UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2006
o TRANSITON REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 000-25261
BANCORP INTERNATIONAL GROUP, INC.
(formerly March Indy International, Inc.)
(Name of small business issuer in its Charter)
NEVADA |
| 88-0339817 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
Edmond, Oklahoma 73013
(Address of principal executive offices)
(405) 235-8318
(Issuer’s telephone number)
))))))))))))))))))))))))
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
YES x | No o |
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
CLASS |
| OUTSTANDING AS OF |
Common Stock |
| September 9, 2006 |
Par value $0.001 per share |
| 500,010,229 Shares |
Transitional Small Business Disclosure Format: Yes o No x
PART 1 - FINANCIAL INFORMATION
Our financial statements presented in this report were prepared and included in this report in accordance with Regulation S-X and Regulation S-B and appear in this report beginning on page F-1.
Item 2. Management’s Discussion and Analysis or Plan of Operation.
The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.
Throughout this report the first personal plural pronoun in the nominative case form “we” and its objective case form “us”, its possessive and the intensive case forms “our” and “ourselves” and its reflexive form “ourselves” refer collectively to Bancorp International Group, Inc., its subsidiaries and executive officers and directors.
Cautionary Statement Relating to Forward Looking Information
We have included some forward-looking statements in this section and other places in this report regarding our expectations. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, levels of activity, performance or achievements, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategies that involve risks and uncertainties. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future operating results or of our future financial condition, or state other “forward-looking” information.
We believe it is important to discuss our expectations; however, it must be recognized that events may occur in the future over which we have no control and which we are not accurately able to predict. Readers are cautioned to consider the specific business risk factors described under the caption “Additional Factors that May Affect Our Future Results” appearing under “Item 1. Description of Business” of our Annual Report on Form 10-KSB filed with the United States Securities and Exchange Commission on June 21, 2006, and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this report. We undertake no obligation to publicly revise forward-looking statements to reflect events or circumstances that may arise after the date of this report.
Overview
We are a “blank check company” that has not conducted any business activities since 2000 and a “shell company.” Furthermore, since our inception we have not generated any revenue from operations and, accordingly, are a development stage enterprise.
We were initially incorporated as N.E.C. Properties, Inc. (“NEC”) on September 16, 1995, under the laws in the State of Nevada. We were organized as a blank check company with no operations or plan of business. On September 30, 1995 we had 25,000 shares at no par value authorized and 18,600 shares issued and outstanding for $1,860 in cash. On November 19, 1998 we amended and restated Articles of Incorporation to increase our authorized common shares from 25,000 to 25,000,000, and established a par value of $.001 per share. In November 1998 our stockholders approved two forward stock splits. The first was a 100-for-1 split increasing our outstanding common shares to 1,860,000 and the second was a 1.77-for-1 stock split that increased our outstanding common stock shares to 3,292,200.
On November 10, 1999, we exchange for 7,706,575 shares of our common stock for the outstanding capital stock of March Indy International, Inc. (“March”) (the “Share Exchange”). March was incorporated in Delaware on November 24, 1998 (“inception”). For accounting purposes, our acquisition of March was accounted for as a reverse acquisition under the purchase method for business combinations, and accordingly the transaction was treated as a recapitalization of March, with March having acquired us.
On June 17, 2000, we declared a one-for-three reverse stock split, effective September 26, 2000. This reverse stock split reduced the number of our outstanding common stock shares from 12,090,234 to 4,030,078.
2
We are a development stage enterprise. From inception through September 30, 2000, we were in the preliminary stages of engaging in the business of designing, building and racing cars for Formula One, Cart and Indy competition both in the United States and abroad. We also planned to develop an Internet website to offer and sell merchandise products related to our racing activities and enterprise. In October 2000, because of our inability to successfully organize an Indy car race team and our failure to compete in the 2000 Indianapolis 500 race, we discontinued our racing and related promotional activities.
During the calendar quarter ended September 30, 2001, we changed our name to Bancorp International Group, Inc.
On August 19, 2005, our Board of Directors approved and adopted the Certificate of Designation Preferences and Right of Preferred Stock (“Certificate of Designation”). The Certificate of Designation sets forth the preferences and rights of the Company’s 15,000,000 authorized shares of preferred stock, $.0001 par value, to be designated as the Series A Convertible Preferred Stock (“Series A Preferred Stock”).
