveness, services and features of our products and services, by developing or acquiring new features to meet customer needs and by successfully developing and introducing new versions of our Internet-based e-commerce business software on a timely basis. The life cycles of the software that will be used to support our e-commerce services are difficult to predict because the market for our e-commerce will be new and emerging and will be characterized by changing customer needs and industry standards. The introduction of on-line products employing new technologies and industry standards could render our future-developed system obsolete and unmarketable. If a new software language becomes the industry standard, we may need to rewrite our future-developed software to remain competitive, which we may not successfully accomplish in a timely and cost-effective manner.
In addition, as traffic to our platform increases, if at all, we may need to expand and upgrade our technology, transaction processing systems and network hardware and software. We may not be able to project accurately the rate of growth in our on-line businesses. We also may not be able to expand and upgrade our systems and network hardware and software capabilities to accommodate increased use of our on-line businesses, which would have a material and adverse affect on our business and operations.
An unexpected event, such as a power or telecommunications failure, fire or flood, or physical or electronic break-in at any of our facilities or those of any third parties on which we rely, could cause a loss of critical data and prevent us from offering services. If our hosting and information technology services were interrupted, including from failure of other parties' software that we integrate into our technology, our business and the businesses of our marketplaces using these services would be disrupted, which could result in decreased revenues, lost customers and impaired business reputation for us and them. As a result, we could experience greater difficulty attracting new customers. A failure by us or any third parties on which we rely to provide these services satisfactorily would impair our ability to support the operations of our services and could subject us to legal claims.
In addition, to a large extent, our company's profits will be dependent upon the operation of its internal risk management system. There is no guarantee that such system will operate successfully in every eventuality.
Anti-takeover provisions and our right to issue preferred stock could make a third party acquisition of us difficult.
Forex is a Nevada corporation. Anti-takeover provisions of Nevada law tend to make it difficult for a third party to acquire control of us, even if a change in control would be beneficial to our shareholders. In addition, our board of directors may issue preferred stock with voting or conversion rights that may have the effect of delaying, deferring or preventing a change of control. Preventing a change of control could adversely affect the market price of Forex common stock and the voting and other rights of holders of Forex common stock.
Our common stock price is likely to be highly volatile.
The market price of our common stock is likely to be highly volatile, as the stock market in general, and the market for Internet-related and technology companies in particular, has been highly volatile. Our shareholders may not be able to resell their shares of our common stock following periods of volatility because of the market's adverse reaction to this volatility. Factors that could cause this volatility may include, among other things:
• announcements of technological innovations and the creation and failure of B2B marketplaces;
• actual or anticipated variations in quarterly operating results;
• new sales formats or new products or services;
• changes in financial estimates by securities analysts;
• conditions or trends in the Internet, B2B and other industries;
• changes in the market valuations of other Internet companies;
• announcements by us or our competitors of significant acquisitions, strategic partnerships or joint ventures;
• changes in capital commitments;
• additions or departures of key personnel;
• sales of our common stock; and
• general market conditions.
Many of these factors are beyond our control.
ITEM 1B. UNRESOLVED STAFF COMMENTS
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item 1B. Unresolved Staff Comments. However, at this time, there are no unresolved staff comments.
ITEM 2. PROPERTIES
The Company’s headquarters and operations office is located at One Grand Central Place 60 E 42nd Street,
Suite 5310 New York, New York 10165.Moria 30 Avenue, Haifa, Israel 34572 c/o Mrs. Franco the Company CEO and President. The Company contributesis not paying rent to Forex NYC and Wheatley lease payments of $9,500 per monthMrs. Franco for the space with term ending December 2011. Futureusing this facility, as such future minimum payments of obligations under the commitment to contribute to the operating lease at March 18,are $0. During 2011 are as follows:
· | Until: December 2011 - $95,000 |
Thethe Company leasesleased two virtual offices in Las Vegas Nevada and in Dallas, Texas paying aboutapproximately $250 per month for each virtual office. The virtual leases have terminated.
ITEM 3. LEGAL PROCEEDINGS
From time to time, wethe Company may becomebe involved in various lawsuits and legal proceedings,litigation matters, which arise in the ordinary course of business. LitigationThere is subjectcurrently no litigation that management believes will have a material impact on the financial position of the Company.
On or about June 13, 2011 the Company initiated a complaint against an individual and website for defamation, intentional interference with prospective economic advantage, negligent and violations of business and professions code. The Complaint was filled with the Superior Court of the State of California - County of San Diego. . On August 22, 2011, the defendants filed a notice of motion to inherent uncertainties,strike the complaint under the anti-slapp statute. On September 14, 2011, a request for dismissal, without prejudice was submitted to the court by the Company.
On January 20, 2012 the defendant’s motion was heard by the court and the judge ruled in favor of the defendant as a default judgment and awarded attorney fees and court costs in the amount of $21,462. The Company has retained an adverse result in these or other matters may arise from timeattorney and has filed a motion to time that may harm our business. Wevacate the judgment.
Other than the above, we are currently unaware of any such additional legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.
ITEM 4. (REMOVED AND RESERVED)MINE SAFERY DISCLOSURES
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
On December 29, 2010, our common stock began trading on the OTC Bulletin Board under the symbol “FXIT”. The Company is authorized to issue 400,000,000 of its $0.00001 par value common stock and 20,000,000 shares of its $0.00001 par value preferred stock. As of December 31, 2010, 63,586,666 shares of common stock were issued and outstanding and zero (0)no shares of preferred stock were issued and outstanding. As of December 31, 2011, 34,248,585 shares of common stock were issued and outstanding and 45,000 shares of preferred stock Series B were issued and outstanding. As of April 5, 2012, 34,248,585 shares of common stock were issued and outstanding and 45,000 shares of preferred stock Series B were issued and outstanding. The Board of Directors reserves the right to issue shares of preferred stock in the future indicating preference or rights as appropriate.
Market Information
Our common stock commenced quotation on the OTCBB and OTCQB under the symbol “FXIT” as of December 9,29, 2010. The following table sets forth the range of high and low prices per share of our common stock for each period indicated. As there was no trading in 2009, we have only included data for 2010 and 2011 through March 31, 2011.
| Quarters Ended | Mar 31 | | Jun 30 | | Sept 30 | | Dec 31 | | | Mar 31 | | | Jun 30 | | | Sept 30 | | | Dec 31 | |
| | High | | Low | | High | | Low | | High | | Low | | High | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | |
| 2011 | $ | 0.60 | | 0.18 | | | | | | | | | | | | | | | $ | 0.57 | | | $ | 0.30 | | | $ | 0.50 | | | $ | 0.10 | | | $ | 0.12 | | | $ | 0.03 | | | $ | 0.07 | | | $ | 0.007 | |
| 2010 | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | $ | 0.32 | | $ | 0.28 | | | $ | n/a | | | $ | n/a | | | $ | n/a | | | $ | n/a | | | $ | n/a | | | $ | n/a | | | $ | 0.32 | | | $ | 0.28 | |
| 2009 | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | $ | n/a | | |
Record Holders
The number of holders of record for our common stock as of December 31, 2010 was approximately thirty one (31),31, and as of the day of this filing about fourty four (44).December 31, 2011 approximately 47.
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.
Securities Authorized for Issuance Under Equity Compensation Plans
We presently do not have equity compensation plans authorized.
Recent Issuances of Unregistered Securities
On July 22, 2009 theThe Company issued 40,000,000was authorized to issue 400,000,000 shares of its $0.00001 par value common stock to Meridad Inc. and 40,000,00020,000,000 shares of its $0.00001 par value commonpreferred stock to Rasel Ltd. These shares were issued at par with no Additional Paid In Capital for a totalas of $800.December 31, 2011.
Common Shares:
On March 26, 2010 the Company entered into agreement with Island Capital Management, LLC for the purpose of obtaining DTC Corporate Eligibility. The Company paid as a fee $2,000 in cash and 120,000 shares of restricted stock for the purpose of obtaining DTC Eligibility, including but not limited to performing director, officer and control shareholder Background Reviews and Consultation Services with respect to transfer services, including obtaining CUSIP number(s), documentation formatting and third-party professional consultation services. The Company received DTC eligibility in December 2010.
On April 23, 2010, the Company entered into an Employment Agreement (the “Agreement”“Dunckel Agreement”) with Darren Dunckel (“Executive”) whereby the Company will employ Executive as its Chief Executive Officer for a term of two years (the “Term”). Executive was granted a signing bonus consisting of 4,000,000 shares of common stock of the Company upon signing the Dunckel Agreement
On July 8, 2010, the Company issued a Convertible Promissory Note to ATL in aggregate principal amounts of $500,000 (the “Forex Note”). In consideration for the Company issuing the Forex Note, ATL issued the Company a Secured and Collateralized Promissory Note in the principle amount of $400,000 (the “ATL Note”). Concurrent with the conversion of the Forex Note, ATL must make a payment to the Company reducing a pro rata amount owed to the Company under the ATL Note. On November 8, 2010, the Company and ATL agreed that various loans in the principal amount of $71,736 (the “Prepaid Amount”) provided by ATL to the Company shall be applied to the ATL Note reducing the principal of the ATL Note by such amount. Accordingly, upon the initial conversions of the Forex Note, ATL will not be required to make such pro-rata payment reducing the ATL Note until the Prepaid Amount has been exceeded. On or about January 18, 2011 the Company issued 324,234 common shares to ATL to pay the Prepaid Amount, in lieu of cash.
On November 17, 2010, the Company entered into a Share Exchange Agreement - the APH Agreement with APH pursuant to APH agreement the Company agreed to issue 36,000,000 shares of common stock of the Company as well as a 6% Convertible Note in the principal amount of $1,200,000 due February 15, 2011 (the “APH Note”). On December 30, 2010, the Company and APH entered into an amendment to the APH Agreement whereby the number of shares to be delivered by the Company was reduced from 36,000,000 to 25,000,000. Further, on December 30, 2010, in order to expedite the transaction and avoid further dilution of the existing shareholders, Medirad Inc. and Rasel Ltd., shareholders of the Company, have agreed to return an aggregate of 70,000,000 shares of common stock to the Company for cancellation upon closing of the APH Agreement. The above transaction closed on December 30, 2010 with an effective date of October 1, 2010.
On December 18, 2010, the Company entered into a Securities Purchase Agreement with Forex NYC pursuant to which the Company acquired twenty percent (20%) of the issued and outstanding equity of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the FNYCForex NYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of common stock of the Company. On February 23, 2011, the Company entered into additional Securities Purchase Agreement with Forex NYC, pursuant to which the Company acquired additional thirty percent (30%) of the issuedThe transaction was unwound during July 2011.
Between December 2010 and outstanding membership interest of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the additional FNYC Interest, the Company will issue and sold to Forex NYC 675,000 shares of common stock of the Company.
Onor around January 5, 2011, the Company closed private placement memorandum and issued 3,655,6353,655,631 restricted shares to accredited investors at an aggregate purchase price of $520,000.$548,345.
On January 17, 2011 the Company issued to Core Consulting Group (“Core”) 700,000 restricted shares as part of the Company consideration under consulting agreement. Core is was serving as the CompanyCompany’s Investor relations firmfirm.
On February 23,January 27, 2011, the Company entered intoissued 324,234 shares to AT Limited (“ATL”) for certain draws on a Securities Purchase Agreement with Wheatley, pursuantnote to whichpay expenses in the amount of $71,736. The note payable balance to ATL was reduced by the amount of those prepaid expenses. The Company issued Wheatley 1,125,000did not deliver the shares ofto ATL (“Undelivered Shares”). Based on settlement agreement said 324,234 common stock ofshares been surrendered back to the Company in consideration of a 50% interest in Wheatley.Company. (See below Preferred shares Series B).
On March 28, 2011 the Company approved issuingissued to William Jordan ("WJ"(“WJ”) 10,000 restricted shares as part of the Company consideration under a consulting agreement. WJ served as consultant to the Company in connection with referral to third parties.
On April 5, 2011, the Company and Mladen Poropot, a shareholder of the Company, entered into an agreement whereby the parties agreed to convert the $200,000 6% Convertible Debenture, which was in default, and was assigned by APH to Mladen Poropot, into 2,500,000 shares of common stock.
On June 29, 2011, pursuant to the terms of, and in consideration for Centurion entering into, the Investment Agreement, the Company issued 1,214,224 shares of Common Stock to Centurion as a commitment fee in connection with the Investment Agreement (the "Commitment Shares") and 86,730 shares of the Common Stock representing fees incurred by Centurion in connection with the Investment Agreement (the "Fee Shares"), in each case based upon a deemed valuation per share equal to 100% of the volume-weighted average price of the Company's Common Stock for the 5 trading days immediately preceding the date of the Investment Agreement.
All the above shares of common stock of the Company were offered and sold by the Company in a securities purchase transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. The investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act.
Series A Preferred Shares (cancelled at yearend)
On April 5, 2011, the Company entered into a Share Exchange Agreement with HAM pursuant to which it acquired 1,996 ordinary shares of Triple from HAM representing 5% of the issued and outstanding ordinary shares of Triple. After taking into account the effect of this Agreement with HAM, the Company presently owns just under 50% of Triple. In consideration of the shares, the Company issued HAM 12,000 shares of Series A Preferred Stock and a 6% Convertible Debenture due June 30, 2011 for the amount of $600,000 (the “HAM Note”). The Series A Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 4,000,000 shares of common stock. Furthermore, the Series A Preferred Stock votes on an as-converted basis multiplied by three and carries standard anti-dilution rights. The Series A Preferred Stock does not carry preferential liquidation rights.
On April 5, 2011, the Company and APH, which owned 33,000,000 shares of common stock and a 6% Convertible Debenture in the amount of $1,000,000, entered into an agreement whereby APH agreed to extend the maturity date of the APH Note from February 15, 2011 to June 30, 2011. Further, APH agreed that its right to return 16,000,000 shares of common stock to the Company in consideration for the issued and outstanding securities of Triple 8 is of no force and effect. In consideration of the above, the Company agreed to return the 33,000,000 shares of common stock held by APH and issue APH 100,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 33,333,333 shares of common stock. The Series A Preferred Stock votes on an as- converted basis multiplied by three and carries standard anti-dilution rights.
In order to expedite the closing of the Annulment, the Company, APH, HAM and CDOO entered into a Settlement and Foreclosure Agreement. As part of said settlement and Foreclosure Agreement, APH and HAM have also agreed to return to the Company for cancellation all of the APH Stock and all of the HAM Stock. As a result of the cancellation of the APH Stock and the HAM Stock, APH and HAM will no longer own securities in the Company and the Series A Preferred Stock has been cancelled.
Series B Preferred Shares
On July 8, 2010, the Company issued a Convertible Promissory Note to AT Limited (“ATL”) in the aggregate principal amount of $500,000 (the "Forex Note"). In consideration for the Company issuing the Forex Note, ATL issued the Company a Secured and Collateralized Promissory Note in the principle amount of $400,000 (the "ATL Note"). Concurrent with the conversion of the Forex Note, ATL was to make a payment to the Company reducing a pro rata amount owed to the Company under the ATL Note. On November 8, 2010, ATL agreed that various loans in the principal amount of $71,736 (the "Prepaid Amount") provided by ATL to the Company should be converted into shares of common stock. On January 18, 2011, the Company issued 324,234 common shares of the Company to ATL in settlement of the Prepaid Amount in lieu of cash payment in the amount of the Prepaid Amount, but such shares were not delivered to ATL (the "Undelivered Shares"). The Company did not deliver the shares to ATL.
On November 1, 2011, the Company and the ATL Indebted Parties entered into a Settlement Agreement (the "Agreement") whereby without admitting any wrongdoing on either part, the parties thereby settled all previous agreements and resolved any existing disputes. Under the terms of the Agreement, the Company agreed to issue the Indebted Parties 45,000 shares of Series B Preferred Stock of the Company on a pro-rata basis, and the Undelivered Shares were returned to the treasury of the Company. The Series B Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 15,000,000 common shares. Furthermore, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights.
Director Agreements
On April 23, 2010, the Company issued Mr. Dunckel, former Chief Executive Officer, 4,000,000 shares of common stock in conjunction with his April 2010 employment agreementagreement.
In conjunction with their respective employmentBoard of Directors’ agreements with the Company, in 2010, the Company agreed to issue Mr. Glass, Mrs. Atias, and Mr. Reich shares of common stock of the Company registered on a Form S-8 Registration Statement equal to $6,000 divided by the Company’s market price discounted by 25% on an annual basis at the commencement of each term. As of the date hereof, the Company has not issued the shares of common stock to its directors.
On March 7, 2011, Mr. Reich and Mr. Glass each had their agreements with the Company modified to receive restricted shares of common stock of the Company equal to $12,000 divided by the Company’s market price discounted by 25%.
On January 18, 2011, Mrs. Liat Franco was appointed by the Company to serve as the Secretary of the Company. On March 4, 2011, the Company entered into an Employment Agreement with Liat Franco whereby the Company will employ Ms. Franco as its Secretary for a term of one year (the “Term”). For her services during the Term as Secretary, the Company will issue Ms. Franco 15,000 shares of common stock of the Company, which will have a restrictive legend under the Securities Act of 1933, as amended. In the event that the Term of the Employment Agreement is extended, then the number of shares of common stock will be determined by dividing $6,000 by the market price on the first trading day of the Term. On November 15, 2011, Liat Franco was appointed by the Company to serve as the Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a director of the Company. The total compensation package to Mrs. Liat for 2011 (which including her time devoting for the Annulment agreement) was set to $50,000.
The above issued securities were offered and sold in transactions 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.
Equity Offering – Registered Offering
On May 4, As of the date hereof, other than 4,000,000 shares of common stock in conjunction with Mr. Dunckel April 2010 employment agreement, the Company completed an equity offering in which 20,000,000has not issued the shares of par value common stock were sold for $0.01 per share for an aggregate raise of $200,000. A total of 42 investors were solicited, all of which invested in the Company.to its directors.
Issuer Purchases of Equity Securities
The
Treasury Stock
On April 25, 2011, the Company did notissued a press release announcing that its Board of Directors approved a share repurchase anyprogram as of April 25, 2011. Under the program, the Company is authorized to purchase up to 1,000,000 of its securities since inceptionshares of common stock in open market transactions at the discretion of management. All stock repurchases will be subject to date.the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended and other rules that govern such purchases. As of the date of this filing, the Company repurchased 38,000 of its common shares in the open market, which will be returned to treasury.
| | | Total Number of Share Purchased | | Average Price Paid | | Shares Purchased Under Repurchase Plan | | Shares Remaining Under Repurchase | |
| | | | | | | | | | |
| 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 | | | | |
ITEM 6. SELECTED FINANCIAL DATA
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item 6. Selected Financial Data.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions which could cause actual results to differ materially from management's expectations. See "Forward-Looking Statements" included in this report.
General Overview
On April 19, 2010, the Company entered into a Software Licensing Agreement with Triple 8 Limited (“Triple 8”) which is a currency trading platform organized under the laws of Cyprus. The agreement dated April 12, 2010 whereby the Company licensed Triple 8’s proprietary trading software (the “Software”) for the purpose of developing a Forex Trading Platform and introducing prospective clients (“End Users”). Triple 8 created a website for the Company under the domain www.4xint.com which is blocked for US and Canadian clients. The Company maintains a corporate website under the domain www.forex-international-trading.com.
Triple 8 Acquisitions and Divestiture
On November 17, 2010,we entered into a Share Exchange Agreement (the transaction was effectively closed on December 30, 2010) to acquire 17,924 common shares, representing 44.9% of the issued and outstanding shares of Triple 8 Limited (“Triple 8”) from A.P. Holdings Limited (“APH”) (the “APH Agreement”). In consideration for its purchase, Forex issued 25,000,000 shares of common stock and a Note Payable (the “APH Note”) in the principal amount of $1,200,000, bearing interest at an annual rate of 6% and was convertible into 6 million shares of common stock. The APH Note was originally due on February 15, 2011. Concurrently, certain shareholders of Forex agreed to surrender 70,000,000 shares of the Company’s common stock for cancellation to avoid diluting the ownership of other existing shareholders.
Following the purchase of Triple 8 shares from APH, we entered into another Share Exchange Agreement to acquire 1,996 common shares, or 5% of the issued and outstanding common shares of Triple 8, from the H.A.M. Group Limited (“HAM”). As a result, our ownership of Triple 8 increased to 49.9% of the issued and outstanding common shares. As consideration for its purchase, Forex issued HAM 12,000 shares of Series A Preferred Stock and a 6% Convertible Debenture for $600,000, due June 30, 2011 (the “HAM Note”). The Series A Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share, thus representing 4,000,000 shares of common stock of the Company.
Forex defaulted on both its note payable to APH and on its obligation under the HAM Note. In order to avoid costly litigation and the potential detrimental impact of a judgment to the Company, Forex entered into an agreement to annul its purchases of Triple 8 stock. As a part of the Annulment:
| · | Triple 8 has agreed to pay Forex $2,001,000 (the “Triple Payments”) over time through November 2012. If Triple 8 fails to make any of the payments for a period of 60 days, it must transfer the original number of its common shares (17,924) purchased back to the Company. In addition, Triple 8 is not entitled to have any previous payments returned. |
| · | Forex issued a new $1,000,000 promissory note (the "CDOO Note") to an assignee of HAM and APH as consideration for the termination of the APH Note and the HAM Note which were both in default. The assignee has the ability to foreclose on all shares of Triple 8 held by the Company. The CDOO note bears interest at an annual rate of ten percent (10%) and is due and payable in full on November 30, 2012. In the event that Triple 8 fails to make the Triple Payments, then the amount payable under the CDOO Note is to be reduced by half of the amount of any missed payment. |
| · | APH and HAM have agreed to return all of their stock holdings to the Company for cancellation. |
The Annulment closed on December 7, 2011, and Forex received its initial Triple Payment of $732,000 in cash at that time. Subsequently, the Company has received Triple payments of $73,214, $68,214 and $78,214 for the months of January, February and March 2012,
Forex initially accounted for its acquisition of Triple 8 using the acquisition method as prescribed by GAAP. Under the acquisition method, the acquirer must recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their acquisition date fair values. Although the Company acquired less than 50% of the ownership of Triple 8, the use of the acquisition method and the accounting treatment of Triple 8 was considered appropriate because Forex believed that it had both significant influence over the operations of Triple 8 as well as equity investment risk as the Triple 8’s primary beneficiary. The basis behind the determination that Forex had acquired control of Triple 8 even though it owned a minority stake in Triple 8, was that an employee of the Company became the sole member of the Board of Triple 8’s operating subsidiary and continued to be in that role until late June 2011. In addition, Forex believed that Triple 8 was subject to consolidation under GAAP as a Variable Interest Entity.
However in June 2011, Triple 8’s operating subsidiary’s management unilaterally removed our Company’s employee from its Board and asserted its control over business operations. Since then, the Company has reevaluated its determinations that it had acquired control of Triple 8 and that Triple 8 was subject to consolidation as Variable Interest Entity. As a result, management has concluded that it never really had control and that the use of the acquisition method of accounting was not appropriate. Upon reconsideration, management also concluded that Triple 8 was not subject to consolidation as a Variable Interest Entity essentially because the Company had no equity investment at risk. In coming to these conclusions, Forex considered the following:
| 1. | The fair value of the consideration paid in both of the Share Exchange Agreements is questionable. The original consideration included the Company’s stock and notes payable. Given that the fair value of the Company’s stock and the fair value of Triple 8 was difficult to determine and that the Company never made any cash payments for its obligations under the notes payable, there is a legitimate argument that no consideration was paid for the Triple 8 stock received under the Share Exchange Agreements. |
| a. | With respect to exchange value of the Company’s stock, management takes into account that at the time of the Share Exchange Agreements the Company’s stock was not trading. [Since then, the Company’s stock has been a thinly traded penny stock that has had a high level of price volatility with respect to what stock has been traded and has not been rated by any analysts.] |
| b. | With respect to value in use of the would-be acquiree, management takes into account that at the time of the Share Exchange Agreements Triple 8 was a newly formed entity in business for only 2 years. Under the circumstances, any valuation of Triple 8 would be highly subjective. A market or cost approach to valuing Triple 8 was not feasible and an income approach requires highly subjective estimates about future operations, profits, and cash flows. |
| c. | The Company’s failure to make debt payments and the continuing revisions indicate that the Company’s Notes Payable were of little value to Triple 8’s sellers. |
| 2. | The unilateral removal of the Company’s employee from the Triple 8 Board and Triple 8’s operating subsidiary management assertion of its control over business operations indicates the Company’s inability to control Triple 8. |
These considerations have led the Company to conclude that the purchase of Triple 8 involved no consideration. Furthermore, the Share Exchange Agreement transactions do not meet the conditions necessary to qualify as a business combination achieved without the transfer of consideration under GAAP.
The Company has also considered the use of the equity method and the cost method of accounting in connection with the express intentShare Exchange Agreement transactions for the purchase of providing online trading servicesTriple 8. Generally, GAAP requires that investments in common stock or in entities over which the investor can exercise significant influence, but not control, be accounted for using the equity method. Otherwise, an investment should be accounted for at cost. In addition, the Company believes that its investment in Triple 8 should be accounted for at cost during the period from the closing of the APH Agreement through to retail customers giving them accessthe date of the annulment agreement. While the Company did not have significant influence over Triple 8 during that period, the counterparties to online foreign currency trading. We offer online trading servicesthe annulment agreement acknowledged the Company’s investment by entering into the annulment agreement. Therefore, these financial statements have been restated to non US residents, professional and retail clients overpresent the investment in Triple 8 on a web-based live and real-time proprietary trading system. The Company currently operates four websites (via its subsidiaries and not including affiliates),cost basis, as cost being determined by the corporate website, www.forex-international-trading.com ,market value of the Company’s stock paid and the trading platform, which operatesstated value of the note payable issued under an affiliate licensing agreement, www.4xint.com. After the acquisitionAPH Agreement. The gain on settlement of interests in both Wheatley and Forex NYC the Company operates bothhttp://forexnewyorkcity.com/ and http://wheatleyassetmanagement.com. All websites are currently under further development and construction and modifications may apply. The CompanyTriple 8 is incorporatedaccounted for as other income in the State2011 statement of Nevada, and its corporate headquarters and principal offices are located in New York, NY. Forex Sub, the Company’s wholly-owned subsidiary, is incorporated in the State of Israel and maintains only one bank account and one self-trading account on behalf of the Company. operations.
Forex NYC & Wheatley Acquisitions and DivestituresDivestitures:
On December 18, 2010, the Company entered into a Securities Purchase Agreement with Forex NYC pursuant to which the Company acquired twenty percent (20%) of the issued and outstanding equity of FNYC Interest on a fully diluted basis. In consideration for the FNYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of common stock of the Company. On February 23, 2011, the Company entered into additional Securities Purchase Agreement with Forex NYC, pursuant to which the Company acquired additional thirty percent (30%) of the issued and outstanding membership interest of FNYC Interest on a fully diluted basis. In consideration for the additional FNYC Interest, the Company will issue and sold to Forex NYC 675,000 shares of common stock of the Company. Forex NYC is a limited liability company organized under the laws of the State of New York with headquarters located at One Grand Central Place. Forex NYC is a based Forex investment training facility.
On November 17, 2010, the Company entered into a Share Exchange Agreement the APH Agreement with APH pursuant to which the Company agreed to acquire 17,924 ordinary shares of Triple. The securities acquired from APH represent approximately 45% of the issued and outstanding securities of Triple. Pursuant to the APH Agreement, in consideration for the securities of Triple, the Company agreed to issue 36,000,000 shares of common stock of the Company as well as a 6% Convertible Note in the principal amount of $1,200,000 due February 15, 2011 (the “APH Note”). On December 30, 2010, the Company and APH entered into an amendment to the APH Agreement whereby the number of shares to be delivered by the Company was reduced from 36,000,000 to 25,000,000. Further, on December 30, 2010, in order to expedite the transaction and avoid further dilution of the existing shareholders, Medirad Inc. and Rasel Ltd., shareholders of the Company, have agreed to return an aggregate of 70,000,000 shares of common stock to the Company for cancellation upon closing of the APH Agreement. The above transaction closed on December 30, 2010.
Due to the fact that the transaction with APH closed at yearend, we have shown a consolidated balance sheet in the financial statements, but unconsolidated statements of operating income and cash flow.
On April 5, 2011, the Company and APH, which owns 33,000,000 shares of common stock and a 6% Convertible Debenture in the amount of $1,000,000 (the “APH Note”) entered into an agreement whereby APH agreed to extend the maturity date of the APH Note from February 15, 2011 to June 30, 2011. Further, APH agreed that its right to return 16,000,000 shares of common stock to the Company in consideration of 20% of the issued and outstanding securities of Triple is of no force and effect. In consideration of the above, the Company agreed to return the 33,000,000 shares of common stock held by APH to treasury and issue APH 100,000 shares of Series A Preferred Stock. The Series A Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 33,333,333 shares of common stock. Further, the Series A Preferred Stock votes on an as converted basis multiplied by three and carries standard anti-dilution rights.
On April 5, 2011, the Company and Mladen Poropat, a shareholder of the Company, entered into an agreement whereby the parties agreed to convert the $200,000 6% Convertible Debenture, which was in default and was assigned by APH to Mr. Poropat, into 2,500,000 shares of common stock.
On February 23, 2011, the Company entered into a Securities Purchase Agreement with Wheatleya third party, LLC organized under the jurisdiction of New York (“Wheatley”), pursuant to which the Company acquiredto acquire fifty percent (50%) of the issued and outstanding membership interest of Wheatley Interest(the “Wheatley Interest”) on a fully diluted basis. In consideration for the Wheatley Interest, the Company willagreed to issue and sell to Wheatley 1,125,000 shares of common stock of the Company. Wheatley is a limited liability company organized under the laws of the State of New York with headquarters located at One Grand Central Place. On December 18, 2010, the Company entered into a Securities Purchase Agreement with affiliated corporation to Wheatley (“Forex NYC”) pursuant to which the Company acquired twenty percent (20%) of the issued and outstanding equity of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the FNYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of common stock of the Company. On February 23, 2011, the Company entered into additional Securities Purchase Agreement with Forex NYC, pursuant to which the Company agreed to acquire an additional thirty percent (30%) of the issued and outstanding membership interest of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the additional FNYC Interest, the Company agreed to issue and sell to Forex NYC 675,000 shares of common stock of the Company. Due to the failures of Wheatley and Forex NYC to deliver the required conditions under the agreement and especially failure to provide audited financial statements prepared in accordance with US GAAP, it is an NFA Registered Introducing Broker (IB),the Company’s position that the agreements entered February 23, 2011 are void and, as a result, the closings of such interest in Wheatley and Forex FirmNYC did not occur. On or about May 4, 2011, Mr. Michael Weissman notified the Company on potential defaults associated with the agreements the Company entered with Wheatley and/or Forex NYC. The Company’s position is that Mr. Weissman, Forex NYC and Commodity Trading Adviser (CTA)Wheatley are in default with the agreements it entered with the Company. On May 9, 2011, Mr. Weissman resigned as vice president from the Company effective immediately. On July 2011, the Company and the Forex NYC and Wheatley parties unwound the above transactions. Forex NYC returned their 1,000,000 shares to the Company for cancellation. Due to the fact that the Company knew that there the shares would be surrendered, the shares have been treated as returned to Treasury Stock at June 30, 2011.
As part of finalizing the Wheatley and Forex NYC acquisitions, on February 24, 2011 the Company entered into a consulting agreement for M&A activities with Cross Point Capital Advisors (“Cross Point”). The Company agreed to pay Cross Point a consulting fee of $150,000 in cash plus retainer of $9,500 per month for the next 18 months commencing on April 1, 2011 for bringing the Company M&A-related opportunities, and for structuring and advising the Company on those opportunities, pending the closing of the Wheatley and FOREX NYC transactions. Due to the fact that the Wheatley and FOREX NYC transactions did not close, the Company has not commenced paying the agreed-upon monthly fees to Cross Point. The Company paid the $150,000 fee.
The Company continues to operate its website under www.4xint.com which is blocked for US and Canadian clients in accordance with the Software Licensing Agreement entered with Triple 8 in April 2010.
20102011 and 20092010 Results of Operations:
Due to the commencement of our business during this year, the consolidated statements of operations for the years ended December 31, 2010 and July 31 2009 are not comparable. This section of the report should be read together with Notes of the Company’s restated consolidated financials as well as the disclosures in this filling.filing.
The consolidated statements of operations for the years ended December 31, 20102011 and JulyDecember 31, 20092010 are compared (subject to the above description) in the sections below:
Revenues
The following table summarizes our revenues for the yearyears ended December 31, 20102011 and JulyDecember 31, 2009:2010:
| Year ended December 31 and July 31, respectively | | 2010 | | 2009 | | |
| Year ended December 31, | | | 2011 | | 2010 | |
| Total revenues | | $ | 148,281 | | | $ | 68,916 | | | $ | 10,616 | | | $ | 148,281 | |
The increase in revenues is attributed toCompany earned $616 and $128,281 income from foreign currency operations for the commencement of our trading platform in Mayyears ended 2011 and 2010, for clients outside the US.
respectively.
The following table summarizes our cost ofCompany had had significantly lower revenues from foreign currency operations in 2011, as compared to 2010, as the Company relied on Triple 8 to handle the transactions and did not desire to compete with Triple 8 through its website. The Company’s Triple 8 investment was acquired on December 30, 2010 and sold on December 7, 2011.
The Company entered into a six month consulting agreement in September 2010. The Company earned $10,000 and $20,000 in consulting income for the yearyears ended December 31,in 2011 and 2010, and July 31, 2009:respectively. The Company recorded bad debts of $30,000 in 2011, as the Company was unable to collect the consulting revenues.
| Year ended December 31 and July 31, respectively | | 2010 | | | 2009 | |
| Total cost of revenues | | $ | 0 | | | $ | 0 | |
Operating Expenses
The following table summarizes our operating expenses for the yearyears ended December 31, 20102011 and JulyDecember 31, 2009:2010:
| Year ended December 31 and July 31, respectively | | 2010 | | 2009 | | |
| Year ended December 31, | | | 2011 | | 2010 | |
| Total operating expenses | | $ | 539,827 | | | $ | 236,313 | | | $ | $1,527,321 | | | $ | 515,717 | |
The increaseCompany had significant operating costs (including professional and consulting fees, compensation and travel costs) associated with the Company’s investment in operating expenses is attributedTriple 8 in 2011, as compared to 2010. In addition, the commencementCompany recorded bad debt expense of our trading platform$170,000 in May 20102011 for clients outside the US.a non-performing loan and uncollectible consulting fee.
Net interest income (expense)
The following table summarizes our net interest income for the yearyears ended December 31, 20102011 and July 31, 2009:December31, 2010:
Year ended December 31 and July 31, respectively | | 2010 | | 2009 | | |
| | | 2011 | | 2010 | |
| Interest income | | $ | --- | | | $ | 3,025 | | | $ | 36,844 | | | $ | 0 | |
| Interest expense | | $ | (48,108 | ) | | $ | (40,932) | | | $ | (165,298) | | | $ | (72,818) | |
| Net interest expense | | $ | (48,108) | | | $ | (37,907) | | | $ | (128,454) | | | $ | (72,818) | |
On November 1, 2011, the Company swapped its existing convertible notes outstanding to Series B Preferred Stock. The increase inSeries B Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 15,000,000 shares of common stock. We anticipate that interest expense is attributed toin fiscal 2012 should be lower as a result of exchanging the issuance of notes payable to finance operations in 2010. In 2009 we did not have any operations, and as such we did not accrue any interest expenses or income.convertible debt for Preferred Shares.
Liquidity and Capital Resources
As of December 31, 2010, our cash, cash equivalents were $3,078,339 (at December 31, 2009, ourOur cash and cash equivalents were $307), an increase of approximately $3,078,007 from$411,656 and $460,149 for the years ended December 31, 2009 to December 31, 2010.2011 and 2010, a decrease of $48,493. The increasedecrease in our cash and cash equivalents is primarily the result of our private placements of restricted stock, and the acquisition of approximately 45% of Triple yearend. In our financial statements included herein, we have consolidated the balance sheet of Triple with our balance sheet, but because the acquisition occurred at year end, we have not consolidated the statement of cash flow and statement ofa larger operating income.loss in fiscal 2011.
Cash flowflows used byin operating activities for the yearyears ended December 31, 2011 and 2010 was $355,157,$(646,244), and cash flow used by operating activities in 2009 was $97,046. In 2010, the$(108,100), respectively. The Company had ansignificant operating platform, whereascosts (including professional and consulting fees, and compensation and travel costs) associated with the Company’s investment in 2009, Company activities were limitedTriple 8 in 2011, as compared to production of financial statements and legal fees in connection with our public offering. 2010.
Cash flow usedflows provided by (used in) investing activities for the yearyears ended December 31, 2011 and 2010 was $24,442,639,$580,465 and cash flow used by investing activities$(61,187), respectively. In 2011, the Company received $731,980 in 2009 was $58,152. Cash from used by investing activities in 2010 includes an adjustment to reflect the cashproceeds from the acquisitionsale of a subsidiary. the Company’s 49.9% interest in Triple 8, which was partially offset by $150,000 note issued to Fortune Marketing Media, Inc.
Cash flows provided by financing activities infor the yearyears ended December 31, 2011 and 2010 was $27,875,828,$17,286 and cash flow provided by financing activities was $240,291 for the year ended July 31, 2009.$629,129, respectively. . During 2010, FXITthe Company completed restricted registered offering of common stock to accredited investors, raising $200,000, and issued advances on equity in the amount of $520,000 for a private placement that was completed shortly after yearend. In 2009, FXIT completed aplacement. The Company also received $28,345 from the remainder of the private placement of 80MM shares to Rasel and Medirad, respectively,that were issued in the aggregate amount of $800.
Our future capital requirements and the adequacy of available funds will depend on numerous factors, including the successful commercialization of our products, competing technological and market developments, and the development of strategic alliances for the development and marketing of our products. Our Company intends to try to obtain additional funds through equity or debt financing, strategic alliances with corporate partners and others, or through other sources. On October 6, 2009, October 20, 2009 and January 29, 2010, Rasel Ltd., a shareholder of our company, loaned $25,000, $50,000 and $50,000, respectively, to our company. .There is no guarantee that these sources will be available at all or available on acceptable terms.
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 12 months, we expect that we will need approximately a minimum of $50,000 per month.month, minimum. We expect to be able to remain in operation for a period of 128 months with cash on hand. InWe also expect to receive monthly collections from our settlement agreement with Triple 8 to support our operations in 2012. It is likely that the event Forex's plans change or its assumptions change or proveCompany will have to be inaccurate orraise additional capital in the next 8 months to continue operations. The required funds available prove to be insufficient to fund operations at the planned level (due to further unanticipated expenses, delays, and problems or otherwise), Forex could be required to obtain additional funds earlier than expected. Forex does have committed sources of additional financing, though there can be no assurance that additional funding, if necessary, willmay not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to further delay, scale-back, or eliminate certain aspectswhich would adversely affect the financial performance and continuing operation of our operations or attempt to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates, products, or potential markets. If adequate funds are not available, Forex's business, financial condition, and results of operations will be materially and adversely affected.the Company.
Until required for operations, Forex's policy will be to invest its cash reserves in bank deposits or deploy its cash in short term loans. Forex expects that its operating results will fluctuate significantly from quarter to quarter in the future and will depend on a number of factors mostincluding the state of the worldwide economy and financial markets, which are outside Forex's control.
Debt Financing Arrangements
Rasel, LTD - Affiliated Party (During 2010)
On October 6, 2009 the Company signed a Note Payable for $25,000 payable to Rasel due on October 6, 2010 at 4% per annum. The proceeds were used to pay for half of an existing Accounts Payable to Stephen Fleming 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 at 4% per annum. 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 at 4% per annum. These proceeds will be used for working capital and future expenses.
On January 22, 2010 the Company signed an amendment to extend the maturity date of the Promissory Notes in the amount of $50,000 and $25,000 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 said note with either a 5% discount to the market price or a fixed price of $0.60. SaidThe extension of maturity was agreed to be effective as of December 30, 2010,
The accrued balance of the notes including interest as of December 31, 20102011 is $130,547.$135,548.
A.T. Limited, APH Note, H.A.M Note – ConvertibleConvertibles Note and Accrued Interest
APH Note and H.A.M Note:
As partial payments for the Triple 8 interest’s acquisitions (see disclosure in prior sections of this filling) the Company issued convertible Note to APH and HAM. A 6% Convertible Note in the principal amount of $1,200,000 due February 15, 2011 (the “APH Note”) and a 6% Convertible Debenture due June 30, 2011 for the amount of $600,000 (the “HAM Note”). As previously disclosed in the Company’s Quarterly Report for the quarters ended September 30, 2011 and June 30, 2011, the HAM Note and the APH Note were in default and the parties were negotiating a further extension of the maturity date of the HAM Note and the APH Note. The APH Note was assigned to a third party. On September 29, 2011, the Company received a formal notice of default from the holders of the HAM Note and the APH Note demanding payment of the notes and advising that they intend to take immediate legal action against the Company. In order to expedite the closing of the Annulment, the Company, APH, HAM and Cordellia d.o.o., a Croatian company ("CDOO"), third party which is not affiliated with the Company entered into a Settlement and Foreclosure Agreement (the "Settlement Agreement"), whereby the Company provided CDOO, as the assignee of HAM and APH, with the ability to foreclose on all shares of Triple 8 held by the Company in consideration of the termination of the APH Note and the HAM Note, which were in default, and the issuance of a new promissory note in the name of CDOO in the principal amount of $1,000,000 (the "CDOO Note").
ATL Note:
On July 8, 2010, the Company issued a Convertible Promissory Note to A.T. Limited (“ATL”)a third party - ATL in aggregate principal amounts of $500,000 (the “Forex Note”). In consideration for the Company issuing the ATL Note, ATL issued the Company a Secured and Collateralized Promissory Note in the principle amount of $400,000 (the “ATL Note”).
The Forex Note bears interest at 10%, matures two years from the date of issuance and is convertible into our common stock, at ATL’s option, at a conversion price of $0.20 subject to adjustment. On the 21st trading day following each conversion, the number of shares of common stock issuable to ATL pursuant to the Forex Note shall be adjusted such that the aggregate number of shares of common stock issuable to ATL is equal to the amount converted divided by 75% of the average of the three lowest closing bid prices during the 20 trading days following delivery of the shares of common stock upon the initial conversion. Concurrent with the conversion of the Forex Note, ATL must make a payment to the Company reducing a pro rata amount owed to the Company under the ATL Note. As of July 12, 2010, the Company is received a trading symbol (FXIT) but has not commenced trading. Based on fixed conversion price of $0.20, the Forex Note in the aggregate amount of $500,000, excluding interest, is convertible into 2,500,000 shares of our common stock. ATL has agreed to restrict their ability to convert the Forex 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 ATL Note bears interest at the rate of 12% per annum and matures one year from the date of issuance. No interest or principal payments are required until the maturity date, but both principal and interest may be prepaid prior to maturity date and ATL is required to pay down an amount equal to any amounts converted under the Forex Note. The ATL Note is secured by shares of common stock of a publicly listed company on the Tel Aviv and London Stock Exchanges with an approximate market value of $400,000 (the “ATL Collateral”). In the event that ATL defaults on the ATL Note, the Company may take possession of the ATL Collateral and, in the event that the ATL Collateral is insufficient to pay the full debt owed under the ATL Note, the Company may pursue further remedies against ATL.
On November 8, 2010, the Company and ATL agreed that various loans in the principal amount of $71,736 (the “Prepaid Amount”) provided by ATL to the Company shall be applied to the ATL Note reducing the principal of the ATL Note by such amount. Accordingly, upon the initial conversions of the Forex Note, ATL will not be required to make such pro-rata payment reducing the ATL Note until the Prepaid Amount has been exceeded. On or about January 18, 2011 the Company issued 324,234 common shares to ATL to settle the Prepaid Amount in lieu of cash.
The Forex Note was offered and sold to ATL in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated thereunder. ATL is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
The accrued balance of the Forex note including interest as of December 31, 2010 is $524,110.
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.
Critical Accounting Policies and Estimates
We conducted our audits in accordance with standards required by the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Although these estimates are based on management’s best knowledge of current events and circumstances that may impact the Company in the future, actual results may differ from these estimates.
Basis of consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary and all variable interest entities for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated upon consolidation. Control is determined based on ownership rights or, when applicable, whether the Company is considered the primary beneficiary of a variable interest entity
Marketable securities
The Company determines the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time of purchase, and re-evaluates such classification as of each balance sheet date. The Company assesses whether temporary or other-than-temporary gains or losses on its marketable securities have occurred due to increases or declines in fair value or other market conditions. The Company had marketable securities within continuing operations during the year, which have been sold in the market.
Cash and Cash Equivalents
The Company maintains a cash balance in a non-interest bearing account that currently does not exceed federally insured limits. For purposes of financial statement presentation,On November 1, 2011, the Company considersand the ATL Indebted Parties entered into a Settlement Agreement (the "Agreement") whereby without admitting any wrongdoing on either part, the parties thereby settled all highly liquid instruments with a maturity of three months or less to be cash.
Revenue Recognition
The Company usesprevious agreements and resolved any existing disputes. Under the accrual basis of accounting for all transactions. The Company recognized revenue and gains when earned and related costs of sales and expenses when incurred.
Fixed and Other Assets
Fixed assets are stated at cost, less accumulated depreciation. Office furniture and equipment are depreciated using the straight-line method over seven years. Computer equipment and software are depreciated using the straight-line method over three years. Leasehold improvements are amortized on a straight-line basis over the lesserterms of the useful life or the life of the lease (three years).
Costs of software acquired along with payroll costs and consulting fees relating to the development of internal use software, including that used to provide internet solutions, are capitalized. Once the software is placed in service, the costs are amortized over the estimated useful life.
Costs of Debt Discount are amortized over the life of the note that was discounted, typically two years.
Variable Interest Entities
The Company is required to consolidate variable interest entities (“VIE's”), where it is the entity’s primary beneficiary. VIE's are entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The primary beneficiary is the party that has exposure to a majority of the expected losses and/or expected residual returns of the VIE. For the year ended December 31, 2010, the balance sheets and results of operations of FOREX INTERNATIONAL TRADING CORP M.S. LTD, (our wholly owned subsidiary, which is not active in operation and serving as our agent), were consolidated into these financial statements. The results of operations of Triple and its subsidiary were not consolidated, because the transaction occurred at yearend; only Triple balance sheet was consolidated.
On November 17, 2010, Company, entered into the APH Agreement, with APH pursuant to which the Company agreed to acquire 17,924 ordinary shares of Triple. The securities acquired from APH represent approximately 45% of the issued and outstanding securities of Triple. Pursuant to the APH Agreement, in consideration for the securities of Triple, the Company agreed to issue 36,000,000the Indebted Parties 45,000 shares of common stockSeries B Preferred Stock of the Company as well ason a 6% Convertible Note inpro-rata basis, and the principal amount of $1,200,000 due February 15, 2011 (the “APH Note”). On December 30, 2010, the Company and APH entered into an amendmentUndelivered Shares were returned to the APH Agreement whereby the number of shares to be delivered by the Company was reduced from 36,000,000 to 25,000,000. Further, on December 30, 2010, in order to expedite the transaction and avoid further dilutiontreasury of the existing shareholders, Medirad Inc. and Rasel Ltd., shareholders of the Company, have agreed to return an aggregate of 70,000,000 shares of common stock to the Company for cancellation upon closing of the APH Agreement. The above transaction closed on December 30, 2010. Due to the Company default on the APH Note, the parties entered a settlement agreement which is summarized below:
On April 5, 2011, the Company and APH, which currently owns 33,000,000 shares of common stock and a 6% Convertible Debenture in the amount of $1,000,000 (the “APH Note”) entered into an agreement whereby APH agreed to extend the maturity date of the APH Note from February 15, 2011 to June 30, 2011. Further, APH agreed that its right to return 16,000,000 shares of common stock to the Company in consideration of 20% of the issued and outstanding securities of Triple is of no force and effect. In consideration of the above, the Company agreed to return the 33,000,000 shares of common stock held by APH to treasury and issue APH 100,000 shares of Series A Preferred Stock.Company. The Series AB Preferred Stock has a stated value of $100 per share and is convertible into our common stock at a conversion price of $0.30 per share representing 33,333,333 shares of15,000,000 common stock. Further,shares. Furthermore, the Series AB Preferred Stock votes on an as converted basis multiplied by three and carries standard anti-dilution rights.
On April 5, 2011, the Company and Mladen Poropat, a shareholder of the Company, entered into an agreement whereby the parties agreed to convert the $200,000 6% Convertible Debenture, which was in default and was assigned by APH to Mr. Poropat, into 2,500,000 shares of common stock.
Although the Company acquired approximately 45% of Triple, the Company determined that Triple was a VIE, and that the Company was the primary beneficiary of the VIE’s residual gains and losses, because it gained de-facto control of the Company’s operations through the appointment of one of its employees as the sole director of the VIE. The Company therefore elected to consolidate Triple’s balance sheet only in the financials herein.
Loss per Share
Net loss per share is provided in accordance with ASC Codification Topic 260 Section S99-1 and Statement of Financial Accounting Standards No. 128 (SFAS #128) “Earnings Per Share”. Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period. The Company had no dilutive common stock equivalents, such as stock options or warrantsThrough various settlement agreements described herein, all convertible notes have been cancelled as of the date of this filing.
Cordellia d.o.o.:
As disclosed above, in order to expedite the closing of the Triple 8 Annulment, the Company, APH, HAM and Cordellia d.o.o., a Croatian company ("CDOO"), third party which is not affiliated with the Company entered into a Settlement and Foreclosure Agreement (the "Settlement Agreement"), whereby the Company provided CDOO, as the assignee of HAM and APH, with the ability to foreclose on all shares of Triple 8 held by the Company in consideration of the termination of the APH Note and the HAM Note, which were in default, and the issuance of a new promissory note in the name of CDOO in the principal amount of $1,000,000 (the "CDOO Note"). The CDOO note bears interest at the rate of ten percent (10%) per annum and is due and payable in full on November 30, 2012. In the event that Triple 8 fails to make the Triple Payments, then the amount payable under the CDOO Note shall be reduced by half of the amount of the missed payment. In addition, APH and HAM have also agreed to return to the Company for cancellation all of the APH Stock and all of the HAM Stock and APH, HAM and CDOO have provided a full release of the Company. As a result of the cancellation of the APH Stocks and the HAM Stocks, APH and HAM will no longer own securities in the Company.
Via various settlement agreements described herein, all convertible notes have been cancelled as of the date of this filing.
Critical Accounting Policies and Use of Estimates
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements, the reported amounts and classification of revenues and expenses during the periods presented, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis and material changes in these financials.estimates or assumptions could occur in the future. Changes in estimates are recorded on the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances and at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates if past experience or other assumptions doe not turn out to be substantially accurate.
We believe that the accounting policies described below are critical to understanding out business, results of operations, and financial condition because they involve significant judgments and estimates used in the preparation of our consolidated financial statements. An accounting is deemed to be critical if it requires a judgment or accounting estimate to be made based on assumptions about matters that are highly uncertain , and if different estimates that could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically , could materially impact our consolidated financial statements. Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed below, are also critical to understanding our consolidated financial statements. The notes to our consolidated financial statements contain additional information related to our accounting policies and should be read in conjunction with this discussion.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted accounting principlesin the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actualperiods. Significant estimates include valuation of goodwill, the useful lives of tangible and intangible assets, depreciation and amortization, allowances for doubtful account and credit losses, valuation of common and preferred stock issuances, and the valuation allowance on deferred tax assets. Although management believes these estimates and assumptions are adequate, actual results could differ from those estimates.