On August 19, 2005, our stockholders voted to amend our Articles of Incorporation to increase the number of authorized shares of common stock from 25,000,000 at a par value of $.001 to 500,000,000 at a par value of $0.0001. In a second amendment on August 19, 2005, effective January 6 2006, our stockholders approved another amended to our Articles of Incorporation that increased the number of our authorized shares of common stock from 500,000,000 at $.0001 par value to 2,000,000,000 at $.0001 par value.
During the past 12 months we have not timely filed our reports with the U.S. Securities and Exchange Commission in accordance with our obligations under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We are in the process of becoming current in our reporting obligations under the Exchange Act.
Operations
Since our inception, we have not realized any revenue from operations. We discontinued our motor racing business activities in the third quarter of 2000 and have not undertaken any business activities since. Accordingly, all of these activities were reflected as discontinued operations in 2000 and a loss of $4,488,503.
In September 2005 we entered into a non-binding joint venture agreement with ESC Oil Export, Ltd. Under the terms of this joint venture arrangement, we will obtain the rights to sell and market the oil and natural gas production from the petroleum reserves of Papua New Guinea. This joint venture agreement is subject to the approval and acceptance by the government of Papua New Guinea of certain related natural gas and supply contracts. Until the governmental approval and acceptance are obtained, our joint venture agreement with ESC Oil Export, Ltd. will not be binding or effective. Because we are only in the preliminary stages of this joint venture with ESC Oil Export, Ltd., we have not completed a definitive plan of operation. As of the date of this report, other than the non-binding joint venture agreement with ESC Oil Export, Ltd., we are not considering any other plan of operation.
Our operations for the three months and nine months ended September 30, 2006 and 2005 were primarily of a corporate nature including legal, accounting and general corporate administrative matters. We did not conduct any business enterprise activities during the three and nine months ended September 30, 2006 and 2005.
Going Concern
As indicated in the notes to the financial statements included elsewhere in this report, the financial statements have been prepared assuming that we will continue as a going concern. During the nine months ended September 30, 2006, we incurred a net loss of $363,562 and at September 30, 2006 we had a cumulative deficit of $4,949,874. In addition, at September 30, 2006, we had a working capital deficit of $223,841. These conditions raise substantial doubt about our ability to continue as a going concern. Our plans with respect to these matters include restructuring our existing obligations, raising additional capital through issuances of stock or debentures, and to complete a business acquisition for future operations. The accompanying financial statements do not include any adjustments that might be necessary in the event we are unable to continue as a going concern.
3
12-Month Overhead Budget
Although our joint venture agreement with ESC Oil Export, Ltd. is contingent upon obtaining approval and acceptance of the proposed terms of certain natural gas and supply contracts by the government of Papua New Guinea, we have prepared a budget for the 12 months ending September 30, 2007 based upon obtaining this governmental approval. Accordingly, our budgeted overhead expenses for the 12 months ending June 30, 2007 are as follows:
| Per |
| 12 |
| |||
Expenditures: |
|
|
|
|
| ||
Travel expenses |
| $ | 8,750 |
| $ | 105,000 |
|
Hotel accommodations |
| 2,500 |
| 30,000 |
| ||
Rent and office expenses |
| 1,000 |
| 12,000 |
| ||
Employee compensation |
| 2,667 |
| 32,000 |
| ||
Accounting expenses |
| 7,500 |
| 90,000 |
| ||
Utilities and telephone |
| 3,000 |
| 36,000 |
| ||
Transfer agent |
| 625 |
| 7,500 |
| ||
Office supplies and equipment |
| 1,042 |
| 12,500 |
| ||
Miscellaneous expenses |
| 833 |
| 10,000 |
| ||
Total Administrative Expenditures |
| $ | 27,917 |
| $ | 335,000 |
|
Additional Financial Commitments. Other than our commitments discussed above, we do not have any capital commitments. Because we do not have any assets, additional capital resources and funding will be required in the event we obtain the Papua New Guinea governmental approval of our proposed natural gas and supply contracts and proceed with our joint venture arrangements with ESC Oil Export, Ltd. We have not formalized any plans for obtaining the necessary additional capital resources and funding, and have not obtained any related commitments related. We anticipate however that, on a short-term basis, Thomas Megas (our controlling shareholder and Chief Executive Officer and one of our directors) will provide the necessary capital resources and funding through loans until alternative funding arrangements are completed. These funding arrangements may include either or a combination of sales of common stock shares or lending arrangements; however, there is no assurance that these sales or arrangements will become available or will be on terms acceptable to us. Unless the necessary capital resources are obtained, we may unable to proceed with our joint venture arrangement with ESC Oil Export, Ltd. even though governmental approval may have been obtained.