Foreign currency translation
The Company considers the United States Dollar (“US Dollar” or "$") to be the functional currency of the Companyestimates and its subsidiary. The reporting currency of the Company is the US Dollar and accordingly, all amounts included in the consolidated financial statements have been presented or translated into US Dollars. For non-US subsidiaries that do not utilize the US Dollar as its functional currency, assets and liabilities are translated to US Dollars at period-end exchange rates, and income and expense items are translated at weighted-average rates of exchange prevailing during the period. Translation adjustments are recorded in “Accumulated other comprehensive income” within stockholders’ equity. Foreign currency transaction gains and losses are included in the consolidated results of operations for the periods presented.
Fair value of financial instruments
SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of the fair value of certain financial instruments. The carrying value of financial instruments, which include cash and cash equivalents, loans payable, customer deposits and accrued expenses, approximate their fair values due to the short-term nature of these financial instruments. The carrying value of the Company’s note receivable approximates its fair value based on management’s best estimate of future cash collections.
Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income, requires a full set of general-purpose financial statements to be expanded to include the reporting of comprehensive income. Comprehensive income is comprised of two components, net income and other comprehensive income. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non owner sources. As of December 31, 2010 foreign currency translation adjustments were the only items of other comprehensive income for the Company.
Segment reporting
The Company follows Statement of ASC Codification Topic 220 and Statement of Financial Accounting Standards No. 130, “Disclosures About Segments of an Enterprise and Related Information”. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.assumptions used.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception.
Recent pronouncements
In May 2008, FAS No. 163, “Accounting for Financial Guarantee Insurance Contracts”, and SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”, were issued. In March 2008, FAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133 was issued.
The Financial Accounting Standards Board (FASB) issued Statement No. 168 – become effective on July 1, 2009 – The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles which makes the Accounting Standards Codification (ASC) the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities for interim and annual periods ending after September 15, 2009. Rules and interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The adoption of ASC Topic 105 did not have a material impact on the Company’s financial position, cash flows or result of operations. Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material effect on the Company’s operations or financial position.
Stock-Based Compensation
The Company accounts for stock-based awards to employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations and has adopted the disclosure only alternative of ASC Codification Topic 220 and SFAS No. 123, “Accounting for Stock-Based Compensation”. Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by ASC Codification Topic 220 and SFAS No. 123.
Year End
On October 18, 2010, the Board of Directors of the Company approved a change in the Company's fiscal year of July 31 to December 31 (the “Fiscal Year Change”). The Company filed a transition report on Form 10-K covering the transition period of August 1, 2010 through December 31, 2010 (the “Transition Period”). The Company also filed its Form 10-Q for the nine months ended September 30, 2010 accordingly.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The future of the Company is dependent upon its ability to raise funds, generate revenues and upon future profitable operations from the development of its new business opportunities. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Notes and Short-Term Receivable
The note 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 of the loan 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. 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.
Impairment of long lived assets
The Company evaluates the fair value of long-lived assets on an annual basis or whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Accordingly, any impairment of value is recognized when the carrying amount of a long-lived asset exceeds its fair value. No impairment losses have been recognized at December 31, 2011 and 2010.
Revenue Recognition
Income from foreign currency operations is earned by referring potential customers to foreign exchange trading companies. The Company’s websites identify potential customers with a short-term foreign exchange trading need. 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 during the year ended December 31, 2011 and $40,000 was recognized during the year ended December 31, 2010.
New Accounting Pronouncements
In July 2010, the FASB issued ASU 2010-20, “Receivables (Topic 310) – Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.” The new disclosure guidance expands the existing requirements and will lead to greater transparency into a company’s exposure to credit losses from lending arrangements. The new disclosures of information as of the end of a reporting period became effective for both interim and annual reporting periods ending on or after December 15, 2010. Specific disclosures regarding activity that occurred before the issuance of the ASU, such as the allowance roll forward and modification disclosures, is required for periods beginning on or after December 15, 2010. The Company has included the required disclosures in its consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect that are applicable. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
ITEM 7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 appears at Page F-1, which appears after the signature page to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ThereOn December 30, 2011 (the “Dismissal Date”), the Company advised Eugene M. Egeberg, CPA (the “Former Auditor”) that he was dismissed as the Company’s independent registered public accounting firm. The decision to dismiss the Former Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors on December 30, 2011. The reports of the Former Auditor on the Company’s consolidated financial statements for the years ended December 31, 2010 and July 31, 2010 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.
During the years ended December 31, 2010 and July 31, 2010, and through the Dismissal Date, the Company has been no change ornot had any disagreements with accountants during the previous two fiscalFormer Auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the Former Auditor’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s consolidated financial statements for such years.
During the years ended December 31, 2010 and July 31, 2010, and through the Dismissal Date, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company has requested that Former Auditor furnish it with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements. A copy of this letter was filed as Exhibit 16.1 to the Form 8KA filed January 6, 2012.
New independent registered public accounting firm
On December 28, 2011 (the “Engagement Date”), the Company engaged Rosen, Seymour, Shapss, Martin & Company LLP (“New Auditor”) as its independent registered public accounting firm for the Company’s fiscal year ended December 31, 2011. The decision to engage the New Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors.
During the two most recent fiscal years and through the Engagement Date, the Company has not consulted with the New Auditor regarding either:
| 1. | application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that the New Auditor concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or |
| 2. | any matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions) or reportable event (as defined in Regulation S-K, Item 304 |
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period 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. Our Chief Executive Officer
As a smaller reporting company, without a viable business and Chief Financial Officer concluded ourrevenues, the Company does not have the resources to install a dedicated staff with deep expertise in all facets of SEC disclosure controls and procedures wereGAAP compliance. As is the case with many smaller reporting companies, the Company will continue to work 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 reporting period ending December 31, 2010.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 small business, 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.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| | · | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of our assets; |
| | · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| | · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations and provide only reasonable assurance, not absolute assurance, with respect to financial statement preparation and presentation. The design of an internal control system reflects resource constraints and the benefits must be considered relative to the costs of implementing and maintaining the system.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010.2011. This assessment was based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, other than the control weakness mentioned above, we believe that as of December 31, 20102011 the Company’s internal control over financial reporting was not effective based on those criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting during the fourth quarter of 20102011 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9A(T). CONTROLS AND PROCEDURES
Not applicable.
ITEM 9B. OTHER INFORMATION
Not applicable.Investment Agreements
On June 27, 2011, the Company entered into an investment agreement (the "Investment Agreement") with Centurion Private Equity, LLC ("Centurion") pursuant to which the Company may issue registered, tradable shares of its common stock, par value $0.00001 per share (the "Common Stock"), up to $10,000,000 over a 36-month period. Pursuant to that certain Registration Rights Agreement (the "Registration Rights Agreement"), the Company agreed to register the shares issuable under the Investment Agreement. Any use of this funding mechanism will be entirely at the Company's discretion.
Subject to an effective registration statement, the Company may submit a notice to Centurion from time to time, as and when the Company deems appropriate in accordance with the terms and conditions of the Investment Agreement. The maximum amount that the Company is entitled to put in any one notice is such number of shares of common stock as equals $250,000 subject to certain volume limitations. The put price of the securities to Centurion will equal the lesser of: (i) 98% of the average of the lowest three daily volume weighted average price, or "VWAPs," of our common stock during the fifteen trading day period beginning on the trading day immediately following the date Centurion receives our put notice (the "Market Price") or (ii) the Market Price minus $0.01. The Investment Agreement provides that the Company must deliver an advance put notice to Centurion at least five business days but no more than ten business days prior to any intended put date. The advance put notice must provide the number of shares included in the put and the put date. Pursuant to the terms of, and in consideration for Centurion entering into, the Investment Agreement, the Company issued 1,214,224 shares of Common Stock to Centurion as a commitment fee in connection with the Investment Agreement (the "Commitment Shares") and 86,730 shares of the Common Stock representing fees incurred by Centurion in connection with the Investment Agreement (the "Fee Shares"), in each case based upon a deemed valuation per share equal to 100% of the volume-weighted average price of the Company's Common Stock for the 5 trading days immediately preceding the date of the Investment Agreement.
The Company may terminate the facility at any time for any reason during an Extended Put Period (as defined in the Investment Agreement), provided that such termination shall have no effect on the parties' other rights and obligations under the Investment Agreement and the Registration Rights Agreement. The Investment Agreement contains customary representations and warranties of each of the Company and Centurion. There are circumstances under which we will not be entitled to put shares to Centurion in accordance with the terms and conditions of the Investment Agreement. In addition, the Company executed a Registration Rights Agreement with Centurion whereby the Company agreed to register a number of shares of its Common Stock equal to the Commitment Shares, the Fee Shares, any shares of Common Stock to be issued in connection with a put and any shares resulting from a dividend, stock split, exchange, reclassification or similar distribution. The Company agreed to file a registration statement with the Securities and Exchange Statement to register such shares within 60 days and to have such registration be effective within 120-150 days and to keep such registration statement, or additional registration statements if necessary, remain effective until either all of the registered shares are sold or the shares may be sold in accordance with Rule 144 of the Securities Act of 1933, as amended.
In connection with the Investment Agreement, the Company issued the Commitment Shares and the Fee Shares to Centurion. These securities were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended. The issuance did not involve any general solicitation or advertising by us. Centurion acknowledged the existence of transfer restrictions applicable to the securities sold by us. Certificates representing the securities sold contain a legend stating the restrictions on transfer to which such securities are subject. The commitment fee for the transaction has been capitalized under Other Assets.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE.GOVERANCE
Below are the names and certain information regarding our executive officers and directors:
| Name | | Age | | Position with the Company |
| | | | | |
Darren DunckelLiat Franco | | 4336 | | Chief Executive Officer, President, Treasurer, Secretary and Director |
William GlassErik Klinger | | 4042 | | Chief Financial Officer and Director |
Liat Franco | | 36 | | Secretary |
Stewart Reich | | 67 | | Chairman & Director |
Mosche Schnapp, a former officer and director, and Anita Atias, a former director, resigned during the year ended December 31, 2010.
Set forth below is a biographical description of each of our directors and senior executive officers based on information supplied by each of them.
Mr. Schnapp resigned from the board on or around October 18, 2010 to pursue other opportunities, but still provides assistance to the Company through his network of contacts.
Darren Dunckel - Mr. Dunckel has served as the Company’s Chief Executive Officer since April 23, 2010. In addition, Mr. Dunckel is also a member of the Board of Directors of the Company. From 2005 to the present, Mr. Dunckel has served as the President of several privately owned companies. As President, he oversees management of real estate acquisitions and development and sales in the United States and overseas. Since 2004, Mr. Dunckel has served as the President of My Daily Corporation, managing the operations of this financial services company. From 2002 through 2004, Mr. Dunckel was Vice President, Regional Director for the Newport Group managing the territory for financial and consulting services. From 2000 to 2002, Mr. Dunckel was Vice President, Regional Director for New York Life Investment Management consulting with financial advisors and corporations with respect to investments and financial services. Mr. Dunckel was appointed on September 17, 2007 to the Board of Directors as a director of Emvelco Corp., a publicly traded company (f/k/a Vortex Resources Corp). Mr. Dunckel resigned from Emvelco Corp board on April 2009 to pursue other opportunities.
William Glass - Mr. Glass was appointed to the Board of Directors of the Company on August 5, 2010. From 2008 to present, Mr. Glass is presently employed by Gemini Energy. In additional, since 2004, Mr. Glass serves as a member of the Board of Directors and as a consultant to Platinum Energy Resources (Pinksheets: PGRI). From 2000 to 2003, Mr. Glass served as Vice President of Gas Operations and Manager of Natural Gas Trading for Mieco Inc. in Houston, Texas. From 1996 to 2000, Mr. Glass worked as an energy trader at the Atlanta, Georgia based Southern Company Energy Marketing. Mr. Glass also has a Bachelors of Business Administration in both Finance and Accounting from Texas A&M University.
Stewart Reich - Mr. Reich was appointed to the Board of Directors of the Company on July 29, 2010. Mr. Reich was a member of the Board of Directors of Yasheng Eco-Trade Corporation from June 2004 until June 2010, was CEO and President of Golden Telecom Inc., Russia’s largest alternative voice and data service provider as well as its largest ISP, since 1997. In September 1992, Mr. Reich was employed as Chief Financial Officer at UTEL (Ukraine Telecommunications), of which he was appointed President in November 1992. Prior to that, Mr. Reich held various positions at a number of subsidiaries of AT&T Corp. Mr. Reich will serve as Chairman of the Company’s Board of Directors.
Liat Franco - On January 18, 2011, Mrs. L.Liat Franco was appointed by the Company to serve as the Secretary of the Company. Mrs. Franco will replace Mr. Darren Dunckel, the Company's Chief Executive Officer, who acted as the Company Secretary. Mr. Dunckel will continue to serve as a director as well as Chief Executive Officer, President, Chief Financial Officer and Treasurer of the Company. Mrs. Franco graduated with a B.A. Magna Cum Laude from the University of California at Los Angeles and holds a J.D. from the UCLA School of Law in California where she specialized in corporate law, which she received in 2003. Prior to joining the Company, Mrs. Franco served as a Security Officer for foreign consulate in Beverly Hills, California, from 2003 until 2009. From 2009 to the present Mrs. Franco has served as a lecturer on contract law and evidence law at foreign college. On March 4, 2011, the Company entered into an Employment Agreement (the “Employment Agreement”) with Liat Franco whereby the Company will employ Ms. Franco as its Secretary for a term of one year (the “Term”). Ms.On November 15, 2011, Liat Franco does not have any family relationship with any director, executive officer or person nominated or chosenwas appointed by the Company to becomeserve as the Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a director or executive officer.of the Company.
Erik Klinger - On December 20, 2011, effective January 2, 2012, Erik Klinger was appointed by the Company to serve as the Chief Financial Officer and a Director of the Company. Mr. Klinger’s principal objectives will be to assist in the deployment of the Corporation’s assets, management and oversight of the Corporation’s financial statements and filings with the Securities and Exchange Commission and to perform due diligence on proposed acquisition targets, if any. Mr. Klinger has extensive experience in Private Equity, Management Consulting, and Entrepreneurship. During his career, Mr. Klinger has worked with small companies to Fortune 500 companies. From May 2011 to present, Mr. Klinger has served as a partner at Ocelot Partners in Los Angeles, California, a company that provides due diligence services both on the buy side and on the sell side of transactions. From the years 2004 to 2011, Mr. Klinger was a Partner at Mindshift Partners, which focused on providing pre-audit preparation to public and private companies. As a Private Equity Associate at Orchard Capital from 1999 - 2001, he analyzed, structured, and helped to close leveraged buyouts of companies, and served on the Board of Directors of a large private airfreight carrier. Formerly, Mr. Klinger worked at Price Waterhouse (New York office) from 1994 - 1997, where his client work focused on process improvement and systems integration. Mr. Klinger earned a Masters of Business Administration from the Anderson School at UCLA in 1999 and earned a Bachelor’s Degree in Engineering Sciences modified with Economics from Dartmouth College in 1992.
Our directors are elected for a term of one year or until their successors are elected and qualified.
Family Relationships
There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer.
Involvement in Certain legalLegal Proceedings
To our knowledge, during the last ten years, none of our directors and executive officers has:
| | · | Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time. |
| | · | Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses. |
| | · | Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. |
| | · | Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. |
| | · | Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
CORPORATE GOVERNANCE
Committees
WeAs we increase the number of Directors in the future, we intend to appoint an audit committee. Accordingly, we will designate a director as an "audit committee financial expert", as that term is defined in the rules of the Securities and Exchange Commission, at such time.
The Board of Directors does not have a standing nominating committee. Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder entitled to vote for the election of directors in accordance with our bylaws and Nevada law.
Meetings may be held from time to time to consider matters for which approval of our Board of Directors is desirable or is required by law.
Agreements with Officers and Directors
On April 23, 2010, the Company entered into the Dunckel Agreement with Darren Dunckel (“Dunckel”) whereby the Company will employ Dunckel as its Chief Executive Officer for a term of two years (the “Term”). For his services during the Term as Chief Executive Officer of the Company, will pay Dunckel a salaryreceived annual compensation of $120,000 to be paid on a monthly basis at a rate ofor $10,000 per month. Dunckel was also granted a signing bonus consisting of 4,000,000 shares of common stock of the Company upon signing the Dunckel Agreement. Additionally, if the Company generates net incomeAgreement, of at least $1,000,000 during any fiscal year during the Term, the Company will paywhich he assigned or sold 1,000,000. Dunckel an annual bonus in the amount of $100,000. Dunckel will also receivereceived during the Term such medical, health and disability insurance as the Company provides to its executive officers, two weeks of vacation in each calendar year and eligibility to participate in such pension, profit-sharing, retirement and other benefits as are available to executive officers of the Company. On November 15, 2011, Darren Dunckel resigned as an executive officer and director of the Company.
On July 29, 2010, Anita Atias and Stewart Reich were elected as members of the Board of Directors of the Company. On August 5, 2010, Mr. William Glass was elected as a member of the Board of Directors. Mr. Reich and Mr. Glass willwere each to initially receive on an annual basis at the commencement of each term shares of common stock of the Company registered on a Form S-8 Registration Statement equal to $6,000 divided by the Company’s market price discounted by 25%. Mrs. Atias has since resigned from the Board due to a conflict of interest. On March 4, 2011, the Company amended the Director Agreements by and between the Company and William Glass and Stewart Reich whereby Mr. Glass and Mr. Reich will each receive shares of common stock of the Company equal to $12,000 divided by the Company’s market price discounted by 25% on an annual basis. The shares of common stock will be restricted as required under the Securities Act of 1933, as amended. On November 15, 2011, William Glass and Stewart Reich resigned as directors.
On January 18, 2011, Mrs. L.Liat Franco was appointed by the Company to serve as the Secretary of the Company. For her services during the Term as Secretary, the Company will issue Ms. Franco 15,000 shares of common stock of the Company, which will have a restrictive legend under the Securities Act of 1933, as amended. In the event that the Term of the Employment Agreement is extended, then the number of shares of common stock will be determined by dividing $6,000 by the market price on the first trading day of the Term. On November 15, 2011, Liat Franco was appointed by the Company to serve as the Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a director of the Company. The entire compensation of Mrs. Franco as the Company’s President (on top of her compensation as the Company’s Secretary) was set as $50,000 for the year ended December 31, 2011.
Effective January 2, 2012, Erik Klinger was appointed by the Company to serve as the Chief Financial Officer and a Director of the Company. Mr. Klinger’s principal objectives will be to assist in the deployment of the Corporation’s assets, management and oversight of the Corporation’s financial statements and filings with the Securities and Exchange Commission and to perform due diligence on proposed acquisition targets, if any. Since his appointment in January, a company controlled by Mr. Klinger has received compensation of $3,500 per month for part-time services..
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers and directors, and persons who beneficially own more than ten percent10% of the Company’sour common stock to file with the SEC initial reports of ownership and reports of changes in ownership withof common stock and other of our equity securities. During the SEC for Companies registeredfiscal year ended December 31, 2011, our Chief Executive Officer and Chief Financial Officer did not file the required reports under Section 12 of the Exchange Act (“Section 12”) . Since we are not registered under Section 12, the executive officers, directors and greater than ten percent beneficial owners were not required by SEC regulations to file forms under 16(a)16.
Code of Ethics
We have adopted a Code of Ethics that applies to all officers, directors and employees. The Company will provide to any person without charge a copy of such code of ethics upon written request to the Company at its registered offices.
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth all compensation paid in respect of our Chief Executive Officer and our most highly compensated three executive officers (collectively, the "Named Executive Officers") for the year ended December 31, 2010 only as the Company did not pay any compensation during2011 and for the year ended JulyDecember 31, 2009.
Summary Compensation Table
| Name and | | | | Salary | | | Bonus | | | Restricted Stock Awards | | | Option Awards | | | Non-Equity Incentive Plan Compensation | | | Nonqualified Deferred Compensation Earnings | | | All Other Compensation | | | Total | | | | Salary | | Bonus | | Restricted Stock Awards | | Option Awards | | Non-Equity Incentive Plan Compensation | | Nonqualified Deferred Compensation Earnings | | All Other Compensation | | Total | |
| Position | | Year | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | ( $) | | | ($) | | | ($) | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ( $) | | ($) | | ($) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Moshe J. Schnapp CEO(1) | | 2010 | | | 28,286 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | 2010 | | | 28,286 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 28,286 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Darren Dunckel CEO | | 2010 | | | 88,459 | | | | | | | | 40,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | 2010 | | | 88,459 | | | | | | | | 40,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 128,459 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Darren Dunckel CEO (2) | | 2011 | | | 107,500 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 107,500 | | | | 107,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liat Franco | | 2011 | | | 50,000 | | | | 0 | | | | 4,159 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 54,159 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Resigned as an executive officer and director in 2010. |
| (2) | Resigned as an executive officer and director in 2011 (during 2011 the Company disbursed Mr. Dunckel $37,014 for travel expenses which is not included in his $107,500 base compensation). |
The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer.
Per the Dunckel Agreement whereby the Company employed Darren Dunckel as its Chief Executive Officer until November 15, 2011 when he resigned, the Company paid $107,500 as compensation and additional $37,014 for travel costs for the year ended on December 31, 2011.
Per the Officer and Directors agreements, the Company accrued $34,800 as compensation for the year ended on December 31, 2011 since commencement.
Per the Franco Agreement whereby the Company employed Liat Franco as its Chief Executive Officer, the Company accrued $50,000 as salary and related compensation for the year ended on December 31, 2011.
Per the Klinger Agreement whereby the Company employed Erik Klinger as its Chief Financial Officer, the Company accrued $6,500 as salary and related compensation for the year ended on December 31, 2011.
There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our sole officer and director other than as described herein.
Director Compensation
Pursuant to the employment agreement between the Company and Dunckel, the Company will pay Mr. Dunckel a salary of $120,000 to be paid on a monthly basis at a rate of $10,000 per month. Mr. Dunckel was also granted a signing bonus consisting of 4,000,000 shares of common stock of the Company upon signing the agreement. Additionally, if the Company generates net income of at least $1,000,000 during any fiscal year during the Term, the Company will pay Mr. Dunckel an annual bonus in the amount of $100,000.
Pursuant to the respective employmentboard of directors' agreements between the Company and each director, Mr. Reich, and Mr. Glass will each receive shares of common stock of the Company equal to $12,000 divided by the Company’s market price discounted by 25% on an annual basis. The shares of common stock will be restricted as required under the Securities Act of 1933, as amended.
For services during the Term as Secretary, the Company will issue Ms. Franco 15,000 shares of common stock of the Company, which will have a restrictive legend under the Securities Act of 1933, as amended. In the event that the Term of the Employment Agreement is extended, then the number of shares of common stock will be determined by dividing $6,000 by the market price on the first trading day of the Term. The entire compensation of Mrs. Franco as the Company’s President (in addition to her compensation as the Company’s Secretary) was set as $50,000 for the year ended December 31, 2011.
On December 29, 2010, Mrs. Atias resigned as a director of the Company due to a potential conflict of interest. Ms. Atias is currently the Operations Manager for Online Trading Academy, and the Company operates in a similar industry. Ms. Atias was not compensated by the Company for her services.
| Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) | | | Stock Options ($) | | | Non-equity Incentive Plan Compensation ($) | | | Non-Qualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | |
| Darren Dunckel* | | | 107,500 | | | | | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 107,500 | |
| William Glass | | | 0 | | | | 15,321 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 15,321 | |
| Stewart Reich | | | 0 | | | | 15,321 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 15,321 | |
| Liat Franco | | | 50,000 | | | | 5,159 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 54,159 | |
*) During 2011 the Company reimbursed Mr. Dunckel $37,014 for his traveling expenses on top of his $107,500 base salary.
| Name | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) | | | Stock Options ($) | | | Non-equity Incentive Plan Compensation ($) | | | Non-Qualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | |
| Darren Dunckel | | | 88,458.36 | | | | 4,000,000 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 4,088,458.36 | |
| William Glass | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | |
| Stewart Reich | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding Equity Awards at Fiscal Year-End
ThereOther than the above disclosure there are no outstanding equity awards outstanding at December 31, 2010.2011.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth the beneficial ownership of our company's common stock as of April 5, 2011,2012, as to
| | · | each person known to beneficially own more than 5% of the Company's common stock |
| | · | all directors and officers as a group |
Unless otherwise indicated, each of the stockholders can be reached at our principal executive offices located at One Grand Central Place, 60 E 42nd Street, Suite 5310, New York, New York 10165.Moria 30 Ave., Haifa, Israel 34572.
| Name of Beneficial Owner | | Common Stock Beneficially Owned (1) | | | Percentage of Common Stock (1) | | | Common Stock Beneficially Owned (1) | | Percentage of Common Stock (1) | |
Darren Dunckel (2)(3) | | | 4,000,000 | | | | 11.66 | % | | 3,000,000 | | 8.76 | % |
Stewart Reich (2)(3) | | | 0 | | | | * | | | 0 | | * | |
William Glass (2)(3) | | | 0 | | | | * | | | 0 | | * | |
| Liat Franco (2) | | | 0 | | | | * | | | 0 | | * | |
| AP Holdings Limited (4) | | | 38,333,333 | | | | 52.77 | % | |
| Medirad, Inc. (3) | | | 700,000 | | | | 2.04 | % | |
| HAM Group Limited(5) | | | 7,000,000 | | | | 20.40 | % | |
| Erik Klinger (2) | | | 0 | | * | |
| A. T. Limited (4) | | | 5,000,000 | | 10.15 | % |
| Watford Holding Inc. (4) | | | 5,000,000 | | 10.15 | % |
| James Bay Holding Inc. (4) | | | 5,000,000 | | 10.15 | % |
| Mladen Poropot | | | 2,500,000 | | | | 7.29 | % | | 2,833,333 | | 8.27 | % |
| | | | | | | | | | | | | | |
| Total Officers and Directors (4 persons) | | | 4,000,000 | | | | 11.66 | % | |
| Total Officers and Directors (2 persons) | | | 3,000,000 | | 8.76 | % |
* less than 1%,
(1) Beneficial ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table. The above is based on 34,309,86534,248,585 shares of common stock outstanding as of April 5, 2011.2012.
(2) Officer and/or director of the Company.
(3) Sean Schnapp, the soleResigned as an executive officer and directorand/or director.
(4) Assumes the full conversion of Medirad, Inc., has voting and dispositive control over the shares held by Medirad, Inc. Series B Preferred Stock.
(4) AP Holdings Limited beneficially owns 38,333,333 common shares which represents 33,333,333 shares of common stock issuable upon conversion of the Series A Preferred Stock and 5,000,000 shares of common stock issuable upon conversion of the 6% Convertible Debenture. Shalom Atia, the sole executive officer and director of AP Holdings Limited, has voting and dispositive control over the shares held by AP Holdings Limited.
(5) H.A.M. Group Limited (“HAM”) beneficially owns 7,000,000 common shares which represents 4,000,000 shares of common stock issuable upon conversion of the Series A Preferred Stock and 3,000,000 shares of common stock issuable upon conversion of the 6% Convertible Debenture. Moshe Har Adir, the sole executive officer and director of HAM, has voting and dispositive control over the shares held by HAM.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
On April 23, 2010, the Company entered into the Dunckel Agreement with Dunckel whereby the Company willto employ Dunckel as its Chief Executive Officer for a term of two years (the “Term”). For his services during the Term as Chief Executive Officer, the Company will pay Dunckel a salarycompensation of $120,000 to be paid on a monthly basis at a rate of $10,000 per month. Dunckel was also granted a signing bonus consisting of 4,000,000 shares of common stock of the Company upon signing the Dunckel Agreement. Additionally, if the Company generates net income of at least $1,000,000 during any fiscal year during the Term, the Company will pay Dunckel an annual bonus in the amount of $100,000. Dunckel will also receive during the Term such medical, health and disability insurance as the Company provides to its executive officers, two weeks of vacation in each calendar year and eligibility to participate in such pension, profit-sharing, retirement and other benefits as are available to executive officers of the Company.
Mr. Dunckel resigned from his duties as an officer and director with the Company on November 15, 2011.
On July 29, 2010, Anita Atias and Stewart Reich were elected as members of the Board of Directors of the Company. On August 5, 2010, Mr. William Glass was elected as a member of the Board of Directors. Mr. Reich and Mr. Glass will each receive on an annual basis at the commencement of each term shares of common stock of the Company registered on a Form S-8 Registration Statement equal to $6,000 divided by the Company’s market price discounted by 25%. Mrs. Atias has since resigned from the Board due to a conflict of interest. On March 4, 2011, the Company amended the Director Agreements by and between the Company and William Glass and Stewart Reich whereby Mr. Glass and Mr. Reich will each receive shares of common stock of the Company equal to $12,000 divided by the Company’s market price discounted by 25% on an annual basis. The shares of common stock will be restricted as required under the Securities Act of 1933, as amended. Mr. Glass and Mr. Reich resigned as Directors of the Company on November 15, 2011.
On January 18, 2011, Mrs. L. Franco was appointed by the Company to serve as the Secretary of the Company. For her services during the Term as Secretary, the Company will issue Ms. Franco 15,000 shares of common stock of the Company, which will have a restrictive legend under the Securities Act of 1933, as amended. In the event that the Term of the Employment Agreement is extended, then the number of shares of common stock will be determined by dividing $6,000 by the market price on the first trading day of the Term. The entire compensation of Mrs. Franco as the Company’s President (on top of her compensation as the Company’s Secretary) was set as $50,000 for the year ended December 31, 2011.
Effective January 2, 2012, Erik Klinger was appointed by the Company to serve as the Chief Financial Officer and a Director of the Company. Mr. Klinger’s principal objectives will be to assist in the deployment of the Corporation’s assets, management and oversight of the Corporation’s financial statements and filings with the Securities and Exchange Commission and to perform due diligence on proposed acquisition targets, if any. Since his appointment in January, a company controlled by Mr. Klinger has received compensation of $3,500 per month for part-time services.
Rasel, LTD - Affiliated Party (During 2010)
On October 6, 2009 the Company signed a Note Payable for $25,000 payable to RASEL, LTD (“Rasel”) (an affiliated entity) due on October 6, 2010 at 4% per annum. The proceeds were used to pay for half of an existing Accounts Payableaccounts payable to Stephen Fleming 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 (a Company Shareholder) due on October 20, 2010 at 4% per annum. 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 (a Company Shareholder) due on October 30, 2011 at 4% per annum. These proceeds will be used for working capital and future expenses. On January 22, 2010 the Company signed an amendment to extend the maturity date of the Promissory Notes in the amount of $50,000 and $25,000 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 said note with either a 5% discount to the market price or a fixed price of $0.60. Said extension of maturity was agreed to be effective as of December 30, 2010, Thethe accrued balance of the notes including interest as of December 31, 20102011 is $130,547.$135,548.
Procedures for Approval of Related Party Transactions
Our Board of Directors is charged with reviewing and approving all potential related party transactions. All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.
Director Independence
In 2011 Board of Directors has determined that Mrs. Franco and Mr. Klinger are each independent directors as of December 31, 2011 based on the definition of independence in the listing standards of the NASDAQ Corporate Governance Rules. Mr. Klinger was, subsequent to the year end, appointed as the Chief Financial Officer of the Company and, as a result, Mr. Klinger is no longer considered independent. In 2010, Board of Directors has determined that Mr. Reich and Mr. Glass are each independent directors as of December 31, 2010 based on the definition of independence in the listing standards of the NasdaqNASDAQ Corporate Governance Rules. The Board of Directors areis currently evaluating committee charters with the goal of establishing a Compensation Committee, a Governance and Nominating Committee and an Audit Committee.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
We have engaged Eugene M. Edgeberg,Egeberg, CPA as our auditor for the fiscal year ended December 31, 2010 and 2009.(and 2009).
Audit Fees. The aggregate fees accrued for professional services rendered for the audit of our annual financial statements for the years ended December 31, 2010 and 2009 and for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q during these fiscal years were $10,000 for 2010 and $2,500 for 2009.
The audit fees incurred in 2010 are not comparable to other periods, because the Company a) restated their financials during the year due to the incorrect classification of certain startup-related expenses in 2009, among other items, and b) the Company changed their fiscal year in 2010 to end on December 31, 2010 from July 31, 2010.
Tax Fees. WeOn December 30, 2011 (the "Dismissal Date"), we dismissed Eugene M. Egeberg, CPA (the "Former Auditor") as the Company's independent registered public accounting firm. The decision to dismiss the Former Auditor as the Company's independent registered public accounting firm was approved by the Company's Board of Directors on December 30, 2011. The reports of the Former Auditor on the Company's consolidated financial statements for the years ended December 31, 2010 and July 31, 2010 did not incurcontain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle. During 2011 and until Dismissal Date we incurred $9,000 in fees for professional services rendered for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q.
On December 28, 2011 (the "Engagement Date"), the Company engaged Rosen, Seymour, Shapss, Martin & Company LLP ("New Auditor") as its independent registered public accounting firm for the Company's fiscal year ended December 31, 2011. The decision to engage the New Auditor as the Company's independent registered public accounting firm was approved by the Company's Board of Directors.
The aggregate fees accrued for professional services rendered for the audit of our annual financial statements for the years ended December 31, 2011 and for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q during these fiscal years were $9,000 for 2011 for the Former Auditor. In fiscal 2012, in lieu of additional work required by the New Auditor that relate to restatement of prior year’s financials, the Company and the New Auditors agreed to modify their fees to auditors$55,000 from $30,000.
We incurred $12,500 fees to an accountant for tax advice and tax compliance services during the fiscal years ended JulyDecember 31, 2010 and 2009, respectively.2010.
The CompanyCompany’s board has considered whether the provision of non-audit services is compatible with maintaining the principal accountant’s independence.
ITEM 15. 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 |
| 4.1 | | Convertible Promissory Note issued by the Company to A.T. LimitedATL dated July 8, 2010 (3) |
4.2 | | |
4.2 | | Secured and Collateralized Promissory Note issued by A.T. LimitedATL to the Company dated July 8, 2010 (3) |
4.3 | | |
4.3 | | Collateral and Security Agreement by and between Forex International Trading Group and A.T. LimitedATL dated July 7, 2010 (3) |
4.4 | | |
4.4 | | Promissory Note issued to Rasel Ltd. Dated October 6, 2009(7) |
4.5 | | |
4.5 | | Promissory Note issued to Rasel Ltd. Dated October 20, 2009 (7) |
4.6 | | |
4.6 | | Letter Agreement between Rasel Ltd. and Forex International Trading Corp. dated January 22, 2011 (8) |
4.7 | | |
4.7 | | Letter Agreement by and between Forex International Trading Group and A.T. LimitedATL dated November 8, 2010(9) |
4.8 | | |
4.8 | | 6% Convertible Note issued to AP Holdings LimitedAPH (11) |
4.9 4.10 | | |
4.9 | | 6% Convertible Debenture issued to HAM Group Limited dated April 5, 2011 (14) Promissory Note dated November 30, 2011 issued to Cordellia d.o.o. in the amount of $1,000,000 (18) |
10.1 | | |
10.1 | | Software Licensing Agreement dated April 12, 2010, by and between Forex International Trading Corp and Triple 8 Limited (1) |
10.2 | | |
10.2 | | Employment Agreement dated April 23, 2010, by and between Forex International Trading Corp and Darren Dunckel (2) |
10.3 | | |
10.3 | | Letter Agreement by and between Forex International Trading Corp. and Anita Atias, dated July 29, 2010 (4) |
10.4 | | |
10.4 | | Letter Agreement by and between Forex International Trading Corp. and Stewart Reich, dated July 29, 2010 (4) |
10.5 | | |
10.5 | | Letter Agreement by and between Forex International Trading Corp. and Mr. William Glass, dated August 6, 2010 (5) |
10.6 | | |
10.6 | | Share Exchange Agreement by and between Forex International Trading Corp. and AP Holdings LimitedAPH (10) |
10.7 | | |
10.7 | | Letter Agreement by and between Forex International Trading Corp., AP Holdings Limited,APH, Medirad Inc. and Rasel Ltd. (11) |
10.8 | | |
10.8 | | Form of Securities Purchase Agreement by and between Forex International Trading Corp. and Forex New York City, LLC (12) |
| | |
10.9 | | Form of Securities Purchase Agreement by and between Forex International Trading Corp. And Wheatley Asset Management , LLC(12) |
| | |
10.10 | | Letter Amendment by and between Forex International Trading Corp. and William Glass, dated March 4, 2011 (13) |
10.9 | | |
10.11 | | Letter Amendment by and between Forex International Trading Corp. and Stewart Reich, dated March 4, 2011 (13) |
10.10 | | |
10.12 | | Employment Agreement by and between Forex International Trading Corp. and Liat Franco, dated March 7, 2011 (13) |
10.11 | | |
10.13 | | Agreement between Forex International Trading Corp. and AP Holdings LimitedAPH dated April 5, 2011 (14) |
10.12 | | |
10.14 | | Conversion Agreement between Mladen PoropatMP and Forex International Trading Corp. dated April 5, 2011 (14) |
10.13 | | |
10.15 | | Share Exchange Agreement between Forex International Trading Corp. and HAM Group Limited 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 June 27, 2011 (16) |
21.110.15 | | Registration Rights Agreement with Centurion by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated June 27, 2011 (16) |
| 10.16 | | Settlement Agreement between AT Limited and Forex International Trading Corp. |
| 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) |
21.1 | | List of Subsidiaries |
31.1 | | Certification of Chief Executive 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 |
31.131.2 | | Certification of Chief Executive and 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 andOfficer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| EX-101.INS | | XBRL INSTANCE DOCUMENT |
99.1 EX-101.SCH | | Form of Securities Purchase Agreement by and between Forex International Trading Corp. and Forex New York City, LLC (10)XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT |
| EX-101.CAL | | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
| EX-101.DEF | | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
| EX-101.LAB | | XBRL TAXONOMY EXTENSION LABELS LINKBASE |
| EX-101.PRE | | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
(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
(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
| (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 |
| (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 June 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 |
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: April 5, 201113, 2012 | By: | /s/ Darren DunckelLiat Franco | |
| | | Darren DunckelLiat Franco | |
| | | Chief Executive Officer, President, | |
| | | Secretary, Treasurer and Director | |
| | (Principal Executive | |
| | Officer) | |
| | | |
| By: | /s/ Erik Klinger | |
| | Erik Klinger | |
| | Chief Financial Officer and TreasurerDirector | |
| | | |
| | | (Principal Financial Accounting and | |
| | | Financial 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/Darren Dunckel
| | Darren Dunckel
| | Director
| | April 5, 2011
|
| | | | | | |
/s/William Glass | | William Glass | | Director | | April 5, 2011 |
| | | | | | | |
| /s/Liat Franco | | Liat Franco | | Director, CEO, President, Treasurer and Secretary | | April 5, 201113, 2012 |
| | | | | | | |
/s/ Stewart ReichErik Klinger | | Stewart ReichErik Klinger | | Director and CFO | | April 5, 201113, 2012 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
FOREX INTERNATIONAL TRADINGINTERNATIONALTRADING CORP.
INDEX TO CONSOLIDATED AUDITED FINANCIAL STATEMENTS
For the Year Ended December 31, 2011 and 2010
FOREX INTERNATIONAL TRADING CORP.
TABLE OF CONTENTS
INDEPENDENT AUDITORS REPORT | F-2 |
| | |
CONSOLIDATED AUDITED BALANCE SHEETREPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS | F-2 – F-3 |
| | |
CONSOLIDATED AUDITED STATEMENT OF OPERATIONSFINANCIAL STATEMENTS | |
| |
| Consolidated Balance Sheets as of December 31, 2011 and 2010 | F-4 |
| | |
CONSOLIDATED AUDITED STATEMENT OF CASH FLOWSConsolidated Statements of Operations for the Two Years Ended December 31, 2011 | F-5 |
| |
| Consolidated Statements of Changes in Stockholders’ Equity for the Two Years Ended December 31, 2011 | F-6 |
| | |
CONSOLIDATED AUDITED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYConsolidated Statements of Cash Flows for the Two Years Ended December 31, 2011 | F-5F-7 – F-8 |
| | |
NOTES TO CONSOLIDATED AUDITED FINANCIAL STATEMENTSNotes to Consolidated Financial Statements | F-7 - F-22F-9 – F-20 |
| |
EUGENE M EGEBERG
CERTIFIEDREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
2400 BOSTON STREET, SUITE 102
BALTIMORE, MARYLAND 21224
Telephone (410) 218-1711 Fax (410) 522-5889ACCOUNTING FIRM
To the Board of Directors and Stockholders
Forex International Trading Corp.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheet of Forex International Trading Corp., and its Wholly owned Subsidiaries (collectively, the "Company"(the “Company”) as of December 31, 2010 and as of July 31, 2009,2011, and the related consolidated statements of operations, stockholders'stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2010.year then ended. These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our auditsaudit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Forex International Trading Corp. as of December 31, 2011 and the consolidated results of its operations and its cash flows for the year ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.
We also audited the restatements as described in Note 3 that were applied to the Company’s consolidated balances sheet as of December 31, 2010 and the related consolidated statements of stockholders’ equity and cash flows for the year then ended. In our opinion, such restatements are appropriate and have been properly applied.
/s/ Rosen Seymour Shapss Martin & Company LLP CERTIFIED PUBLIC ACCOUNTANTS New York, New York April 9, 2012 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Forex International Trading Corp.
We have audited, before the effects of the adjustments for the correction of the errors described in Note 3, the accompanying consolidated balance sheet of Forex International Trading Corp. as of December 31, 2010, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year ended December 31, 2010. The 2010 consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
On December 30, 2010, the Company acquired approximately 45% of Triple 8 Limited, a foreign company which was audited separately and by another firm. Those numbers have been consolidated with the Company’s Balance Sheet, because we have determined that the Company is the main beneficiary of the Variable Interest Entity, but its Statement of Cash Flow and Statement of Operating Income have not been consolidated into these financial statements, due to the fact that the transaction closed at year-end. We were not engaged to express an opinion on Triple 8 Limited’s financial statement. No such opinion is expressed by us herein.
In our opinion, based on our audits andexcept for the report oferrors described in Note 3, the other auditors, such2010 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company.Forex International Trading Corp. as of December 31, 2010, and as of July 31, 2009 and the results of its operations and its cash flows for each of the two years in the periodyear then ended December 31, 2010, in conformity with generally accepted accounting principles generally accepted in the United States of AmericaAmerica.
Baltimore, Maryland, March 29, 2011
/s/Eugene M Egeberg
Eugene M Egeberg
Certified Public Accountant
FOREX INTERNATIONAL TRADING CORP.
CONSOLIDATED BALANCE SHEET
[Missing Graphic Reference]
| | | Consolidated | | | | | | | |
| | | December 31, 2010 | | | July 31, 2010 | | | December 31, 2009 | |
| | | AUDITED | | | AUDITED | | | UNAUDITED | |
| Current Assets | | | | | | | | | |
| Cash and cash equivalents | | | 3,078,339 | | | | 85,893 | | | | 307 | |
| Secured Note and Debt Discount | | | 473,146 | | | | 453,025 | | | | - | |
| Prepaid Expenses and Accounts Receivable | | | 188,075 | | | | 4,207 | | | | - | |
| Total Current Assets | | | 3,739,561 | | | | 543,125 | | | | 307 | |
| | | | | | | | | | | | | |
| Fixed Assets | | | | | | | | | | | | |
| Property and Equipment, Net | | | 1,442,222 | | | | 55,124 | | | | - | |
| Goodwill | | | 26,594,710 | | | | - | | | | - | |
| Other Assets | | | 346,755 | | | | 226,962 | | | | 50,625 | |
| TOTAL ASSETS | | | 32,123,247 | | | | 825,211 | | | | 50,932 | |
| | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | |
| Current Liabilities | | | | | | | | | | | | |
| Accounts payable and Accrued Liabilities | | | 3,416,480 | | | | 154,412 | | | | 25,700 | |
| Note Payable to APH with Accrued Interest | | | 1,208,800 | | | | | | | | | |
| Total Current Liabilities | | | 4,625,280 | | | | 154,412 | | | | 25,700 | |
| | | | | | | | | | | | | |
| Minority Interest | | | 497,361 | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Long term Liabilities | | | | | | | | | | | | |
| Convertible Note & Accrued Interest | | | 654,658 | | | | 631,603 | | | | - | |
| Other long-term liabilities | | | 75,000 | | | | - | | | | 75,129 | |
| Total Long term Liabilities | | | 729,658 | | | | 631,603 | | | | 75,129 | |
| | | | | | | | | | | | | |
| Commitments and Contingencies | | | - | | | | - | | | | - | |
| TOTAL LIABILITIES | | | 5,852,298 | | | | 786,015 | | | | 100,829 | |
| | | | | | | | | | | | | |
| Stockholders' Deficit: | | | | | | | | | | | | |
| Common Stock - $0.00001 par value - 400,000,000 | | | | | | | | | | | | |
| shares authorized, 63,586,666 issued and | | | | | | | | | | | | |
| outstanding as of 12/31/10; 104,120,000 issued and | | | 636 | | | | 1,041 | | | | 800 | |
| outstanding as of 7/31/10 | | | | | | | | | | | | |
| Additional Paid-In Capital | | | 26,760,664 | | | | 240,959 | | | | - | |
| Accumulated deficit | | | (490,351 | ) | | | (202,804 | ) | | | (50,697 | ) |
| TOTAL STOCKHOLDERS DEFICIT | | | 26,270,949 | | | | 39,196 | | | | (49,897 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | | | 32,123,247 | | | | 825,211 | | | | 50,932 | |
| | | | | | | | | | | | | |
| | | | | | | | - | | | | - | |
The accompanying notes are an integral part of these financial statements.
FOREX INTERNATIONAL TRADINGINTERNATIONALTRADING CORP.