Item 3. Controls and Procedures.
Our Chief Executive Officer and Acting Chief Financial Officer are responsible primarily for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. These controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to ou r management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Furthermore, our Chief Executive Officer and Acting Chief Financial Officer are responsible for the design and supervision of our internal controls over financial reporting that are then effected by and through our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. These policies and procedures (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance tha t transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Thomas Megas, our Chief Executive Officer and Acting Chief Financial Officer, based upon his evaluation of the effectiveness of our disclosure controls and procedures and the internal controls over financial reporting as of the last day of the period covered by this report, concluded that our disclosure controls and procedures and internal controls over financial reporting were fully ineffective as of the last day of the period covered by this report and reported to our auditors
4
and board of directors that there are no controls and procedures and internal control over financial reporting during the period covered by this report and that all of which materially affect or is reasonably likely to materially affect our disclosure controls and procedures or internal control over financial reporting. In conducting the evaluation of our disclosure controls and procedures and internal controls over financial reporting, Mr. Megas did not discover any fraud that involved management or other employees who have a significant role in our disclosure controls and procedures and internal controls over financial reporting. Furthermore, although the disclosure controls and procedures and internal controls over financial reporting were deficient and absent, there were no changes made in our disclosure controls and procedures, internal controls over financial reporting, or other factors that wo uld eliminate the deficiencies in our disclosure controls and procedures or internal controls over financial reporting subsequent to the date of their evaluation. Although significant deficiencies or material weaknesses existed, no corrective actions were taken to correct significant deficiencies and material weaknesses in our internal controls and disclosure controls and procedures because of the lack of required financial resources to correct such deficiencies and weaknesses.
We are currently involved in pursuing additional legal action filed in the state of Oklahoma against Pamela Thompson CPA, The Grace Trust and Charles Weller, esq. This case is related to the filing described below and represents the unsettled portion of case.
In August 2005, our management became aware of the unauthorized fraudulent issuance of approximately 243,842,000 shares of our common stock (the “Wrongfully Issued Shares”) to various entities and individuals for services and gifts, whereupon these entities and individuals attempted to sell the Wrongfully Issued Shares in the open market. Our officers and directors had no relationship with the entities and individuals that issued the Wrongfully Issued Shares.
In September 2005, we a civil action in the District Court of Oklahoma County, Oklahoma, styled Bancorp International Group, Inc. v.Mario A. Pino, an individual, Sam Deeb, an individual, Jean Carlos Medina, an individual, Charles Weller, an individual, Barkev Kibarian, an individual, Felica Morales, an individual, Clearstock, Inc., a Texas corporation, DealFlo, L.L.C., a New York Limited Liability Company, The Grace Trust, a foreign trust, Global Consulting Group, a Maryland corporation, Intelligent Message Distributors, a Nevada corporation, and Wall Street Group, L.L.C., a Arizona limited liability company (the “Defendants”), Case No. CJ-2005-7459 (the “Civil Litigation”), seeking the return of the Wrongfully Issued Shares and the Defendants’ receipt of proceeds from the sale of those shares.
In the Civil Litigation we that Mr. Pino individually and through various affiliated entities and co-conspirators, including the Wall Street Group, L.L.C., prepared or possessed 20 or more common stock certificates purportedly representing 235,000,000 shares of our common stock, the previously referred to Wrongfully Issued Shares, that were distributed to various individuals and entities, including the other Defendants. The number of shares in question was what we could identify but could not determine if, in addition to the 235,000,000 shares, any additional shares issued to the market. Capital Growth Financial, L.L.C. and JH Darbie & Co. intervened in the Civil Litigation (the “Intervenors”) and alleged that the Company negligently hired the Defendants and negligently supervised their actions and activities, and asserted Oklahoma and federal securities fraud and failure-to-register claims against the Defendants and us.