CONSOLIDATED AUDITED STATEMENT OF INCOME AND EXPENSESBALANCE SHEETS
(Does not include operating results of Triple 8 Limited)December 31, 2011 and 2010
| | | | | | | | | | |
| | | Year Ended | | | Year Ended | | | Year Ended | |
| | | December 31, 2010 | | | July 31, 2010 | | | July 31, 2009 | |
| | | AUDITED | | | AUDITED | | | AUDITED | |
| Revenue | | | | | | | | | |
| Net gain from foreign currency future operations | | | 128,281 | | | | 39,416 | | | | - | |
| Consulting & Services | | | 20,000 | | | | 29,500 | | | | 5000 | |
| Total Revenue | | | 148,281 | | | | 68,916 | | | | 5,000 | |
| Cost of Revenue | | | - | | | | - | | | | - | |
| Gross Profit | | | 148,281 | | | | 68,916 | | | | 5,000 | |
| | | | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | | | |
| Salaries | | | 177,208 | | | | 100,094 | | | | - | |
| Rent & Office | | | 116,473 | | | | 13,229 | | | | - | |
| Marketing expenses | | | 11,100 | | | | - | | | | - | |
| Professional Fees | | | 73,067 | | | | 74,048 | | | | 2,500 | |
| Filing Fees | | | 30,011 | | | | 25,456 | | | | - | |
| Depreciation & Amortization | | | 105,458 | | | | 6,178 | | | | - | |
| Travel | | | 25,510 | | | | 13,745 | | | | - | |
| Other Expenses | | | 1,000 | | | | 3,563 | | | | - | |
| Total Operating Expenses | | | 539,827 | | | | 236,313 | | | | 2,500 | |
| | | | | | | | | | | | | |
| Net Profit (Loss) from Operations | | | (391,546 | ) | | | (167,397 | ) | | | 2,500 | |
| Interest Income | | | - | | | | 3,025 | | | | - | |
| Interest expense | | | (48,108 | ) | | | (40,932 | ) | | | - | |
| Interest Expense, net | | | (48,108 | ) | | | (37,907 | ) | | | - | |
| Pretax Income (Loss) | | | (439,654 | ) | | | (205,304 | ) | | | 2,500 | |
| Income Taxes | | | - | | | | - | | | | - | |
| Net Profit (Loss) after Taxes | | | (439,654 | ) | | | (205,304 | ) | | | 2,500 | |
| Weighted average number of common shares outstanding | | | | | | | | | | | | |
| Basic | | | 95,827,580 | | | | 104,120,000 | | | | 80,000,000 | |
| Diluted | | | 95,827,580 | | | | 104,120,000 | | | | 80,000,000 | |
| Net Loss per share - basic | | | (0.00459 | ) | | | (0.00197 | ) | | | 0.00003 | |
| Net Loss per share - fully diluted | | | (0.00459 | ) | | | (0.00197 | ) | | | 0.00003 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | December 31, | |
| | | | | | | |
| | | 2011 | | | 2010 | |
| | | | | | (Restated) | |
| ASSETS | | | | | | |
| | | | | | | |
| Current assets : | | | | | | |
| Cash and cash equivalents | | $ | 411,656 | | | $ | 460,149 | |
| Accounts receivable | | | - | | | | 20,000 | |
| Note and short term receivables, net of allowance for credit losses of | | | | | |
| $100,000 and $0 as of December 31, 2011 and 2010, respectively | | | 1,319,900 | | | | 423,148 | |
| Prepaid expenses and other current assets | | | 10,655 | | | | 3,236 | |
| Total current assets | | | 1,742,211 | | | | 906,533 | |
| | | | | | | | | |
| Property and equipment, net | | | 13,944 | | | | 17,661 | |
| | | | | | | | | |
| Investment in private company | | | - | | | | 8,700,000 | |
| | | | | | | | | |
| Other assets | | | 17,560 | | | | 270,239 | |
| | | | | | | | | |
| Total assets | | $ | 1,773,715 | | | $ | 9,894,433 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| Current liabilities : | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 501,016 | | | $ | 186,541 | |
| Notes payable and accrued interest | | | 1,142,492 | | | | 1,208,800 | |
| Total current liabilities | | | 1,643,508 | | | | 1,395,341 | |
| | | | | | | | | |
| Long-term liabilities: | | | | | | | | |
| Notes payable and accrued interest, net of debt discount of | | | | | | | | |
| $0 and $75,890 in 2011 and 2010, respectively | | | - | | | | 578,768 | |
| | | | | | | | | |
| Total liabilities | | | 1,643,508 | | | | 1,974,109 | |
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders' equity: | | | | | | | | |
| Series A Preferred stock, $0.00001 par value, 20,000,000 and 0 shares authorized; | |
| 0 shares issued as of December 31, 2011 and 2010, respectively | | | - | | | | - | |
| | | | | | | | | |
| Series B Preferred stock, $0.00001 par value, 20,000,000 and 0 shares authorized; | |
| 45,000 and 0 shares issued as of December 31, 2011 and 2010, respectively | | | - | | | | - | |
| | | | | | | | | |
| Common stock - $0.00001 par value, 400,000,000 shares authorized; 34,248,585 | | | | | | | | |
| and 63,586,666 shares issued and outstanding as of December 31, 2011 | | | | | |
| and 2010, respectively | | | 343 | | | | 636 | |
| | | | | | | | | |
| Treasury stock at cost; 38,000 and 0 at December 31, 2011 and 2010, respectively | | | (11,059 | ) | | | - | |
| Additional paid-in capital | | | 1,372,333 | | | | 8,410,039 | |
| Accumulated deficit | | | (1,231,410 | ) | | | (490,351 | ) |
| | | | | | | | | |
| Total stockholders' equity | | | 130,207 | | | | 7,920,324 | |
| | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,773,715 | | | $ | 9,894,433 | |
| | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
FOREX INTERNATIONALTRADING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Two Years Ended December 31, 2011
| | | | | | | |
| | | 2011 | | | 2010 | |
| | | | | | | |
| Revenue : | | | | | | |
| Income from foreign currency operations | | $ | 616 | | | $ | 128,281 | |
| Consulting and services | | | 10,000 | | | | 20,000 | |
| Total revenue | | | 10,616 | | | | 148,281 | |
| | | | | | | | | |
| General and administrative expenses | | | 1,527,321 | | | | 515,717 | |
| | | | | | | | | |
| Loss from operations | | | (1,516,705 | ) | | | (367,436 | ) |
| | | | | | | | | |
| Other income (expense): | | | | | | | | |
| Gain on sale of investment in private | | | 904,100 | | | | - | |
| Interest expense, net of interest income of $36,844 and $0 | | | | | |
| in 2011 and 2010, respectively | | | (128,454 | ) | | | (72,218 | ) |
| Total other income (expense) | | | 775,646 | | | | (72,218 | ) |
| | | | | | | | | |
| Loss before income taxes | | | (741,059 | ) | | | (439,654 | ) |
| | | | | | | | | |
| Income tax expense | | | - | | | | - | |
| | | | | | | | | |
| Net loss | | $ | (741,059 | ) | | $ | (439,654 | ) |
| | | | | | | | | |
| Net loss per share: | | | | | | | | |
| Basic and diluted | | $ | (0.02 | ) | | $ | (0.00 | ) |
| | | | | | | | | |
| Weighted average number of common shares outstanding: | | | | | |
| Basic and diluted | | | 41,795,274 | | | | 95,827,580 | |
| | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
FOREX INTERNATIONALTRADING CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Two Years Ended December 31, 2011
| | | Series A | | | Series B | | | | | | | | | Treasury | | | | | | | | | | |
| | | Convertible Preferred Stock | | | Convertible Preferred Stock | | | Common Stock | | | Stock at Cost | | | | | | | | | | |
| | | Shares | | | Amount | | | Preferred Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Additional Paid In Capital | | | Accumulated Deficit | | | Total | |
| Balances at December 31, 2009 | | | - | | | $ | - | | | | - | | | $ | - | | | | 80,000,000 | | | $ | 800 | | | | - | | | $ | - | | | $ | - | | | $ | (50,697 | ) | | $ | (49,897 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock issued in private placement, net of offering costs of $50,625 | | | - | | | | - | | | | - | | | | - | | | | 20,000,000 | | | | 200 | | | | - | | | | - | | | | 149,175 | | | | - | | | | 149,375 | |
| Restricted common shares issued to an executive | | | - | | | | - | | | | - | | | | - | | | | 4,000,000 | | | | 40 | | | | - | | | | - | | | | 39,960 | | | | - | | | | 40,000 | |
| Restricted common shares issued to a consultant | | | - | | | | - | | | | - | | | | - | | | | 120,000 | | | | 1 | | | | - | | | | - | | | | 1,199 | | | | - | | | | 1,200 | |
| Restricted common shares issued in investment of 44.5 % of Triple 8 Limited | | | - | | | | - | | | | - | | | | - | | | | 25,000,000 | | | | 250 | | | | - | | | | - | | | | 7,499,750 | | | | - | | | | 7,500,000 | |
| Restricted common shares issued to acquire a 20% interest in Forex NYC | | | - | | | | - | | | | - | | | | - | | | | 1,000,000 | | | | 10 | | | | - | | | | - | | | | 199,990 | | | | - | | | | 200,000 | |
| Return and cancellation of Medirad shares | | | - | | | | - | | | | - | | | | - | | | | (30,000,000 | ) | | | (300 | ) | | | - | | | | - | | | | - | | | | - | | | | (300 | ) |
| Return and cancellation of Rasel LTD shares | | | - | | | | - | | | | - | | | | - | | | | (40,000,000 | ) | | | (400 | ) | | | - | | | | - | | | | - | | | | - | | | | (400 | ) |
| Private placement shares issued | | | - | | | | - | | | | - | | | | - | | | | 3,466,666 | | | | 35 | | | | - | | | | - | | | | 519,965 | | | | - | | | | 520,000 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (439,654 | ) | | | (439,654 | ) |
| Balances at December 31, 2010 - Restated | | | - | | | $ | - | | | | - | | | $ | - | | | | 63,586,666 | | | $ | 636 | | | | - | | | $ | - | | | $ | 8,410,039 | | | $ | (490,351 | ) | | $ | 7,920,324 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Additional private placement shares issued | | | - | | | | - | | | | - | | | | - | | | | 188,965 | | | | 2 | | | | - | | | | - | | | | 28,343 | | | | - | | | | 28,345 | |
| Restricted common shares issued for consulting services | | | - | | | | - | | | | - | | | | - | | | | 10,000 | | | | - | | | | - | | | | - | | | | 2,000 | | | | - | | | | 2,000 | |
| Restricted common shares issued to ATL for certain draws on a note to pay certain expenses | | | - | | | | - | | | | - | | | | - | | | | 324,234 | | | | 3 | | | | - | | | | - | | | | 71,733 | | | | - | | | | 71,736 | |
| Restricted common shares issued to investor relations firm | | | - | | | | - | | | | - | | | | - | | | | 700,000 | | | | 7 | | | | - | | | | - | | | | 209,993 | | | | - | | | | 210,000 | |
| Mladen Poropat conversion of debt to common shares | | | - | | | | - | | | | - | | | | - | | | | 2,500,000 | | | | 25 | | | | - | | | | - | | | | 199,975 | | | | - | | | | 200,000 | |
| Restricted common shares issued for commitment fee in investment | | | - | | | | - | | | | - | | | | - | | | | 1,300,954 | | | | 13 | | | | - | | | | - | | | | 149,987 | | | | - | | | | 150,000 | |
| Issuance of Series A preferred shares to HAM pursuant to share exchange agreement to acquire an additional 5% of Triple 8 Limited | | | 12,000 | | | | - | | | | - | | | | - | | | | | | | | - | | | | - | | | | - | | | | 1,200,000 | | | | - | | | | 1,200,000 | |
| Issuance of Series A preferred shares to APH pursuant to share exchange agreement and cancellation of related common shares | | | 100,000 | | | | 1 | | | | - | | | | - | | | | (33,000,000 | ) | | | (330 | ) | | | - | | | | - | | | | 329 | | | | - | | | | - | |
| Return and cancellation of common shares issued for Forex NYC | | | - | | | | - | | | | - | | | | - | | | | (1,000,000 | ) | | | (10 | ) | | | - | | | | - | | | | (199,990 | ) | | | - | | | | (200,000 | ) |
| Repurchase of common shares on open market | | | - | | | | - | | | | - | | | | - | | | | (38,000 | ) | | | - | | | | 38,000 | | | | (11,059 | ) | | | - | | | | - | | | | (11,059 | ) |
| Issuance of Series B preferred shares to ATL and in exchange cancellation of common shares as per settlement agreement | | | - | | | | - | | | | 45,000 | | | | - | | | | (324,234 | ) | | | (3 | ) | | | - | | | | - | | | | 3 | | | | - | | | | - | |
| Annulment of 49.5 % investment in Triple 8 Limited | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (7,499,750 | ) | | | - | | | | (7,499,750 | ) |
| Cancellation of Series A preferred shares of HAM pursuant to Triple 8 settlement agreement | | | (12,000 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,200,000 | ) | | | - | | | | (1,200,000 | ) |
| Cancellation of common stock Series A preferred shares issued to APH pursuant to Triple 8 Limited settlement agreement | | | (100,000 | ) | | | (1 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (329 | ) | | | - | | | | (330 | ) |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (741,059 | ) | | | (741,059 | ) |
| Balances at December 31, 2011 | | | - | | | $ | - | | | | 45,000 | | | $ | - | | | | 34,248,585 | | | $ | 343 | | | | 38,000 | | | $ | (11,059 | ) | | $ | 1,372,333 | | | $ | (1,231,410 | ) | | $ | 130,207 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
FOREX INTERNATIONAL TRADING CORP.
CONSOLIDATED AUDITED CHANGES IN STOCKHOLDERS' EQUITY
(Does not include the equity of Triple 8 Limited)
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | Common | | | Additional | | | Retained | | | | |
| | | Shares | | | Stock | | | Paid In Capital | | | Earning (Deficit) | | | Total | |
| Balance at July 22, 2009 | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Stock Issued | | | 80,000,000 | | | | 800 | | | | - | | | | - | | | | 800 | |
| Net Profit | | | - | | | | - | | | | - | | | | 2,500 | | | | 2,500 | |
| Balance at July 31, 2009 - Audited | | | 80,000,000 | | | | 800 | | | | - | | | | 2,500 | | | | 3,300 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss: transition period Aug 09-Dec 09 Audited | | | | | | | | | | | | | | | (53,197 | ) | | | (53,197 | ) |
| Balance at December 31, 2009 - Audited | | | 80,000,000 | | | | 800 | | | | - | | | | (50,697 | ) | | | (49,897 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Stock issued in private placement | | | 20,000,000 | | | | 200 | | | | 199,800 | | | | | | | | 200,000 | |
| Restricted shares issued to an Executive | | | 4,000,000 | | | | 40 | | | | 39,960 | | | | | | | | 40,000 | |
| Restricted Shares Issued to a Consultant | | | 120,000 | | | | 1 | | | | 1,199 | | | | | | | | 1,200 | |
| AP Holdings shares issued to acquire approximately 45% of Triple 8 Limited | | | 25,000,000 | | | | 250 | | | | 25,799,750 | | | | | | | | 25,800,000 | |
| Shares issued to Forex NYC to acquire 20% | | | 1,000,000 | | | | 10 | | | | 199,990 | | | | | | | | 200,000 | |
| Return and cancellation of Medirad shares | | | (30,000,000 | ) | | | (300 | ) | | | - | | | | | | | | (300 | ) |
| Return and cancellation of Rasel LTD shares | | | (40,000,000 | ) | | | (400 | ) | | | - | | | | | | | | (400 | ) |
| Private placement shares issued | | | 3,466,666 | | | | 35 | | | | 519,965 | | | | | | | | 520,000 | |
| Net loss: for the year ended 12/31/10 - Audited | | | | | | | | | | | | | | | (439,654 | ) | | | (439,654 | ) |
| Balance at December 31, 2010 - Audited | | | 63,586,666 | | | | 636 | | | | 26,760,664 | | | | (490,351 | ) | | | 26,270,949 | |
| | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
FOREX INTERNATIONAL TRADING CORP.
CONSOLIDATED AUDITED STATEMENT OF CASH FLOWS
| | | | | | | | | | |
| | | | | | | | | | |
| | | Year Ended | | | Year Ended | | | Year Ended | |
| | | December 31 2010 | | | July 31, 2010 | | | July 31, 2009 | |
| | | AUDITED | | | AUDITED | | | AUDITED | |
| Cash Flows From Operating Activities | | | | | | | | | |
| Net Profit (loss) | | | (439,654 | ) | | | (205,304 | ) | | | 2,500 | |
| | | | | | | | | | | | | |
| Adjustments to reconcile net income (loss) to | | | | | | | | | | | | |
| net cash (used) provided by operating activities: | | | | | | | | | | | | |
| Depreciation & amortization | | | 105,458 | | | | 6,178 | | | | - | |
| Other adjustments | | | (158,566 | ) | | | - | | | | - | |
| Decrease (Increase) in Accounts Receivable | | | (23,236 | ) | | | 793 | | | | (5,000 | ) |
| Increase in Accounts Payable and Accrued Expenses | | | 160,841 | | | | 101,287 | | | | 53,125 | |
| | | | | | | | | | | | | |
| Net cash provided (used) by operating activities | | | (355,157 | ) | | | (97,046 | ) | | | 50,625 | |
| | | | | | | | | | | | | |
| Cash Flows from Investing Activities | | | | | | | | | | | | |
| Purchase of fixed assets | | | (20,097 | ) | | | (17,420 | ) | | | - | |
| Cash received from investment in subsidiary | | | 2,618,190 | | | | - | | | | - | |
| Acquisition of Triple 8 Limited | | | (27,000,000 | ) | | | - | | | | - | |
| Leasehold improvements | | | (40,732 | ) | | | (40,732 | ) | | | - | |
| | | | | | | | | | | | | |
| Net cash used by investing activities | | | (24,442,639 | ) | | | (58,152 | ) | | | - | |
| | | | | | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | | | | | |
| Issuance of Common Stock | | | 441,200 | | | | 241,200 | | | | 800 | |
| Advance on issuance of stock | | | 520,000 | | | | | | | | | |
| Increase in Capitalized Costs Related to Issuance of Stock | | | - | | | | - | | | | (50,625 | ) |
| Issuance of note payable in connection with Triple 8 acquisition | | | 1,200,000 | | | | - | | | | - | |
| Issuance of shares in connection with Triple 8 acquisition | | | 25,800,000 | | | | - | | | | - | |
| Issuance of Notes to Affiliated Party | | | 54,159 | | | | 128,452 | | | | - | |
| Issuance of Convertible Notes to Third Party | | | 511,507 | | | | 503,151 | | | | - | |
| Consideration returned for return of shares | | | (700 | ) | | | - | | | | - | |
| Investment in Secured Note | | | (411,047 | ) | | | (403,025 | ) | | | - | |
| Investment in Debt Discount | | | (100,000 | ) | | | (100,000 | ) | | | - | |
| Investment in Project | | | (33,932 | ) | | | (24,128 | ) | | | - | |
| Investment in Licensing and Websites | | | (105,359 | ) | | | (105,359 | ) | | | - | |
| | | | | | | | | | | | | |
| Net cash provided (used) by financing activities | | | 27,875,828 | | | | 240,291 | | | | (49,825 | ) |
| | | | | | | | | | | | | |
| Net Increase in cash and cash equivalents | | | 3,078,032 | | | | 85,093 | | | | 800 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, Beginning of Period | | | 307 | | | | 800 | | | | - | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, End of Period | | | 3,078,339 | | | | 85,893 | | | | 800 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Non-cash transactions - Accrued interest on notes receivable | | | 23,145 | | | | 3,025 | | | | - | |
| Non-cash transactions - Accrued interest on notes payable | | | 54,657 | | | | 6,603 | | | | - | |
| Non-cash transactions - Issuing of Convertible Note | | | 500,000 | | | | 500,000 | | | | - | |
| Non-cash transactions - Receiving of Secured Note | | | 400,000 | | | | 400,000 | | | | | |
| Non-cash transactions - Issuing of Restricted Shares | | | 41,200 | | | | 41,200 | | | | - | |
| Non-cash transactions - Issuance of shares in connection with Triple 8 acquisition | | | 25,800,000 | | | | - | | | | - | |
| Non-cash transactions - Issuance of note payable in connection with Triple 8 acquisition | | | 1,200,000 | | | | - | | | | - | |
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
FOREX INTERNATIONAL TRADING CORP. STATEMENTS OF CASH FLOWS
TWO YEARS ENDED DECEMBER 31, 20102011
NOTES TO CONSOLIDATED AUDITED FINANCIAL STATEMENTS
NOTE 1
History and Organization of the Company
Forex International Trading Corp. and its subsidiaries and/or variable interests (“Forex”, “FXIT”, or the “Company”), a Nevada corporation, is principally engaged in offering foreign currency market trading to non US residents, professionals and retail clients over its web-based trading systems.
Shares in the Company are currently listed for trading on the Over the Counter Bulletin Board listings (OTCBB: FXIT). The Company’s headquarters and operating offices are located in New York, NY. The CUSIP number for the Company is 34631J104 and The ISIA number of FXIT is – US34631J1043.
On April 19, 2010, the Company entered into a Software Licensing Agreement with Triple 8 Limited (“Triple 8”) which was dated April 12, 2010 whereby the Company will license Triple 8’s proprietary trading software (the “Software”) for the purpose of developing a Forex Trading Platform and introducing prospective clients (“End Users”). Triple 8 will create a website for the Company, which will be funded by the Company at a cost of $50,000 (the “Setup Fee”). Upon the Company and Triple 8 generating $100,000 in revenue under the agreement, the Company will be reimbursed 50% of the Setup Fee ($25,000). The Company will receive 30% of the net profit generated from End Users, which will be increased to 50% in the event that the monthly volume generated by the Company is in excess of $250 million. Triple 8 created a website for the Company under the domain www.4xint.com which is blocked for US and Canadian clients. The Company maintains a corporate website under the domain www.forex-international-trading.com .
Overview
The Company was incorporated on July 22, 2009 as a development stage company under the laws of the State of Nevada as “Forex International Trading Corp”. On September 9, 2009 the Company filed form S-1 General form for registration of securities under the Securities Act of 1933 with the SEC, which became effective on March 5, 2010.
On March 24, 2010 the Company incorporated its wholly-owned subsidiary in the State of Israel under the name: FOREX INTERNATIONAL TRADING CORP M.S. LTD – Company number 514424985 (“Forex Sub”). To date, Forex Sub has not commenced operations, and only accepts bank deposits on behalf of investors, as authorized by the Company
On April 19, 2010, the Company entered into a Software Licensing Agreement with Triple 8 as detailed above.
On April 23, 2010, the Company entered into an Employment Agreement (the “Agreement”) with Darren Dunckel (“Executive”) whereby the Company will employ Executive as its Chief Executive Officer for a term of two years (the “Term”). Executive does not have any family relationship with any director, executive officer or person nominated or chosen by the Company to become a director or executive officer In addition, Executive has been appointed as a member of the Board of Directors of the Company. For his services during the Term as Chief Executive Officer, the Company will pay Executive a salary of $120,000 to be paid on a monthly basis at a rate of $10,000 per month. Executive will also be granted a signing bonus consisting of 4,000,000 shares of common stock of the Company upon signing the Agreement. Additionally, if the Company generates net income of at least $1,000,000 during any fiscal year during the Term, the Company will pay the Executive an annual bonus in the amount of $100,000. Executive will also receive during the Term such medical, health and disability insurance as the Company provides to its executive officers, two weeks of vacation in each calendar year and eligibility to participate in such pension, profit-sharing, retirement and other benefits as are available to executive officers of the Company.
| | | 2011 | | | 2010 | |
| | | | | | (Restated) | |
| Cash Flows From Operating Activities: | | | | | | |
| Net loss | | $ | (741,059 | ) | | $ | (439,654 | ) |
| Adjustments to reconcile net loss to net cash | | | | | | | | |
| provided by (used in) operating activities: | | | | | | | | |
| Loss on termination of lease | | | - | | | | 32,809 | |
| Loss on disposition of joint venture | | | - | | | | 35,512 | |
| Depreciation of property and equipment | | | 5,232 | | | | 10,717 | |
| Amortization of intangible assets | | | 52,679 | | | | 35,120 | |
| Amortization of debt discount | | | 41,668 | | | | 24,110 | |
| Bad debts | | | 130,000 | | | | - | |
| Gain on sale of disposition of interest in private company | | | (904,100 | ) | | | - | |
| Common stock issued to consultants for services rendered | | | 362,000 | | | | 1,200 | |
| Common stock issued to an executive | | | - | | | | 40,000 | |
| Changes in assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (10,000 | ) | | | (20,000 | ) |
| Prepaid expenses and other current assets | | | (7,419 | ) | | | (3,236 | ) |
| Accrued interest on notes receivable | | | (36,657 | ) | | | (23,148 | ) |
| Accounts payable and accrued expenses | | | 319,071 | | | | 160,141 | |
| Accrued interest on notes payable | | | 142,341 | | | | 38,329 | |
| | | | | | | | | |
| Net cash used in operating activities | | | (646,244 | ) | | | (108,100 | ) |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Purchase of fixed assets | | | (1,515 | ) | | | (20,455 | ) |
| Issuance of a note receivable | | | (150,000 | ) | | | - | |
| Proceeds received from sale of interest in private company | | | 731,980 | | | | - | |
| Leasehold improvements | | | - | | | | (40,732 | ) |
| | | | | | | | | |
| Net cash provided by (used in) investing activities | | | 580,465 | | | | (61,187 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Issuance of common stock in private placement | | | 28,345 | | | | 720,000 | |
| Purchase of shares returned to treasury | | | (11,059 | ) | | | - | |
| Issuance of notes payable to affiliate party | | | - | | | | 50,000 | |
| Investment in joint venture | | | - | | | | (35,512 | ) |
| Investment in licensing and websites | | | - | | | | (105,359 | ) |
| | | | | | | | | |
| Net cash provided by financing activities | | | 17,286 | | | | 629,129 | |
| | | | | | | | | |
| Net (decrease) increase in cash and cash equivalents | | | (48,493 | ) | | | 459,842 | |
| | | | | | | | | |
| Cash and cash equivalents, beginning of year | | | 460,149 | | | | 307 | |
| | | | | | | | | |
| Cash and cash equivalents, end of year | | $ | 411,656 | | | $ | 460,149 | |
| | | | | | | | | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | |
| Cash paid during the year for: | | | | | | | | |
| Interest | | $ | - | | | $ | - | |
| | | | | | | | | |
| Income taxes | | $ | - | | | $ | - | |
| | | | | | | | | |
| NON-CASH INVESTING ACTIVITIES: | | | | | | | | |
| Issuance of common stock in connection with investment | | | | | | | | |
| in private company | | $ | - | | | $ | 7,500,000 | |
| Issuance of note payable in connection with investment | | | | | | | | |
| in private company | | $ | - | | | $ | 1,200,000 | |
| Issuance of restricted shares | | $ | - | | | $ | 41,200 | |
| Issuance of convertible note | | $ | - | | | $ | 500,000 | |
| Receipt of secured note | | $ | - | | | $ | 400,000 | |
| Debt discount on issuance of convertible note | | $ | - | | | $ | 100,000 | |
| Restricted common shares issued to acquire a 20% interest in Forex NYC | | $ | - | | | $ | 200,000 | |
| Restricted common shares issued to ATL for certain draws on a note | | | | | | | | |
| to pay certain expenses | | $ | 71,736 | | | $ | - | |
| Issuance of Series A preferred shares issued to HAM pursuant to | | | | | | | | |
| share exchange Convertible Preferred Share issued to HAM | | | | | | | | |
| to acquire an additional 5% of private company | | $ | 1,200,000 | | | $ | - | |
| Return and cancellation of common shares issued to FOREX NYC | | $ | 200,000 | | | $ | - | |
| Mladen Poropat conversion of debt to common shares | | $ | 200,000 | | | $ | - | |
| Issuance of Series B preferred shares to ATL in exchange for | | | | | | | | |
| cancellation of common shares as per settlement agreement | | $ | 159,495 | | | $ | - | |
| Cancellation of Series A convertible preferred shares issued to APH | | | | | | | | |
| pursuant to private company settlement agreement | | $ | 7,499,750 | | | $ | - | |
| Cancellation of Series A convertible preferred shares issued to HAM | | | | | | | | |
| pursuant to private company settlement agreement | | $ | 1,200,000 | | | $ | - | |
| Recording of short-term receivable as part of private company settlement | | $ | 1,269,000 | | | $ | - | |
| Issuance of a note payable to Cordelia as part of private company settlement | | $ | 1,000,000 | | | $ | - | |
| | | | | | | | | |
| | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
OnFOREX INTERNATIONAL TRADING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011
1. Organization and Nature of Business
Forex International Trading Corp. (the “Company”) was incorporated on July 29, 2010, Anita Atias and Stewart Reich were elected as members22, 2009 under the laws of the BoardState of DirectorsNevada and is headquartered in Haifa, Israel. 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.
2. Summary of Significant Accounting Policies
Presentation and Basis of Financial Statements
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial statements include the accounts of Forex International Trading Corp. and all of its consolidated subsidiaries (collectively the “Company”). All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with 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 Company. Therefinancial 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 note 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 no understanding or arrangement between Mrs. Atias and Mr. Reich and any other person pursuant torecognized when management believes it is probable that payments will not be received on some portion of the loan, which they were appointed as directors. Mrs. Atias and Mr. Reich do not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director oris determined on an executive officer. Mrs. Atias and Mr. Reich have not had direct or indirect material interest in any transaction or proposed transaction, in which theindividual loan basis. The Company was or is a proposed participant exceeding $120,000. Mrs. Atias and Mr. Reich will each receiveevaluates 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 commencement of each term shares of common stockrelated depreciation is computed using the straight-line method over the estimated useful lives of the Company registered on a Form S-8 Registration Statement equalrespective assets. Expenditures for repairs and maintenance are charged to $6,000 divided byoperations as incurred. Renewals and betterments are capitalized. Upon the Company’s market price discounted by 25%. On December 29, 2010, Anita Atias, resigned as a directorsale 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 Company due to a potential conflictestimated life of interest. Ms. Atias is currently the Operations Managerasset or the lease term.
As required by GAAP for Online Trading Academy andlong-lived assets, the Company now operates in a similar industry (See Subsequent Events).
On August 5, 2010, Mr. William Glass was elected as membersevaluates the fair value of the Board of Directors of the Company, which such appointment was accepted by Mr. Glass on August 9, 2010. There is no understanding or arrangement between Mr. Glassits property and any other person pursuant to which he was appointed as director. Mr. Glass does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Mr. Glass has not had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant exceeding $120,000. Mr. Glass will receive,equipment on an annual basis ator whenever events or changes in circumstances indicate that the commencementcarrying amounts may not be recoverable. Any impairment of each term, shares of common stockvalue is recognized when the carrying amount of the Company registeredasset exceeds its fair value. There were no impairment losses during either of the years ended December 31, 2011 and 2010.
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 Form S-8 Registration Statement equalhierarchy which 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 which describe the degree of objectivity of the inputs used to $6,000 divided by the Company’s market price discounted by 25%. (See Subsequent Events).determine fair value. The fair value hierarchy is set forth below:
On December 18, 2010, the Company entered into a Securities Purchase Agreement with Forex New York City, LLC (“Forex NYC”) pursuant to which the Company acquired twenty percent (20%) of the issued and outstanding equity of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the FNYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of common stock of the Company (See Subsequent Events).
On November 17, 2010, the Company entered into a Share Exchange Agreement (the “APH Agreement”) with AP Holdings Limited (“APH”) pursuant to which the Company agreed to acquire 17,924 ordinary shares of Triple 8 Limited, a corporation organized under the laws of Cyprus, engaged in the business of operating a Forex trading platform (“Triple”). The securities acquired from APH represent approximately 45% of the issued and outstanding securities of Triple. Pursuant to the APH Agreement, in consideration for the securities of Triple, the Company agreed to issue 36,000,000 shares of common stock of the Company as well as a 6% Convertible Note in the principal amount of $1,200,000 due February 15, 2011 (the “APH Note”). On December 30, 2010, the Company and APH entered into an amendment to the APH Agreement whereby the number of shares to be delivered by the Company was reduced from 36,000,000 to 25,000,000. Further, on December 30, 2010, in order to expedite the transaction and avoid further dilution of the existing shareholders, Medirad Inc. and Rasel Ltd., shareholders of the Company, have agreed to return an aggregate of 70,000,000 shares of common stock to the Company for cancellation upon closing of the APH Agreement. The above transaction closed on December 30, 2010. As of the date of these financial statements, the Company is on default on the APH Note. For settlement terms, please see Subsequent Events.
On December 29, 2010, the Company announced that it began trading on the Over the Counter (OTC) exchange under the symbol FXIT. The Company also announced in December that it was eligible to receive deposits only from customers outside the US and Canada.
Risk Management
Overview
The Company has exposure to credit risk, liquidity risk and market price risk. The company's Management has overall responsibility for the oversight of the Company's risk management within parameters established by the board of Directors. Triple activities, given the above mentioned risks, are monitored and managed as follows:
Credit risk
Credit risk is the risk of financial loss to the Company if a client fails to meet its margin requirements due to a loss of funds. Clients are required to deposit cleared funds as margin before they can trade. If the clients' margin falls below the minimum margin requirement to maintain a position, they will be issued a margin call.
The clients either have to increase the margin that they have deposited by providing additional funds or to reduce and/or close out their position. At any point the clients' account is in a status of margin call, the company may, at its discretion, liquidate some or all of that client's positions in order to bring them back into line with their margin requirements. The company also has potential credit risk exposure to market counterparties with which it hedges and with banks that hold company's funds and customers' funds.
The Company manages a number of accounts with leading international banks and brokers and does not expect such counterparties to fail to meet their obligations.
| Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
FOREX INTERNATIONAL TRADING CORP.
Liquidity risk
The liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The company continuously monitors its working capital adequacy, including forecast and actual gross profit and cash flows from operations.
Market price risk
Market risk arises from open contracts with customers and counterparties. Exposure to market risk is closely monitored in accordance with limits, and reduced through hedging with other institutions. (i.e. clearing the contracts and recognize a loss or revenue from actions in derivative financial instruments). The company is exposed to currency risk for its financial assets and liabilities which are denominated predominantly in US dollars. The gains and losses arising from the company's exposure are recognized in the profit and loss account.
NOTE 2
Summary of Significant Accounting Policies
Basis of consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary and all variable interest entities for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated upon consolidation. Control is determined based on ownership rights or, when applicable, whether the Company is considered the primary beneficiary of a variable interest entity. The balance sheet of Triple 8 Limited and its subsidiary was consolidated, not including consolidation of Triple 8 Limited (and its subsidiary) operations, as the acquisition took place at yearend. .
Marketable securities
The Company determines the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time of purchase, and re-evaluates such classification as of each balance sheet date. The Company assesses whether temporary or other-than-temporary gains or losses on its marketable securities have occurred due to increases or declines in fair value or other market conditions. The Company had marketable securities within continuing operations during the year, which have been sold in the market.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011
Cash and Cash Equivalents
The Company maintains a cash balance in a non-interest bearing account that currently does not exceed federally insured limits. For purposes of financial statement presentation, the Company considers all highly liquid instruments with a maturity of three months or less to be cash.
Revenue Recognition
The Company uses the accrual basis of accounting for all transactions. The Company recognized revenue and gains when earned and related costs of sales and expenses when incurred.
Fixed and Other Assets
Fixed assets are stated at cost, less accumulated depreciation. Office furniture and equipment are depreciated using the straight-line method over seven years. Computer equipment and software are depreciated using the straight-line method over three years. Leasehold improvements are amortized on a straight-line basis over the lesser of the useful life or the life of the lease (three years).
Costs of software acquired along with payroll costs and consulting fees relating to the development of internal use software, including that used to provide internet solutions, are capitalized. Once the software is placed in service, the costs are amortized over the estimated useful life.
Costs of Debt Discount are amortized over the life of the note that was discounted, typically two years.
Variable Interest Entities
The Company is required to consolidate variable interest entities (“VIE's”), where it is the entity’s primary beneficiary. VIE's are entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The primary beneficiary is the party that has exposure to a majority of the expected losses and/or expected residual returns of the VIE. For the year ended December 31, 2010, the balance sheets and results of operations of FOREX INTERNATIONAL TRADING CORP M.S. LTD, (our wholly owned subsidiary, which is not active in operation and serving as our agent), were consolidated into these financial statements. The Triple 8 acquisition took place at yearend; therefore, the balance sheet for Triple 8 is consolidated, but the statements of operation and cash flow are not.
On November 17, 2010, Forex International Trading Corp., a Nevada corporation (the “Company”), entered into a Share Exchange Agreement (the “APH Agreement”) with AP Holdings Limited (“APH”) pursuant to which the Company agreed to acquire 17,924 ordinary shares of Triple 8 Limited, a corporation organized under the laws of Cyprus, engaged in the business of operating a Forex trading platform (“Triple”). The securities acquired from APH represent approximately 45% of the issued and outstanding securities of Triple. Pursuant to the APH Agreement, in consideration for the securities of Triple, the Company agreed to issue 36,000,000 shares of common stock of the Company as well as a 6% Convertible Note in the principal amount of $1,200,000 due February 15, 2011 (the “APH Note”). On December 30, 2010, the Company and APH entered into an amendment to the APH Agreement whereby the number of shares to be delivered by the Company was reduced from 36,000,000 to 25,000,000. Further, on December 30, 2010, in order to expedite the transaction and avoid further dilution of the existing shareholders, Medirad Inc. and Rasel Ltd., shareholders of the Company, have agreed to return an aggregate of 70,000,000 shares of common stock to the Company for cancellation upon closing of the APH Agreement. The above transaction closed on December 30, 2010. | 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. |
Although the Company acquired approximately 45% of Triple, the Company determined that Triple was a VIE, and that the Company was the primary beneficiary of the VIE’s residual gains and losses, because it gained de-facto control of the Company’s operations through the appointment of one of its employees as the sole director of the VIE. The Company therefore elected to consolidate Triple’s balance sheet only in the financials herein, due to the fact that the transaction closed at yearend.
Loss per Share
Net loss per share is provided in accordance with ASC Codification Topic 260 Section S99-1 and Statement of Financial Accounting Standards No. 128 (SFAS #128) “Earnings Per Share”. Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period. The Company had no dilutive common stock equivalents, such as stock options or warrants as of the date of these financials.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | 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. |
Foreign currency translation
The Company considers the United States Dollar (“US Dollar” or "$") to be the functional currency of the Company and its subsidiary. The reporting currency of the Company is the US Dollar and accordingly, all amounts included in the consolidated financial statements have been presented or translated into US Dollars. For non-US subsidiaries that do not utilize the US Dollar as its functional currency, assets and liabilities are translated to US Dollars at period-end exchange rates, and income and expense items are translated at weighted-average rates of exchange prevailing during the period. Translation adjustments are recorded in “Accumulated other comprehensive income” within stockholders’ equity. Foreign currency transaction gains and losses are included in the consolidated results of operations for the periods presented.
Fair value of financial instruments
SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of the fair value of certain financial instruments. The carrying value of financial instruments, which include cash and cash equivalents, loansnotes receivable, notes payable, customer deposits and accrued expenses, approximate their fair values due to the short-term nature of these financial instruments. The carrying value of the Company’s note receivable approximates its fair value based on management’s best estimate of future cash collections.
Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income, requiresTreasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a full setfirst-in, first-out basis and any difference between the cost of general-purpose financial statements to be expanded to include the reporting of comprehensive income. Comprehensive income is comprised of two components, net income and other comprehensive income. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non owner sources. As of December 31, 2010 foreign currency translation adjustments were the only items of other comprehensive income for the Company.
Segment reporting
The Company follows Statement of ASC Codification Topic 220 and Statement of Financial Accounting Standards No. 130, “Disclosures About Segments of an Enterprise and Related Information”. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception.
Recent pronouncements
In May 2008, FAS No. 163, “Accounting for Financial Guarantee Insurance Contracts”, and SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”, were issued. In March 2008, FAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133 was issued.
The Financial Accounting Standards Board (FASB) issued Statement No. 168 – become effective on July 1, 2009 – The FASB Accounting Standards Codificationtreasury shares and the Hierarchy of Generally Accepted Accounting Principles which makes the Accounting Standards Codification (ASC) the source of authoritative U.S. GAAP recognized by the FASBre-issuance proceeds are charged to be applied by nongovernmental entities for interim and annual periods ending after September 15, 2009. Rules and interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The adoption of ASC Topic 105 did not have a material impact on the Company’s financial position, cash flows or result of operations. Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material effect on the Company’s operations or financial position.additional paid-in capital.
Stock-Based CompensationIncome Taxes
The Company accounts for income taxes using the liability method, which provides for an asset and liability approach to accounting for income taxes. Under this method, deferred tax assets and liabilities are recorded for future tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities, and measured using the current tax rates and laws that are expected to be in effect when the underlying assets or liabilities are anticipated to be recovered or settled. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount of tax benefits expected to be realized.
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.
Revenue Recognition
Income from foreign currency operations is earned by referring potential customers to foreign exchange trading companies. The Company’s websites identify potential customers with a short-term foreign exchange trading need. 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 during the year ended December 31, 2011 and $40,000 was recognized during the year ended December 31, 2010.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share considers the potential dilution that could occur if securities or other contracts to issue common stock were exercised or could otherwise cause the issuance of common stock, such as options, convertible notes and convertible preferred stock, were exercised or converted into common stock or could otherwise cause the issuance of common stock that then shared in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations and has adopted the disclosure only alternative of ASC Codification Topic 220 and SFAS No. 123, “Accounting for Stock-Based Compensation”earnings (loss). Options granted to consultants, independent representatives and other non-employeesSuch potential additional common shares are accounted for using the fair value method as prescribed by ASC Codification Topic 220 and SFAS No. 123.
Year End
On October 18, 2010, the Board of Directors of Forex the Company approved a changeincluded in the Company's fiscal yearcomputation of July 31 to December 31 (the “Fiscal Year Change”). The Company filed a transition report on Form 10-K coveringdiluted earnings per share. Diluted loss per share is not computed because any potential additional common shares would reduce the transition period of August 1, 2010 through December 31, 2010 (the “Transition Period”). The Company also filed its Form 10-Q for the nine months ended September 30, 2010 accordingly.reported loss per share and therefore have an antidilutive effect.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The future of the Company is dependent upon its ability to raise funds, generate revenues and upon future profitable operations from the development of its new business opportunities. The financial statements do not include any adjustments relating to the recoverability and classification of the Company’s assets or the payment of its liabilities that might be necessary in the event the Company cannot continue in existence.
Reclassifications
Certain reclassifications have been made to the prior years’ consolidated financial statements to conform to the current year’s presentation.
FOREX INTERNATIONAL TRADING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011
NOTE 33. Acquisition and Divestiture
Acquisitions and DivestituresInvestment in Private Company—Triple 8
On November 17, 2010, the Company entered into a Share Exchange Agreement, (the “APH Agreement”which closed on December 30, 2010, to acquire 17,924 common shares, representing 44.9% of the issued and outstanding shares of Triple 8 Limited (“Triple 8”) with APfrom A.P. Holdings Limited (“APH”) pursuant to APH agreement(the “APH Agreement”). In consideration for its purchase the Company issued 25,000,000 shares of common stock and a Note Payable (the “APH Note”) in the principal amount of $1,200,000, bearing interest at an annual rate of 6% and convertible into 6 million shares of common stock. The APH Note was originally due on February 15, 2011. Concurrently, certain shareholders agreed to issue 36,000,000surrender 70,000,000 shares of the Company’s common stock for cancellation to avoid diluting the ownership of the other existing shareholders.
Following the purchase of Triple 8 shares from APH, the Company entered into another Share Exchange Agreement to acquire 1,996 common shares, or 5% of the issued and outstanding common shares of Triple 8, from the H.A.M. Group Limited (“HAM”). As a result, the Company’s ownership of Triple 8 increased to 49.9% of the issued and outstanding common shares. As consideration for its purchase, the Company issued HAM 12,000 shares of Series A Preferred Stock and a 6% Convertible Debenture for $600,000, due June 30, 2011 (the “HAM Note”). The Series A Preferred Stock has a stated value of $100 per share and is convertible into common stock at a conversion price of $0.30 per share, thus representing 4,000,000 shares of common stock of the Company.
The Company has defaulted on its note payable to APH and on its obligation under the HAM Note. In order to avoid costly litigation and the potential detrimental impact of a judgment to the Company as well as a 6% Convertible Note in the principal amountresult of $1,200,000 due February 15, 2011 (the “APH Note”). On December 30, 2010,two defaults, the Company and APH entered into an amendmentagreement to annul its purchases of Triple 8 stock. As a part of the APH Agreement whereby the number of shares to be deliveredAnnulment:
| · | Triple 8 has agreed to pay the Company $2,001,000 (the “Triple Payments”) over time through November 2012. If Triple 8 fails to make any of the payments for a period of 60 days, it must transfer the original number of its common shares (17,924) purchased back to the Company. In addition, Triple 8 is not entitled to have any previous payments returned. |
| · | The Company issued a new $1,000,000 promissory note (the "CDOO Note") to an assignee of HAM and APH as consideration for the termination of the APH Note and the HAM Note, which were both in default. The assignee has the ability to foreclose on all shares of Triple 8 held by the Company. The CDOO note bears interest at an annual rate of ten percent (10%) and is due and payable in full on November 30, 2012. In the event that Triple 8 fails to make the Triple Payments, then the amount payable under the CDOO Note is to be reduced by half of the amount of any missed payment. |
| · | APH and HAM have agreed to return all of their stock holdings to the Company for cancellation. |
The Annulment closed on December 7, 2011, and the Company was reduced from 36,000,000 to 25,000,000. Further, on December 30, 2010,received its initial Triple Payment of $732,000 in order to expeditecash at that time. Subsequently, the transactionCompany received Triple Payments of $73,214, $68,214 and avoid further dilution$78,214 for the months of January, February and March 2012.
The Company initially accounted for its acquisition of Triple 8 using the acquisition method as prescribed by GAAP. Under the acquisition method, the acquirer must recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their acquisition date fair values. Although the Company acquired less than 50% of the existing shareholders, Medirad Inc.ownership of Triple 8, the use of the acquisition method and Rasel Ltd., shareholdersthe accounting treatment of Triple 8 was considered appropriate because the Company believed that it had acquired control of Triple 8. The basis behind the determination that the Company acquired control of Triple 8 even though it owned a minority stake, was that an employee of the Company became the sole member of the Board of Triple 8’s operating subsidiary and continued to be in that role until June 2011. In addition, the Company believed that Triple 8 was subject to consolidation under GAAP as a Variable Interest Entity.
However, in June 2011, Triple 8’s operating subsidiary’s management unilaterally removed the Company’s employee from its Board and asserted its control over business operations. Since then, the Company has reevaluated its determinations that it had acquired control of Triple 8 and that Triple 8 was subject to consolidation as a Variable Interest Entity. As a result, management has concluded that it never really had control and that the use of the acquisition method of accounting was not appropriate. Upon reconsideration, management also has concluded that Triple 8 was not subject to consolidation as a Variable Interest Entity essentially because the Company had no equity investment at risk. In coming to these conclusions, the Company considered the following:
| 1. | The fair value of the consideration paid in both of the Share Exchange Agreements is questionable. The original consideration included the Company’s stock and notes payable. Given that the fair value of the Company’s stock and the fair value of Triple 8 was difficult to determine and that the Company never made any cash payments for its obligations under the notes payable, there is a legitimate argument that no consideration was paid for the Triple 8 stock received under the Share Exchange Agreements. |
| a. | With respect to exchange value of the company’s stock, management takes into account that at the time of the Share Exchange Agreements the Company’s stock was not trading. [Since then, the Company’s stock has been a thinly traded penny stock that has had a high level of price volatility with respect to what stock has been traded and has not been rated by any analysts.] |
| b. | With respect to value in use of the would-be acquiree, management takes into account that at the time of the Share Exchange Agreements Triple 8 was a newly formed entity in business for only 2 years. Under the circumstances, any valuation of Triple 8 would be highly subjective. A market or cost approach to valuing Triple 8 was not feasible and an income approach requires highly subjective estimates about future operations, profits, and cash flows. |
| c. | The Company’s failure to make debt payments and the continuing revisions indicate that the Company’s Notes Payable were of little value to Triple 8’s sellers. |
FOREX INTERNATIONAL TRADING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011
| 2. | The unilateral removal of the Company’s employee from the Triple 8 Board and Triple 8’s operating subsidiary management assertion of its control over business operations indicates the Company’s inability to control Triple 8. |
These considerations have agreedled the Company to return an aggregateconclude that the purchase of 70,000,000 sharesTriple 8 involved no consideration. Furthermore, the Share Exchange Agreement transactions do not meet the conditions necessary to qualify as a business combination achieved without the transfer of consideration under GAAP.
The Company has also considered the use of the equity method and the cost method of accounting in connection with the Share Exchange Agreement transactions for the purchase of Triple 8. Generally, GAAP requires that investments in common stock toor in entities over which the investor can exercise significant influence, but not control, be accounted for using the equity method. Otherwise, an investment should be accounted for at cost. In addition, the Company believes that its investment in Triple 8 should be accounted for cancellation uponat cost because it did not have significant influence over the period from the closing of the APH Agreement through to date of the annulment agreement. While the Company did not have significant influence over Triple 8 during that period, the counterparties to the annulment agreement acknowledged the Company’s investment by entering into the annulment agreement. Therefore, these financial statements have been restated to present the investment in Triple 8 on a cost basis, with cost being determined by the market value of the Company’s stock paid and the stated value of the note payable issued under the APH Agreement. The above transactiongain on settlement of Triple 8 is accounted for as other income in the 2011 statement of operations.
A restated and reclassified consolidated balance sheet as of December 31, 2010 along with a restated and reclassified consolidated statement of cash flows for the year then ended are presented below. The Company had no change to its 2010 statement of operations since the Share Exchange Agreement effectively closed on December 30, 2010.
Although the Company acquired approximately 45% of Triple, the Company determined that Triple was a VIE, and that the Company was the primary beneficiary of the VIE’s residual gains and losses, because it gained de-facto control of the Company’s operations through the appointment of one of its employees as the sole director of the VIE. The Company therefore obligated to consolidate Triple’s balance sheet with its own, but given that the APH transaction closed at yearend, the income statement and statement of cash flows are not consolidated.
FOREX INTERNATIONAL TRADING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following reflects the pro-forma income statement if Triple had been acquired on January 1, 2010, rather than at the end of the year: TWO YEARS ENDED DECEMBER 31, 2011
| | | | | | | | | | |
| | | As Previously Reported | | | Net Change | | | As Restated | |
| | | | | | | | | | |
| ASSETS | | | | | | | | | |
| | | | | | | | | | |
| Current assets : | | | | | | | | | |
| Cash and cash equivalents | | $ | 3,078,339 | | | $ | (2,618,190 | ) | | $ | 460,149 | |
| Accounts receivable | | | - | | | | 20,000 | | | | 20,000 | |
| Notes and short term receivables | | | 473,146 | | | | (49,998 | ) | | | 423,148 | |
| Prepaid expenses and other current assets | | | 188,075 | | | | (184,839 | ) | | | 3,236 | |
| Total current assets | | | 3,739,560 | | | | (2,833,027 | ) | | | 906,533 | |
| | | | | | | | | | | | | |
| Property and equipment, net | | | 1,442,222 | | | | (1,424,561 | ) | | | 17,661 | |
| | | | | | | | | | | | | |
| Goodwill | | | 26,594,710 | | | | (26,594,710 | ) | | | - | |
| | | | | | | | | | | | | |
| Investment in Triple 8 Limited | | | - | | | | 8,700,000 | | | | 8,700,000 | |
| | | | | | | | | | | | | |
| Other assets | | | 346,755 | | | | (76,516 | ) | | | 270,239 | |
| | | | | | | | | | | | | |
| Total assets | | $ | 32,123,247 | | | $ | (22,228,814 | ) | | $ | 9,894,433 | |
| | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Current liabilities : | | | | | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 3,416,480 | | | $ | (3,229,939 | ) | | $ | 186,541 | |
| Notes payable and accrued interest, current portion | | | 1,208,800 | | | | - | | | | 1,208,800 | |
| Total current liabilities | | | 4,625,280 | | | | (3,229,939 | ) | | | 1,395,341 | |
| | | | | | | | | | | | | |
| Long-term liabilities: | | | | | | | | | | | | |
| Notes payable and accrued interest, net of current portion | | | 654,658 | | | | (75,890 | ) | | | 578,768 | |
| Other long-term liabilities | | | 75,000 | | | | (75,000 | ) | | | - | |
| | | | | | | | | | | | | |
| Total liabilities | | | 5,354,938 | | | | (3,380,829 | ) | | | 1,974,109 | |
| | | | | | | | | | | | | |
| Stockholders' equity: | | | | | | | | | | | | |
| Series A Preferred stock | | | - | | | | - | | | | - | |
| Series B Preferred stock | | | - | | | | - | | | | - | |
| Common stock | | | 636 | | | | - | | | | 636 | |
| Non-controlling Interest | | | 497,360 | | | | (497,360 | ) | | | - | |
| Treasury stock at cost | | | - | | | | - | | | | - | |
| Additional paid-in capital | | | 26,760,664 | | | | (18,350,625 | ) | | | 8,410,039 | |
| Accumulated deficit | | | (490,351 | ) | | | - | | | | (490,351 | ) |
| Total stockholders' equity | | | 26,768,309 | | | | (18,847,985 | ) | | | 7,920,324 | |
| | | | | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 32,123,247 | | | $ | (22,228,814 | ) | | $ | 9,894,433 | |
| | | | | | | | | | | | | |
| | | FXIT | | | Triple 8 | | | Consolidated | | | | | | | |
| | | Year Ended | | | Year Ended | | | Year Ended | | | Year Ended | | | Year Ended | |
| | | December 31, 2010 | | | December 31, 2010 | | | December 31, 2010 | | | July 31, 2010 | | | July 31, 2009 | |
| | | AUDITED | | | AUDITED | | | AUDITED | | | AUDITED | | | AUDITED | |
| Total Revenue | | | 148,281 | | | | 7,450,812 | | | | 7,599,093 | | | | 68,916 | | | | 5,000 | |
| Cost of Revenue | | | - | | | | 1,686,371 | | | | 1,686,371 | | | | - | | | | - | |
| Gross Profit | | | 148,281 | | | | 5,764,441 | | | | 5,912,722 | | | | 68,916 | | | | 5,000 | |
| Depreciation & Amortization | | | 105,458 | | | | 348,209 | | | | 453,667 | | | | 6,178 | | | | - | |
| Total Other Operating Expenses | | | 434,369 | | | | 4,532,859 | | | | 4,967,228 | | | | 230,135 | | | | 2,500 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Profit (Loss) from Operations (EBIT) | | | (391,546 | ) | | | 883,373 | | | | 491,827 | | | | (167,397 | ) | | | 2,500 | |
| | | | | | | | | | | | | | | | | | | | | |
| Minority interest in Net Profit (Loss) from Operations | | | - | | | | - | | | | 301,893 | | | | - | | | | - | |
| Total Interest Expense | | | (48,108 | ) | | | (268,507 | ) | | | (316,615 | ) | | | (37,907 | ) | | | - | |
| Pretax Income | | | (439,654 | ) | | | 614,866 | | | | (126,681 | ) | | | (205,304 | ) | | | 2,500 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Profit (Loss) after Taxes | | | (439,654 | ) | | | 547,900 | | | | (193,647 | ) | | | (205,304 | ) | | | 2,500 | |
| EBITDA | | | (286,088 | ) | | | 1,231,582 | | | | 945,494 | | | | (161,219 | ) | | | 2,500 | |
| Weighted average number of common shares outstanding | | | | | | | | | | | | | | | | | | | | |
| Basic | | | | | | | | | | | 95,827,580 | | | | 104,120,000 | | | | 80,000,000 | |
| Diluted | | | | | | | | | | | 95,827,580 | | | | 104,120,000 | | | | 80,000,000 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Loss per share - basic | | | | | | | | | | | (0.00202 | ) | | | (0.00197 | ) | | | 0.00003 | |
| Net Loss per share - fully diluted | | | | | | | | | | | (0.00202 | ) | | | (0.00197 | ) | | | 0.00003 | |
| | | | | | | | | | | | | | | | | | | | | |
On December 18, 2010, the Company entered into a Securities Purchase Agreement with Forex New York City, LLC (“Forex NYC”) pursuant to which the Company acquired twenty percent (20%) of the issued and outstanding equity of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the FNYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of common stock of the Company (See Subsequent Events).