In conjunction with the Civil Litigation, we reached an agreement with JH Darbie & Co., under which we delivered 25,025,000 common stock shares to JH Darbie & Co. to be held pending settlement or conclusion of the Civil Litigation. These shares were delivered to JH Darbie & Co. to satisfy the requirements of Depository Trust Company (“DTC”) until common stock shares eligible to be resold without restriction could be delivered by JH Darbie & Co. to cover its short position in our common stock. Furthermore, JH Darbie & Co. placed in trust $72,500 to be used to pay the costs incurred regarding the litigation.
On January 11, 2006, the Court entered an Order Approving Settlement Agreement (the “Order”). As a result of issuance of the Order, a settlement agreement (the “Settlement Agreement”) became binding upon the Company and the Defendants Mario Pino, Barkev Kibarian, Juan Carlos Medina, Wall Street Group, L.L.C., Clearstock, Inc., Sam Deeb, Global Consulting Group., DealFlo, L.L.C., and Intelligent Message Distributors (the “Settling Defendants”) and the Intervenors with an effective date of December 8, 2005.
In accordance with the Settlement Agreement, our claims against the Settling Defendants and the claims of the Settling Defendants against us were resolved by the exchange of releases of claims, a release of the Wrongfully Issued
5
Shares and payments to us in the aggregate sum of $171,546 from funds held at Capital Growth Financial, L.L.C. and the further agreement to pay an additional $277,093 by Capital Growth. Furthermore, the claims of the Intervenors against us were released for the issuance of 25,025,000 shares of our common stock to JH Darbie & Co. and 219,723,000 shares of our common stock to Capital Growth Financial, L.L.C. for an aggregate sum of 244,748,000 common stock shares (the “Newly Issued Shares”). These shares were required to be deposited with DTC by JH Darbie & Co. and Capital Growth Financial, L.L.C. in satisfaction of their short positions with companies through which securities purchase and sale transactions are cleared on behalf of JH Darbie & Co. and Capital Growth Financial, L.L.C. The Newly Issued Shares were issued in accordance with the registration exemption afforded under Section 3(a)(10) of the Securities Act.
In addition, Defendants Pino, Medina, Kibarian, Global Consulting Group, Intelligent Message Distributors and Wall Street Group, L.L.C. agreed to indemnify and hold harmless the Company against all actions, suits, proceedings, demands, and assessments brought by any past, present or future holder of the shares of common stock of the Company in connection with the Settlement Agreement and the various claims of the Company settled in the Settlement Agreement and any associated judgments, attorney’s fees, costs and expenses.
The Defendants, The Grace Trust, Charles Weller, and Felica Morales (“Non-Settling Defendants”), did not execute the settlement agreement and accordingly did not settle the claims asserted against them in the Civil Litigation. We received judgments against the Non-Settling Defendants, other than The Grace Trust, and are currently pursuing collection of these judgments.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended September 30, 2006, we did not sell any unregistered shares of our common stock.
Item 3. Defaults Upon Senior Securities.
We are not in default on any senior securities.
Item 4. Submission of Matters to a Vote of Securities Holders.
During the three months ended September 30, 2006, no matters were submitted to the holder of our common stock shares, through the solicitation of proxies or otherwise.
We do not have any information required to be disclosed in a repot on Form 8-K during the three months ended September 30, 2006 that has not been previous reported on Form 8-K.
Exhibit |
| Description | |
| 31 |
| Rule 13a - 14(a)/15d - 14(a) Certification, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 |
|
|
|
|
| 32 |
| Certification of the Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BANCORP INTERNATIONAL GROUP, INC. | ||
|
| |
DATE: November 9, 2006 | /s/ THOMAS MEGAS |
|
| Thomas Megas | |
| Chief Executive Officer | |
| Acting Chief Financial Officer | |
6
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm |
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for the Years Ended September 30, 2006 |
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The Board of Directors
Bancorp International Group, Inc.