NOTE 4
Short Term Secured Note & Accrued Interest
On July 8, 2010, the Company issued a Convertible Promissory Note to A.T. Limited (“ATL”) in aggregate principal amounts of $500,000 (the “Forex Note”). In consideration for the Company issuing the ATL Note, ATL issued the Company a Secured and Collateralized Promissory Note in the principle amount of $400,000 (the “ATL Note”). Concurrent with the conversion of the Forex Note, ATL must make a payment to the Company reducing a pro rata amount owed to the Company under the ATL Note. The ATL Note bears interest at the rate of 12% per annum and matures one year from the date of issuance. No interest or principal payments are required until the maturity date, but both principal and interest may be prepaid prior to maturity date and ATL is required to pay down an amount equal to any amounts converted under the Forex Note. The ATL Note is secured by shares of common stock of a publicly listed company on the Tel Aviv and London Stock Exchanges with an approximate market value of $400,000 (the “ATL Collateral”). In the event that ATL defaults on the ATL Note, the Company may take possession of the ATL Collateral and, in the event that the ATL Collateral is insufficient to pay the full debt owed under the ATL Note, the Company may pursue further remedies against ATL.
On November 8, 2010, the Company and ATL agreed that various loans in the principal amount of $71,736 (the “Prepaid Amount”) provided by ATL to the Company shall be applied to the ATL Note reducing the principal of the ATL Note by such amount. Accordingly, upon the initial conversions of the Forex Note, ATL will not be required to make such pro-rata payment reducing the ATL Note until the Prepaid Amount has been exceeded On or about January 18, 2011 the Company issued 324,234 common shares to ATL to pay the Prepaid Amount, in lieu of cash.
Per the issuing and receiving the notes, the Company recognizes a debt discount for the difference in the face value of the notes - $100,000. Said Note Discount will be amortized over the life of the Company note: two years. The current portion of Note Discount was presented as current assets, while the remaining long term balance was presented as other assets.
NOTE 5FOREX INTERNATIONAL TRADING CORP.
Property and Equipment, NetNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property Plant and Equipment for the Company consist as the following, as of December TWO YEARS ENDED DECEMBER 31, 2010 (Audited):2011
| | | | | | | | | | |
| | | As Previously Reported | | | Net Change | | | As Restated | |
| | | | | | | | | | |
| Cash Flows From Operating Activities: | | | | | | | | | |
| Net loss | | $ | (439,654 | ) | | $ | - | | | $ | (439,654 | ) |
| Adjustments to reconcile net loss to | | | | | | | | | | | | |
| net cash provided by (used in) operating activities: | | | | | | | - | | | | | |
| Loss on termination of lease | | | - | | | | 32,809 | | | | 32,809 | |
| Loss on disposition of joint venture | | | - | | | | 35,512 | | | | 35,512 | |
| Depreciation of property and equipment | | | 105,458 | | | | (94,741 | ) | | | 10,717 | |
| Amortization of intangible assets | | | - | | | | 35,120 | | | | 35,120 | |
| Amortization of debt discount | | | - | | | | 24,110 | | | | 24,110 | |
| Common stock issued to consultants for services rendered | | | - | | | | 1,200 | | | | 1,200 | |
| Common stock issued to an executive | | | - | | | | 40,000 | | | | 40,000 | |
| Other adjustments | | | (158,566 | ) | | | 158,566 | | | | - | |
| Changes in assets and liabilities: | | | | | | | | | | | | |
| Accounts receivable | | | (23,236 | ) | | | 3,236 | | | | (20,000 | ) |
| Prepaid expenses and other current assets | | | - | | | | (3,236 | ) | | | (3,236 | ) |
| Accrued interest on notes receivable | | | - | | | | (23,148 | ) | | | (23,148 | ) |
| Accounts payable and accrued expenses | | | 160,841 | | | | (700 | ) | | | 160,141 | |
| Accrued interest on notes payable | | | - | | | | 38,329 | | | | 38,329 | |
| | | | | | | | | | | | | |
| Net cash used in operating activities | | | (355,157 | ) | | | 247,057 | | | | (108,100 | ) |
| | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | |
| Purchase of fixed assets | | | (20,097 | ) | | | (358 | ) | | | (20,455 | ) |
| Cash received from investment in subsidiary | | | 2,618,190 | | | | (2,618,190 | ) | | | | |
| Acquisition of private company | | | (27,000,000 | ) | | | 27,000,000 | | | | | |
| Leasehold improvements | | | (40,732 | ) | | | - | | | | (40,732 | ) |
| | | | | | | | | | | | | |
| Net cash provided by (used in) investing activities | | | (24,442,639 | ) | | | 24,381,452 | | | | (61,187 | ) |
| | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | |
| Issuance of common stock in private placement | | | 441,200 | | | | 278,800 | | | | 720,000 | |
| Advance on issuance of common stock | | | 520,000 | | | | (520,000 | ) | | | - | |
| Issuance of note payable in connection wih acquisition | | | 1,200,000 | | | | (1,200,000 | ) | | | - | |
| Issuance of shares in connection with acquisition | | | 25,800,000 | | | | (25,800,000 | ) | | | - | |
| Issuance of notes payable to affiliate party | | | 54,159 | | | | (4,159 | ) | | | 50,000 | |
| Issuance of convertible notes to third-party | | | 511,507 | | | | (511,507 | ) | | | - | |
| Consideration returned for return of shares | | | (700 | ) | | | 700 | | | | - | |
| Investment in securied note | | | (411,047 | ) | | | 411,047 | | | | - | |
| Investment in debt discount | | | (100,000 | ) | | | 100,000 | | | | - | |
| Investment in project | | | (33,932 | ) | | | 33,932 | | | | - | |
| Investment in joint venture | | | - | | | | (35,512 | ) | | | (35,512 | ) |
| Investment in licensing and websites | | | (105,359 | ) | | | - | | | | (105,359 | ) |
| | | | | | | | | | | | | |
| Net cash provided by financing activities | | | 27,875,828 | | | | (27,246,699 | ) | | | 629,129 | |
| | | | | | | | | | | | | |
| Net (decrease) increase in cash and cash equivalents | | | 3,078,032 | | | | (2,618,190 | ) | | | 459,842 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, beginning of year | | | 307 | | | | - | | | | 307 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents, end of year | | $ | 3,078,339 | | | $ | (2,618,190 | ) | | $ | 460,149 | |
| | | | | | | | |
| FXIT | | | | | | | |
| | | | | | | Purchase | |
| | | | Useful Life | | | Price | |
| | | | | | | | |
| | Computers and equipment | | | 3 | | | | 11,025 | |
| | Furniture | | | 7 | | | | 9,430 | |
| | Leasehold Improvments | | | 3 | | | | 40,732 | |
| | | | | | | | | | |
| | Total cost | | | | | | | 61,187 | |
| | Accumulated depreciation and amortization | | | | | | | 43,526 | |
| | Property Plant and Equipment, Net | | | | | | | 17,661 | |
| | | | | | | | | | |
| Triple 8 | | | | | | | | | |
| | | | | | | | Purchase | |
| | | | Useful Life | | | Price | |
| | | | | | | | | | |
| | Computers | | | 3 | | | | 98,269 | |
| | Software license and development | | | 5 | | | | 1,574,866 | |
| | Furniture and equipment | | | 7 | | | | 119,532 | |
| | Leasehold Improvements | | | 10 | | | | 21,133 | |
| | Vehicle | | | 5 | | | | 7,221 | |
| | | | | | | | | | |
| | Total cost | | | | | | | 1,821,021 | |
| | Accumulated depreciation and amortization | | | | | | | 396,460 | |
| | Property Plant and Equipment, Net | | | | | | | 1,424,561 | |
| | | | | | | | | | |
FOREX INTERNATIONAL TRADING CORP.
NOTE 6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Assets TWO YEARS ENDED DECEMBER 31, 2011
4. Notes and Goodwill:Short-term Receivables
Gold Project JV
The Company entered into a joint venture with a third party: EA Emerging Ventures Corp (“EA”) to obtain exploringAt December 31, 2011 and exporting gold license from the Republic of Ghana. The Company will utilize its contact, know-how2010, notes and expertise, trying to obtain JV the desire licensing. Per the agreement with EA, the Company will not be the beneficial owner of the Ghana subsidiary, and/or will not participate in the actual exploring costs. The Company role is designated to administrative and obtaining the license, and in return will be the sole distributer of potential gold designated for export and sales. Costs associated with the JV project acquired along with payroll costs and consulting fees relating to the development of the EA JV, including that used to provide minimal equipment solutions, are capitalized. Once the EA JV is placed in service, the costs will be amortized over the estimated useful life. After the end of the year, it was decided, based on the results of findings gathered in due diligence, to put development of the joint venture on hold indefinitely, and as such all accrued costs have been amortized in these financial statements.short-term receivables consisted of:
Capitalization of Offering Costs| | | | | | | | |
| | | December 31, | | |
| | | | 2,011 | | | | 2,010 | | |
| | | | | | | | | | |
| Note receivable for annulment of Triple 8 acquisition | | $ | 1,269,000 | | | $ | - | | a. |
| Commercial note receivable, net of impairment | | | 50,900 | | | | - | | b. |
| Foreign company promissory note | | | - | | | | 423,148 | | c. |
| | | | | | | | | | |
| Total notes and short-term receivables | | $ | 1,319,900 | | | $ | 423,148 | | |
| a. | In connection with the Triple 8 annulment agreement, the Company has a short term receivable of $1,269,000 which requires monthly payments of $68,914 in January 2012, $73,214 per month from February 2012 through October 2012, and a final payment of $541,860 in November 2012. This receivable bears no interest and is the remaining portion, after the initial payment of $732,000, of the total $2,001,000 that Triple 8 agreed to pay the Company under the annulment of the share purchase agreements. |
| b. | Note receivable from Fortune Market Media Inc. (the “FTMK”), original principal of $150,000, interest at a 12% annual rate, maturing on February 13, 2012. The Company established a reserve for loan losses of $100,000 in anticipation of a default. The Company evaluated the loan impairment of the FTMK note based on relevant information about the ability of borrower to service its debt such as: current financial information, historical collections experience, credit documentation, public information and current economic trends. |
| c. | Promissory note receivable with an original principal amount of $400,000 due from a foreign corporation, A.T. Limited (the “ATL Note”), plus accrued interest of $23,148 at December 31, 2010. This note had an annual interest rate of 12%. |
The Company determined that it had booked certain costs associated with its offering (mostly legal expenses,Company’s investment in impaired loans is as follows as of December 31, 2011 and expenses associated with producing its financial statements) as expenses in error, which caused a restatement of the financials in 2010. The net amount to be capitalized is $50,625.2010:
Debt Discount on Convertible Note, Net| | | 2011 | | | 2010 | |
| | | | | | | |
| Investment in impaired loans | | $ | 150,000 | | | $ | - | |
| | | | | | | | | |
| Investment in impaired loans that have a | | | | | | | | |
| related allowance for credit losses | | $ | 150,000 | | | $ | - | |
| | | | | | | | | |
| Investment in impaired loans that do not have a | | | | | | | | |
| related allowance for credit losses | | $ | - | | | $ | - | |
| | | | | | | | | |
| Total allowance of credit losses on impaired loans | | $ | 100,000 | | | $ | - | |
| | | | | | | | | |
| Total unpaid principal balance | | $ | 150,000 | | | $ | - | |
| | | | | | | | | |
The Company recognizes a debt discount for the difference in the face value of the ATL notes issued and received by the Company: $100,000. Said Note Discount will be amortized over the life of the Company note: two years. The current portion of Note Discount was presentedCompany’s related interest income on these impaired loans is as current assets, while the remaining long term balance was presented as other asset.follows:
| | | 2011 | | | 2010 | |
| | | | | | | |
| Average recorded investment in impaired loans | | $ | 150,000 | | | $ | - | |
| | | | | | | | | |
| Related amount of interest income recognized | | | | | | | | |
| for the time the loans were impaired | | $ | 900 | | | $ | - | |
| | | | | | | | | |
| Total reserve on accrued interest income | | $ | 900 | | | $ | - | |
| | | | | | | | | |
FOREX INTERNATIONAL TRADING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011
Acquisition
5. Property and Equipment, Net
Property and equipment consisted of 20%the following as of December 31, 2011 and 2010:
| | Estimated | | | | | | |
| | Useful | | | | | | |
| | Lives | | 2011 | | | 2010 | |
| Computers and equipment | 3 years | | $ | 12,539 | | | $ | 11,025 | |
| Furniture | 7 years | | | 9,430 | | | | 9,430 | |
| | | | | 21,969 | | | | 20,455 | |
| Less: Accumulated depreciation | | | | (8,025 | ) | | | (2,794 | ) |
| | | | $ | 13,944 | | | $ | 17,661 | |
| | | | | | | | | | |
Depreciation and amortization expense for the years ended December 31, 2011 and 2010 was $5,232 and $10,717, respectively.
6. Other Assets
Other assets consisted of the following as of December 31, 2011 and 2010:
| | | | | | | |
| | | 2011 | | | 2010 | |
| Investment in FOREX NYC - 20% interest | | $ | - | | | $ | 200,000 | |
| White label licenses and websites | | | 17,560 | | | | 70,239 | |
| | | $ | 17,560 | | | $ | 270,239 | |
Investment in FOREX NYC
On December 18, 2010, the “Company entered into a Securities Purchase Agreement with Forex NYC pursuant to which the Company acquired 20% of the issued and outstanding equity of FNYC Interest on a fully diluted basis. In considerationForex New York City, LLC (“Forex NYC”) in exchange for the FNYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of the Company’s common stock, ofthen valued at $200,000. On July 2011, the Company at a valuation of $200,000 (See Commitmentunwound its agreement with Forex NYC and Contingencies and Subsequent Events).
Acquisition of approximately 45% of Triple 8 Limited
On November 17, 2010, the Company entered into the APH Agreement with APH, as detailed in footnote 3 above. The goodwill recorded in the transaction was $26,594,710. As part of its due diligence process, the Company hired an outside firm to conduct a fairness opinion on the valuation of Triple. One of the methods employed by that firm for assessing the fairness of the transaction1,000,000 shares were returned to the Company was the Net Adjusted Asset method, which assumes as its premise that the fair market value of the assets is equal to the cost and book value of those assets. Triple’s balance sheet was audited at 12/31/10 by a separate audit firm, and it was determined that no additional write-up (or writedown) to the value of the assets and liabilities of Triple was needed to bring those assets and liabilities from audited book value to fair market value, because there was only one buyer for those assets, and the assets, particularly the Property Plant and Equipment, had a very specific use. Therefore, the premium in purchase price over the 44.9% of book value of the net assets was allocated entirely to goodwill. The transaction closed at yearend, and the Company will assess impairments to the goodwill on a quarterly, ongoing basis.Company.
White Label License & Websites Netdevelopment ,net
On April 19, 2010, the Company entered into a Software Licensing Agreement with Triple 8 Limited (“Triple 8”) which was dated April 12, 2010 whereby the Company will license Triple 8’s proprietary trading software (the “Software”) for the purpose of developing a Forex Trading Platform and introducing prospective clients (“End Users”). Triple 8 created a website forIn return, the Company which was funded by the Companyreceived a newly created website, at a cost of $50,000 (the “Setup Fee”). Upon the Company and Triple 8 generating $100,000 in revenue under the agreement, the Company will be reimbursed 50%$105,359. The costs of the Setup Fee ($25,000). The Company will receive 30% ofwebsite includes the net profit generated from End Users, which will be increased to 50% in the event that the monthly volume generated by the Company is in excess of $250 million. Said agreement with Triple 8 is considered by the Company as a mid-term-solution and in order to examine the system closely, the Company evaluate the platforms capabilities and flexibility to create a custom trading platform for the Company’s FUTURE clients. While the Company is developing its own custom software platform, it began operating said affiliate program with Triple 8 Limited’s existing trading platform. The custom platform will be designed to help clients evaluate risk not only on a per trade basis, but also from a portfolio perspective. The Company will then add additional features to their platform such as: (i) Easy deposit and withdrawal or funds transfers between existing banking/investment accounts; (ii) Total portfolio integration of client’s currency accounts with other investment accounts; and (iii) Detailed real time calculations of profits and losses, among others. As disclosed before, costs of software acquired along withvendor’s normal set-up fee plus payroll costs and consulting fees incurred by the Company relating to the development of internal use software, including that used to provide internet solutions, are capitalized. Once the softwaresoftware. The total $105,359 cost was capitalized and is placed in service, the costs arebeing amortized over a 2 year life. Amortization expense for the estimated useful life. As the Company treating said agreement as a midterm evaluation tool, no amortization was recorded on said costs.
Total Other Assets as presented in the Balance Sheet, consist as the following, as ofyears ended December 31, 2011 and 2010 (Audited):
Description | 31-December-10 | |
| Audited | |
| | US$ | |
Capitalization of offering costs | | | 50,626 | |
Acquisition of 20% of FOREX NYC | | | 200,000 | |
Debt Discount on Convertible Note, Net | | | 25,890 | |
White Label License & Websites | | | 70,239 | |
Total | | | 346,755 | |
was $52,679 and $35,120, respectively. The remaining amortization expense $17,560 will be recognized in 2012.
NOTE 7
Accounts Payable
As of December 31, 2010 the Company owes $3,415,780 in payables and accrued expenses, including $20,064 to Moshe Schnapp and $19,785 to Glendon Advisors, respectively. Glendon Advisors is controlled by a third party, which partners with Moshe Schnapp, a former director and officer of the Company, on unrelated ventures.
The Company owes APH on a short-term note payable in the amount of $1,200,000, and $8,800 in accrued interest at 12/31/10, which by settlement agreement between the companies amended and extended to mature in June 30, 2011. The note and accrued interest are thus classified as a short-term liability on the financial statements included herein reflecting the anticipated extension of maturity. The Note carries 6% annual interest, and is convertible to common shares at $0.20 conversion price per share.
NOTE 8
Income taxes
Deferred income tax assets and liabilities are computed annually for the differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable on the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
The provisions for income taxes differ from the amount computed by applying the statutory federal income tax rate to Income before provision for income taxes. The source and tax effects of the differences are as follows:
U.S. federal statutory rate | | | 34.00 | % |
Valuation reserve | | | 34.00 | % |
Total | | | 0.00 | % |
The Company accounts for the income taxes under ASC Codification Topic 740 and SFAS No. 109, “Accounting for Income Taxes”, which requires the use of the liability method. SFAS No. 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the current enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.
FOREX INTERNATIONAL TRADING CORP.
NOTE 9NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011
7. Notes Payable:Payable
At December 31, 2011 and 2010, notes payable and accrued interest consisted of:
| | | 2011 | | | 2010 | |
| | | | | | | |
| Current: | | | | | | |
| APH Note payable and accrued interest | | $ | - | | | $ | 1,208,800 | |
| Rasel Note payable and accrued interest | | | 135,548 | | | | - | |
| Cordelia Note payable and accrued interest | | | 1,006,944 | | | | - | |
| | | | | | | | | |
| Total current notes payable and accrued interest | | $ | 1,142,492 | | | $ | 1,208,800 | |
| | | | | | | | | |
| Long-term: | | | | | | | | |
| ATL Note payable and accrued interest | | | - | | | | 448,220 | |
| Rasel Note payable and accrued interest | | | - | | | | 130,548 | |
| | | | | | | | | |
| Total long-term notes payable and accrued interest | | $ | - | | | $ | 578,768 | |
| | | | | | | | | |
A.P. Holdings Limited (“APH”)
Note payable (the “APH Note”) in consideration for the purchase of Triple 8, in the principal amount of $1,200,000, bearing interest at an annual rate of 6% and convertible into 6 million shares of common stock. Originally due on February 15, 2011.
Rasel LTD - Convertible Notes Payable
On October 6, 2009 the Company signed a Note Payablenote payable for $25,000 payable to Rasel (an affiliated entity)entity of Moshe Schnapp, a former director and officer of the Company in 2010) due on October 6, 2010 bearing interest at 4% per annum. The proceeds were used to pay for half of an existing Accounts Payable toaccounts payable for legal fees incurred at the Company’s inception.
On October 20, 2009 the Company signed a Note Payablenote payable for $50,000 payable to Rasel due on October 20, 2010 bearing interest at 4% per annum. These proceeds were used to pay for startup costs, audit fees and future expenses.
On January 22, 2010 the Company signed a Note Payablenote payable for $50,000 payable to Rasel due on October 30, 2011 bearing interest at 4% per annum. These proceeds will bewere used for working capital and future expenses.
expenditures. On January 22, 2010 the Company signed an amendment to extend the maturity date of the Promissory Notespromissory notes in the amount of $50,000$25,000 and $25,000$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 said notethe notes with either a 5% discount to the market price or a fixed price of $0.60. SaidThe extension of maturity was agreed to be effective as of December 30, 2010,2010.
The accrued balance of the notes including interest as of December 31, 2011 and 2010 is $130,547.was $135,548 and $130,548, respectively, which includes accrued interest in the amounts of $10,548 and $5,548 at December 31, 2011 and 2010, respectively.
AT Limited – Convertible Note &and Accrued Interest
On July 8, 2010, the Company issued a Convertible Promissory Noteconvertible promissory note to A.T. Limited (“ATL”) in aggregatethe principal amountsamount of $500,000 (the “Forex Note”). In consideration for the Company issuing the ATL Note, ATL issued the Company a Secured and Collateralized Promissory Note in the principle amount of $400,000 (the “ATL Note”).
The Forex Note bears interest at 10%, matures two years from the date of issuance and is convertible into ourthe Company’s common stock, at ATL’s option, at a conversion price of $0.20 per share subject to adjustment. On the 21st trading day following each conversion, the number of shares of common stock issuable to ATL pursuant to the Forex Note shallis to be adjusted such that the aggregate number of shares of common stock issuable to ATL is equal to the amount converted divided by 75% of the average of the three lowest closing bid prices during the 20 trading days following delivery of the shares of common stock upon the initial conversion. Concurrent with the conversion of the Forex Note, ATL must make a payment to the Company reducing a pro rata amount owed to the Company under the ATL Note. As of July 12, 2010, the Company is received a trading symbol (FXIT) but has not commenced trading. Based on a fixed conversion price of $0.20, the Forex Note in the aggregate amount of $500,000, excluding interest, is convertible into 2,500,000 shares of ourthe Company’s common stock.
ATL has agreed to restrict their ability to convert the Forex 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.
TheIn efforts to reduce debt and cure defaults, on November 1, 2011, the Company and the indebted parties entered into a Settlement Agreement (the “Agreement”) whereby without admitting any wrong doing on either part, settling all previous agreements and resolved any existing disputes. Under the terms of the Agreement, the Company agreed to issue ATL Note bears interest at the rate of 12% per annum and matures one year from the date of issuance. No interest or principal payments are required until the maturity date, but both principal and interest may be prepaid prior to maturity date and ATL is required to pay down an amount equal to any amounts converted under the Forex Note. The ATL Note is secured by45,000 shares of Series B Preferred Stock of the Company on a pro-rata basis. 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 a publicly listed company$0.30 per share representing. Further, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights. The issuance will represent issuance for cash consideration of approximately $5.14 for each share of Series B Preferred Stock and the Tel Aviv and London Stock Exchanges with an approximate market value of $400,000 (the “ATL Collateral”). In the event that ATL defaults on the ATL Note, the Company may take possession of the ATL Collateral and, in the event that the ATL Collateral is insufficient to pay the fulltotal debt owed under the ATL Note, the Company may pursue further remedies against ATL.
The Forex Note was offered and sold to ATL in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated thereunder. ATL is an accredited investoramount will be recorded as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
The accrued balance of the Forex note including interest as of December 31, 2010 is $524,110.equity.
FOREX INTERNATIONAL TRADING CORP.
NOTE 10NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stockholders’ Equity TWO YEARS ENDED DECEMBER 31, 2011
Following the issuance and delivery of the shares of Series B Preferred Stock to ATL, the Agreement resulted in the settlement of all debts, liabilities and obligations between the parties and that all balances between the Company and ATL will be offset, so no party has any balance with the other party.
The Company recognized a debt discount for the difference in the face value of a note issued and a note received from the same party. The original amount of the debt discount was authorized$100,000 and was amortized over the life of the two year note until the November 1, 2011 settlement agreement. The amortization of the debt discount was $41,668 and $25,890 for 2011 and 2010, respectively, and was recorded as interest expense.
ATL’s note payable balance as of December 31, 2011 and 2010 was $0 and $448,220, which included accrued interest in the amount of $0 and $24,110, and debt discount of $0 and $75,890, respectively.
Cordelia (CDOO) note payable
As disclosed in Note 3, the Company entered into a settlement agreement to issueannul its purchase of Triple 8 stock and the Company issued a new promissory note to CDOO in the principal amount of $1,000,000. The CDOO note bears interest at the rate of ten percent (10%) per annum and is due and payable in full on November 30, 2012. The balance due at December 31, 2011 on the CDOO note is $1,006,944, which includes accrued interest in the amount of $6,944.
8. Income Taxes
The Company has accumulated net operating losses, which can be used to offset future earnings. Accordingly, no provision for income taxes is recorded in the consolidated financial statements. A deferred tax asset for the future benefits of net operating losses and other differences is offset by a 100% valuation allowance due to the uncertainty of the Company’s ability to utilize the losses. These net operating losses will expire in the years 2029 through 2031.
The Company had net operating loss carryforwards of approximately $1,030,000 at December 31, 2011. These net operating loss carryforwards may be limited in accordance with Section 382 of the Internal Revenue Code of 1986, as amended, based on certain changes in ownership that have occurred and that could occur in the future.
The tax effects (computed at 40%) of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following:
| | | | | | Current | | | | |
| | | | | | period | | | | |
| | | 2010 | | | changes | | | 2011 | |
| Deferrred tax assets: | | | | | | | | | |
| Net operating loss carryforwards | | $ | 196,000 | | | $ | 215,000 | | | $ | 411,000 | |
| Loan receivable | | | - | | | | 56,000 | | | | 56,000 | |
| Accounts payable and accrued expenses | | | - | | | | 39,000 | | | | 39,000 | |
| Valuation allowance | | | (196,000 | ) | | | (310,000 | ) | | | (506,000 | ) |
| Net deferred tax assets | | $ | - | | | $ | - | | | $ | - | |
FOREX INTERNATIONAL TRADING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011
A reconciliation of income benefit provided at the federal statutory rate of 34% to income tax benefit is as follows:
| | | | | | | |
| | | 2011 | | | 2010 | |
| Income tax benefit computed at federal statutory rate | | | 34 | % | | | 34 | % |
| State taxes, net of federal tax benefit | | | 6 | % | | | 6 | % |
| Valuation allowance | | | (40 | )% | | | (40 | )% |
| Effective tax rate | | | 0 | % | | | 0 | % |
9. Stockholders’ Equity
Authorized Shares
The Company has 400,000,000 authorized shares of its $0.00001 par value common stock and 20,000,000 shares of its $0.00001 par value preferred stock asPreferred Stock Series A and Bas of JulyDecember 31, 2010.2011.
On July 22, 2009 the Company issued 40,000,000 shares of its $0.00001 par value common stock to Meridad Inc. and 40,000,000 shares of its $0.00001 par value common stock to Rasel Ltd.Common Shares were issued at par with no Additional Paid In Capital for a total of $800.
On March 26, 2010 the Company entered into agreement with Island Capital Management, LLC for the purpose of obtaining DTC Corporate Eligibility. The Company paid as a consulting fee of $2,000 in cash and issued 120,000 shares of restricted stock for the purpose of obtaining DTC Eligibility, including but not limited to performing director, officer and control shareholder Background Reviews and Consultation Services with respect to transfer services, including obtaining CUSIP number(s), documentation formatting and third-party professional consultation services.common stock. The Company received DTC eligibility in December 2010.
On April 23, 2010, the Company entered into an Employment Agreement (the “Agreement”) with Darren Dunckel (“Executive”) whereby the Company will employ Executive as its Chief Executive Officer for a term of two years (the “Term”). Executive was granted a signing bonus consisting of 4,000,000 shares of common stock of the Company upon signing the AgreementAgreement. Mr. Dunckel sold/assigned 1,000,000 shares to a third party.
On May 4, 2010, the Company completed an equity offering in which 20,000,000 shares of par value common stock were sold for $0.01 per share for an aggregate raise of $200,000. A total of 42 investors were solicited, all of which invested in the Company.
On December 31,18, 2010, the Company entered into a Securities Purchase Agreement with Forex NYC pursuant to which the Company acquired twenty percent (20%) of the issued 3,466,666and outstanding equity of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the Forex NYC Interest, the Company issued and sold to Forex NYC 1,000,000 shares of common stock of the Company. In July 2011 the transaction was unwound and the shares were returned to the Company.
As part of a private placement issuance of 3,655,631 restricted shares to accredited investors, at anthe Company issued in December 2010 3,466,666 shares and on January 5, 2011 the balance of 188,965 shares were issued. The aggregate purchase price of $520,000.amounted to $548,345. The shares of common stock were offered and sold to the investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. On January 17, 2011, the Company issued to Core Consulting Group700,000 restricted common shares as part of the Company consideration under a consulting agreement. Core served as the Company’s Investor relations firm. The investors are accredited investors as defined in Tule 501 of Regulation D promulgated under the Securities Act.amount charged to consulting fees was $210,000.
NOTE 11
Financial Statement restatement
On September 7, 2010,January 27, 2011, the Company restated previously issued audited financial statements324,234 shares to capitalize prior startupATL for certain draws on a note to pay expenses including mostly legal expenses that were initially booked asin the amount of $71,736. The note payable balance to ATL was reduced by the amount of those expenses.
NOTE 12
Commitments and Contingencies
S-1 Registration Statement
The Company had filed an S-1 registration statement withdid not deliver the Security and Exchange Commission on September 9, 2009, and the Company received Notice of Effectiveness on March 4, 2010. shares to ATL (“Undelivered Shares”). A total of 42 investors were solicited under the S-1 registration statement, all of which invested in the Company.
Form 15C211and DTC eligibility
On March 22, 2010,28, 2011 the Company entered into agreement with Spartan Securities Group, Ltd for sponsoring the Company form 15C211. The broker dealer and any of its affiliates were not compensatedissued to a consultant 10,000 restricted shares as part of saidthe Company consideration under a consulting agreement.
The Company received DTC eligibility in December 2010 and commenced trading on or about December 28, 2010.amount charged to consulting fees was $10,000.
Employment Agreement
On April 23, 2010,5, 2011, the Company and, a shareholder of the Company, entered into an Employment Agreement (the “Agreement”) with Darren Dunckel (“Executive”)agreement whereby the parties agreed that a $200,000 6% Convertible note payable of the Company will employ Executive as its Chief Executive Officer for a term of two years (the “Term”). Executive does not have any family relationship with any director, executive officer or person nominated or chosenwhich had been assigned to said shareholder and was now in default by the Company to become a director or executive officer In addition, Executive has been appointed as a memberwould be satisfied by the issuance of the Board of Directors of the Company. For his services during the Term as Chief Executive Officer, the Company will pay Executive a salary of $120,000 to be paid on a monthly basis at a rate of $10,000 per month. Executive will also be granted a signing bonus consisting of 4,000,0002,500,000 shares of common stock of the Company upon signing the Agreement. Additionally, if the Company generates net income of at least $1,000,000 during any fiscal year during the Term, the Company will pay the Executive an annual bonus in the amount of $100,000. Executive will also receive during the Term such medical, health and disability insurance as the Company provides to its executive officers, two weeks of vacation in each calendar year and eligibility to participate in such pension, profit-sharing, retirement and other benefits as are available to executive officers of the Company.
Websites
The Company has four websites. All websites are currently under evaluation and further construction, as such modifications may apply. Through the acquisition of the interests with Wheatley, US-based clients can trade on Wheatley platform, but none of the trading occurs on the Company website..
Lease Agreement
The Company’s headquarters and operations office is located at One Grand Central Place 60 E 42nd Street,
Suite 5310 New York, NY 10165. The Company contributes to Forex NYC and Wheatley lease payments $9,500 per month for the space with term ending December 2011. Future minimum payments of obligations under the commitment to contribute to the operating lease at March 18,shareholder.
On June 29, 2011, are as follows:
· | Until: December 2011 - $95,000 |
The Company leases two (2) virtual offices in Las Vegas NV,pursuant to the terms of, and in Dallas TX paying about $250 per month for each virtual office.
Forex NYC
On July 1, 2010, the Company entered into a Letter of Intent (the “LOI”) with Forex New York City LLC (“Forex NYC”) pursuant to which Forex NYC agreed to sell and the Company agreed to purchase a 10% interest in Forex NYC in consideration of a convertible debenture in the amount of $200,000 (the “Debenture”). The Debenture will mature on the six month anniversary of the issuance, carry 5% interest and is convertible into shares of common stock of the Company at a 25% discount to the market price. In lieu of issuing the Debenture, the Company may pay $200,000 in cash at closing. The Company will also acquire an option to acquire an additional 15% of Forex NYC. The purchase price for such option shall be based on a valuation of the greater of $2,000,000 or three times revenue. The option shall be exercisable commencing on the 30th month following the closing of the initial acquisition and shall expire on the 48th month following the closing of the initial acquisition. Except for various miscellaneous provisions, this LOI is non-binding. The LOI calls for the completion of definitive documentation and completion of due diligence prior to September 1, 2010. Final closing is subject to approval of the final definitive agreements by the Boards of Directors of the Company and Forex NYC. Forex NYC is also required to raise a minimum of $40,000 prior to close.
On December 18, 2010, the Company entered into a Securities Purchase Agreement with Forex NYC pursuant to which the Company acquired 20% of the issued and outstanding membership interest of the FNYC Interest on a fully diluted basis. In consideration for Centurion entering into, the FNYC Interest,Investment Agreement, the Company issued and sold to Forex NYC 1,000,0001,214,224 shares of common stockCommon Stock to Centurion as a commitment fee in connection with the Investment Agreement (the "Commitment Shares") and 86,730 shares of the Company.
Legal Proceedings
From timeCommon Stock representing fees incurred by Centurion in connection with the Investment Agreement (the "Fee Shares"), in each case based upon a deemed valuation per share equal to time, we may be a party to litigation or other legal proceedings that we consider to be a part100% of the ordinary coursevolume-weighted average price of our business. We are not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or resultsthe Company's Common Stock for the 5 trading days immediately preceding the date of operations.
the Investment Agreement.
FOREX INTERNATIONAL TRADING CORP.
NOTE 13
Related Parties Transactions
On April 23, 2010, the Company entered into an Employment Agreement (the “Dunckel Agreement”) with Darren Dunckel (“Dunckel”) whereby the Company will employ Dunckel as its Chief Executive Officer for a term of two years (the “Term”). For his services during the Term as Chief Executive Officer, the Company will pay Dunckel a salary of $120,000 to be paid on a monthly basis at a rate of $10,000 per month. Dunckel was also granted a signing bonus consisting of 4,000,000 shares of common stock of the Company upon signing the Dunckel Agreement. Additionally, if the Company generates net income of at least $1,000,000 during any fiscal year during the Term, the Company will pay Dunckel an annual bonus in the amount of $100,000. Dunckel will also receive during the Term such medical, health and disability insurance as the Company provides to its executive officers, two weeks of vacation in each calendar year and eligibility to participate in such pension, profit-sharing, retirement and other benefits as are available to executive officers of the Company.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On July 29, 2010, Anita Atias and Stewart Reich were elected as members of the Board of Directors of the Company. On August 5, 2010, Mr. William Glass was elected as a member of the Board of Directors. Mr. Reich and Mr. Glass will each receive on an annual basis at the commencement of each term shares of common stock of the Company registered on a Form S-8 Registration Statement equal to $6,000 divided by the Company’s market price discounted by 25%. Mrs. Atias has since resigned from the Board due to a conflict of interest. On March 4, 2011, the Company amended the Director Agreements by and between the Company and William Glass and Stewart Reich whereby Mr. Glass and Mr. Reich will each receive shares of common stock of the Company equal to $12,000 divided by the Company’s market price discounted by 25% on an annual basis. The shares of common stock will be restricted as required under the Securities Act of 1933, as amended.
On January 18, 2011, Mrs. L. Franco was appointed by the Company to serve as the Secretary of the Company. For her services during the Term as Secretary, the Company will issue Ms. Franco 15,000 shares of common stock of the Company, which will have a restrictive legend under the Securities Act of 1933, as amended. In the event that the Term of the Employment Agreement is extended, then the number of shares of common stock will be determined by dividing $6,000 by the market price on the first trading day of the Term.
Rasel, LTD - Affiliated Party
Rasel Ltd., which is no longer a related party as a result of closing the APH Share Exchange Agreement which closed at yearend, loaned the Company (while being a related party) the following sums:
On October 6, 2009 the Company signed a Note Payable for $25,000 payable to Rasel due on October 6, 2010 at 4% per annum. The proceeds were used to pay for half of an existing Accounts Payable to 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 at 4% per annum. 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 at 4% per annum. These proceeds will be used for working capital and future expenses.
On January 22, 2010 the Company signed an amendment to extend the maturity date of the Promissory Notes in the amount of $50,000 and $25,000 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 DecemberTWO YEARS ENDED DECEMBER 31, 2012 in consideration of adding a conversion feature to said note with either a 5% discount to the market price or a fixed price of $0.60. Said extension of maturity was agreed to be effective as of December 30, 2010,
The accrued balance of the notes including interest as of December 31, 2010 is $130,547.
NOTE 14
Earnings per share
| | | | | | | | | | |
| | | Year Ended | | | Year Ended | | | Year Ended | |
| | | December 31, 2010 | | | July 31, 2010 | | | July 31, 2009 | |
| | | AUDITED | | | AUDITED | | | AUDITED | |
| Weighted average number of common shares outstanding | | | | | | | | | |
| Basic | | | 95,827,580 | | | | 104,120,000 | | | | 80,000,000 | |
| Diluted | | | 95,827,580 | | | | 104,120,000 | | | | 80,000,000 | |
| Net Loss per share - basic | | | (0.00459 | ) | | | (0.00197 | ) | | | 0.00003 | |
| Net Loss per share - fully diluted | | | (0.00459 | ) | | | (0.00197 | ) | | | 0.00003 | |
NOTE 15
Subsequent Events
On March 4, 2011,All the Company amended the Director Agreements by and between the Company and William Glass and Stewart Reich whereby Mr. Glass and Mr. Reich will each receive shares of common stock of the Company equal to $12,000 divided by the Company’s market price discounted by 25% on an annual basis. The shares of common stock will be restricted as required under the Securities Act of 1933, as amended.
On February 23, 2011, the Company entered into additional Securities Purchase Agreement with Forex NYC, pursuant to which the Company acquired additional thirty percent (30%) of the issued and outstanding membership interest of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the additional FNYC Interest, the Company will issue and sold to Forex NYC 675,000 shares of common stock of the Company. Forex NYC is a limited liability company organized under the laws of the State of New York with headquarters located at One Grand Central Place. Forex NYC is a based Forex investment training facility. Theabove shares of common stock of the Company were offered and sold by the Company in a securities purchase transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. Forex NYC is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act.
On January 5, 2011, the Company closed private placement memorandum and issued 3,655,635 restricted shares to accredited investors at an aggregate purchase price of $520,000. The shares of common stock were offered and sold to the investors in a private placement transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. The investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act. Of these shares, 3,466,666 were issued as of December 31, 2010, for an aggregate purchase price of $520,000.
Treasury Stock
On January 17,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 Core Consulting Group (“Core”) 700,000 restrictedpurchase 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, 2011, the Company repurchased 38,000 of its common shares in the open market, which were returned to treasury.
Series A Preferred Shares (cancelled at year-end)
The Series A Preferred Stock was issued as a part of the Company consideration under consulting agreement. Core is serving asShare Exchange Agreements relating to the Triple 8 purchase and had a stated value of $100 per share and was convertible into the Company’s common stock at a conversion price of $0.30 per share representing 4,000,000 shares of common stock. The Series A Preferred Stock voted on an as-converted basis multiplied by three and carries standard anti-dilution rights. The Series A Preferred Stock did not carry preferential liquidation rights. As part of the annulment of the Triple 8 Share Exchange Agreements share all of the outstanding Series A Preferred shares were returned to the Company Investor relations firmand the stock has been canceled.
Series B Preferred Shares
On or about January 18,November 1, 2011, the Company issuedand certain creditors entered into a Settlement Agreement (the "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 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 Agreement resulted in the settlement of all debts, liabilities and obligations between the parties.
The Series B Preferred Stock has a stated value of $100 per share and is convertible into the Forex Note 324,234Company’s common stock at a conversion price of $0.30 per share to ATL for said consideration of $71,736 that was paid in cash.representing 15,000,000 common shares. Furthermore, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights.
10. 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.
On April 23, 2010, the Company issued 4,000,000 shares of common stock to its former Chief Executive Officer in conjunction with his April 2010 employment agreement.
In conjunction with their respective director agreements with the Company, in July and August 2010 the Company agreed to issue William Glass, and Stewart Reich shares of restricted common stock of the Company registered on a Form S-8 Registration Statement equal to $6,000 divided by the Company’s market price discounted by 25% on an annual basis at the commencement of each term. On March 7, 2011, Mr. Glass and Mr. Reich each had their agreements with the Company modified to receive restricted shares of common stock of the Company equal to $12,000 divided by the Company’s market price discounted by 25%. Mr. Glass and Mr. Reich resigned as Directors of the Company as of November 15, 2011. As of March 31, 2012, no Company shares had been delivered.
On January 18, 2011, Mrs. Liat Franco was appointed by the Company to serve as the Secretary of the Company. Mrs. Franco will replace Mr. Darren Dunckel, the Company's Chief Executive Officer, who acted as the Company Secretary. Mr. Dunckel will continue to serve as a director as well as Chief Executive Officer, President, Chief Financial Officer and Treasurer of the Company. Mrs. Franco graduated with a B.A. Magna Cum Laude from the University of California at Los Angeles and holds a J.D. from the UCLA School of Law in California where she specialized in corporate law, which she received in 2003. Prior to joining the Company, Mrs. Franco served as a Security Officer for foreign consulate in Beverly Hills, California, from 2003 until 2009. From 2009 to the present Mrs. Franco has served as a lecturer on contract law and evidence law at foreign college. On March 4, 2011, the Company entered into an Employment Agreement (the “Employment Agreement”) with Liat Franco whereby the Company will employ Ms. Franco as its Secretary for a term of one year (the “Term”). Ms. Franco does not have any family relationship with any director, executive officer or person nominated or chosen by the Company to become a director or executive officer. For her services during the Termher term as Secretary, the Company willis to issue Ms. Franco 15,000 shares of common stock of the Company, which will have a restrictive legend under the Securities Act of 1933, as amended. In the event that the Term of the Employment AgreementMs. Franco’s employment agreement is extended, then the number of shares of common stock will be determined by dividing $6,000 by the market price on the first trading day of the Term.term. On November 15, 2011, Liat Franco was appointed by the Company to serve as the Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a director of the Company. The Board of Directors elected to appoint Ms. Franco, who is an attorney licensed in the United States and Israel, as an executive officer and director to handle the Triple 8 settlement agreement. As of March 31, 2012, no Company shares had been delivered.
On February 7,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. A company controlled by Mr. Klinger receives a monthly fee of $3,500 for his services.
As of December 31, 2011, the Company entered intoowed Ms. Franco $50,000, a Lettercompany controlled by Mr. Klinger $6,500, and the former CEO $17,409 in compensation, and accrued directors’ fees of Intent ("LOI")$15,321, $15,321 and $4,159 to acquire up to 40.1% equity interest (the “Interest”)Ms. Franco, Mr. Glass, and Mr. Reich, respectively (recorded in Nexus Capital Ltd. (“Nexus”), a U.K. regulated investment advisory firm. The LOI provides that the Company may acquire the option to acquire the Interest in Nexus from equity holders of Nexus at an estimated cost of approximately ₤ 215,600accounts payable in installments no later than May 31, 2011. The Company engaged a U.K. domestic law firm to prepare the needed closing documentation as well as prepare and file an application with the Financial Services Authority (“FSA”) in London for approval of the acquisition. Except for various miscellaneous provisions, this LOI is non-binding. The acquisition is subject to certain requirements including due diligence, approval from the FSA, execution of a mutually-acceptable definitive purchase agreementaccrued expenses) and various other customary conditions such as obtaining board approval. Accordingly, no assurances can be made that the transaction will be consummated. The Company is now working with Nexus management to potentially extend the term specifiedsettled in the LOI.
On February 23, 2011, the Company entered into additional Securities Purchase Agreement with Forex NYC, pursuant to which the Company acquired additional thirty percent (30%) of the issued and outstanding membership interest of Forex NYC (the “FNYC Interest”) on a fully diluted basis. In consideration for the additional FNYC Interest, the Company will issue and sold to Forex NYC 675,000 shares of common stock of the Company.
On February 23, 2011, the Company entered into a Securities Purchase Agreement with Wheatley Asset Management, LLC (“Wheatley”), pursuant to which the Company acquired fifty percent (50%) of the issued and outstanding membership interest of Wheatley (the “Wheatley Interest”) on a fully diluted basis. In consideration for the Wheatley Interest, the Company will issue and sell to Wheatley 1,125,000 shares of common stock of the Company. Wheatley is a limited liability company organized under the laws of the State of New York with headquarters located at One Grand Central Place. Wheatley is an NFA Registered Introducing Broker (IB), Forex Firm and Commodity Trading Adviser (CTA) The shares of common stock of the Company were offered and sold by the Company in a securities purchase transaction made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities Act. Wheatley is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act.
As part of finalizing the Wheatley and Forex NYC acquisitions, on February 24, 2011 the Company entered into consulting agreement for M&A activities with a third party- Cross Point Capital Advisors, introducing and structuring these agreements consulting fee of $150,000 in cash plus retainer of $9,500 per month for the next 18 months commencing on April 1, 2011.
cash.
FOREX INTERNATIONAL TRADING CORP.
On March 4,NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 2011 Michael Weissman was engaged by
11. Commitments and Contingencies
Lease Agreement
The Company’s headquarters is located in Haifa, Israel. The Company is not charged any rent to use this facility since the amount is immaterial.
During 2011 and 2010, the Company to serve as the Executive Vice President of the Company. In 2009, Mr. Weissman founded Wheatley Asset Management LLC (“Wheatley”), a brokerhad also paid rent for space in the ForexCalifornia and Futures markets, and Forex New York City LLC (“Forex NYC”), an education and training company dedicated to serving the market of retail traders wishing to learn how to trade the world's currencies.York. The Company presently owns 50% of the outstanding securities of Forex NYC and Wheatley. As managing member, Mr. Weissman’s responsibilities include strategic planning, administration, compliance and marketing. In 2004, Mr. Weissman started trading currenciesleased two virtual offices in the Foreign Exchange (Forex) markets and acquired his National Futures Association Series 3 & 34 licenses. Mr. Weissman earned a BS degree from the State University of New York at Binghamton in 1978. On March 21, 2011, Paul Brittain was engaged by Wheatley to develop and manage its Las Vegas, office. Paul Brittain began his professional trading career as an options specialist in 1983 trading options on precious metals and was on the front lines as options made their initial debut on the U.S. Exchanges in the mid 1980's. He honed his unique trading approach by working alongside many professional Wall Street traders on the NY exchanges. In addition to working hand-in-hand with customers, Paul has been managing brokerage firms and training brokers since early on in his career including managing both the New Jersey and Las Vegas Branches of Alaron Trading for 11 years and at one time ran a CTA which was ranked 5th in the US and 8th in the world. Considered an expert in the field of commodity options, he has either been quoted in or contributed content to just about every major industry publication, both on paperNevada, and in the electronic media, such as The Wall Street Journal and Bloomberg News, as well as working alongside many of today's most respected analysts in the industry on various trading panels and seminars. Paul has written articlesDallas, Texas, paying about $250 per month for industry publications such as Futures Magazine, Active Trader, Stocks and Commodities and PitNews, as well as been a featured trader in Futures Magazine and Traders Monthly. In 2009, his book "Commodity Options: Trading and Hedging Volatility in the World's Most Lucrative Market" was released and was ranked in the top 10 trading and investment books of 2009 by SFO magazine. Realizing that a better trader made a better customer, he started publishing informative newsletters in the early 1990's in an effort to better communicate as well as educate his clients. Over the years he started and still publishes the following trading recommendation newsletters: The Beast, The BMD and the Optionologist. In 2004 he started the online trading school www.commoditytradingschool.com, which is recognized and attended by students around the world. Additionally, Paul currently runs a live, cyber- assist day-trading room for his discount online customers in an effort to help his customers identify potential profitable trading opportunities in the various financial markets.
each virtual office.
Default on Senior Debt: The Company defaultedhad no future minimum payments on its note payable to APH in connection with the acquisitionlease obligations as of Triple. The note was due on February 15,December 31, 2011.
On March 28,Rent expense for the years ended December 31, 2011 the Company’s transfer agent informedand 2010 was $42,333 and $73,525, respectively.
Legal Proceedings
From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that its shares became eligible to be wired electronically via fast transfer method (DRS/DWAC).management believes will have a material impact on the financial position of the Company.
On March 28,or about June 13, 2011 the Company approved issuinginitiated a complaint against an individual and website for defamation, intentional interference with prospective economic advantage, negligent and violations of business and professions codes. The Complaint was filled with the Superior Court of the State of California - County of San Diego. On August 22, 2011, the defendants filed a notice of motion to William Jordan ("WJ"strike the complaint under the anti-slapp statute. On September 14, 2011, a request for dismissal, without prejudice was submitted to the court by the Company.
On January 20, 2012 the defendants’ motion was heard by the court and the judge ruled in favor of the defendant and awarded attorney fees and court costs in the amount of $21,462, which was recorded in accounts payable and accrued expenses. The Company has retained an attorney and has filed a motion to vacate the judgment.
12. 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”) 10,000 restrictedis computed by dividing the net loss by the weighted-average number of shares as partof common stock, and dilutive common stock equivalents and convertible securities then outstanding. At December 31, 2011 and 2010, there were 15,217,578 and 8,544,000, respectively, of potentially dilutive common stock equivalents outstanding. The 15,217,758 potentially dilutive common stock equivalents at December 31, 2011 arise from the issuance on December 7, 2011 of 45,000 Series B Preferred Shares convertible into 15 million shares and the issuance of the Rasel note convertible into 217,578 shares. The 8,544,000 potentially dilutive common stock equivalents at December 31, 2010 arise from the issuance of the APH and ATL notes convertible into 6,044,000 and 2.5 million shares, respectively. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net loss per common share.
13. Subsequent Events
On February 13, 2012, Direct JV Investments Inc, a wholly-owned subsidiary of the Company, consideration under consulting agreement. WJ served as consultantentered into a Joint Venture Agreement with Vulcan Oil & Gas Inc. (“Vulcan”), whereby the Company will 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. For all Projects in the U.S. residential market, profits and losses from each of the Projects will be allocated at the conclusion of each fiscal year at a ratio of 60% to Vulcan and 40% to the Company in connection with referral to third parties.Company. For all other projects, the profit and loss allocation will be determined on a case by case basis. There is no guarantee that the Projects will generate any revenues.
On or about June 13, 2011 the Company initiated a complaint against an individual and website for defamation, intentional interference with prospective economic advantage, negligent and violations of business and professions code. The Complaint was filled with the Superior Court of the State of California - County of San Diego. On August 22, 2011, the defendants filed a notice of motion to strike the complaint under the anti-slapp statute. On September 14, 2011, a request for dismissal, without prejudice was submitted to the court by the Company.
On January 20, 2012 the defendant’s motion was heard by the court and the judge ruled in favor of the defendant and awarded attorney fees and court costs in the amount of $21,462. The Company has retained an attorney and has filed a motion to vacate the judgment.
F-20
F-22