3126 South Blvd.
Suite 264
Edmond, OK 73013
Dear Board of Directors,
We have reviewed the accompanying Balance Sheet of Bancorp International Group, Inc. as of September 30, 2006, and the related statements of income, stockholders’ equity and comprehensive income and cash flows for the six months then ended. These financial statements are the responsibility of the company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquires of persons responsible for the financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
/s/ Lieberman & Associates |
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| |
Lieberman & Associates P.A. | |
Ft. Lauderdale, Florida | |
October 31, 2006 | |
Bancorp International Group, Inc.
Statement of Financial Position
|
| September 30, |
| December 31, |
| ||
|
| 2006 |
| 2005 |
| ||
|
| (Unaudited) |
|
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| ||
Assets |
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| ||
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| ||
Cash |
| $ | 495 |
| $ | — |
|
Subscription Receivable |
| 267,549 |
| — |
| ||
Total Assets |
| $ | 268,044 |
| $ | — |
|
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Liabilities and Stockholders’ Deficit |
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Accounts Payable and Accrued Expenses |
| $ | 287,574 |
| $ | 267,076 |
|
Current portion of Long Term Debt |
| 203,816 |
| 526,519 |
| ||
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Total Liabilities |
| 491,390 |
| 793,595 |
| ||
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Stockholders’ Deficit |
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Common Stock, $.0001 par value, 2,000,000,000 shares authorized, 500,009,162 shares issued and outstanding at September 30, 2006 and 4,030,078 issued and outstanding at December 31, 2005. |
| 50,001 |
| 403 |
| ||
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Preferred Stock Series A $.0001 par value, 15,000,000 share authorized, issued and outstanding at September 30, 2006 and no shares issued or outstanding at December 31, 2005. |
| 1,500 |
| — |
| ||
Additional Paid in Capital |
| 4,675,027 |
| 3,792,314 |
| ||
Accumulated Deficit |
| (4,949,874 | ) | (4,586,312 | ) | ||
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Total Stockholders’ Equity |
| (223,346 | ) | (793,595 | ) | ||
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Total Liabilities and Stockholders’ Deficit |
| $ | 268,044 |
| $ | — |
|
The attached notes are an integral part of these financial statements
F-2
Bancorp International Group, Inc.
Statement of Operations
For the Nine Months Ended September 30,
(Unaudited)
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| Quarter to date |
| Year to date |
| ||||||||
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| 2006 |
| 2005 |
| 2006 |
| 2005 |
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Gross Revenues |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
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Development Expemse |
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Accounting Fees |
| — |
| — |
| 113,000 |
| — |
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Legal Fees |
| — |
| — |
| 65,374 |
| — |
| ||||
Consulting Fees |
| — |
| — |
| 70,389 |
| — |
| ||||
Transfer Agent Fees |
| — |
| — |
| 4,000 |
| — |
| ||||
Interest Expense |
| 1,686 |
| 3,504 |
| 5,125 |
| 7,009 |
| ||||
Lodging and Travel |
| — |
| 27,911 |
| 52,656 |
| 44,757 |
| ||||
Office Expense |
| — |
| — |
| 53,019 |
| — |
| ||||
Total Development Expenses |
| 1,686 |
| 31,416 |
| 363,562 |
| 51,765 |
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Net (Loss) |
| $ | (1,686 | ) | $ | (31,416 | ) | $ | (363,562 | ) | $ | (51,765 | ) |
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Earnings per Share: |
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Basic |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
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Fully Diluted |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
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The attached notes are an integral part of these financial statements
F-3
Bancorp International Group, Inc.
Statement of Changes in Cash Flow
(Unaudited)
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| Nine Months Ended September 30, |
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| 2006 |
| 2005 |
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Development stage activities: |
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Net Income / (Loss) |
| $ | (363,562 | ) | $ | (51,765 | ) |
Adjustments to reconcile net loss to net cash used in development stage activities: |
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Prior Year adjustment for interest |
| — |
| (32,275 | ) | ||
Changes in operating assets and liabilities |
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Increase in Subscription Receivable |
| (267,549 | ) | — |
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Increase in Accounts Payable and Accrued Expenses |
| 20,498 |
| 7,009 |
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Net cash flow provided from development stage activities: |
| (610,614 | ) | (77,032 | ) | ||
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Investing activities: |
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Increase in Investments |
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Stockholder Loans |
| (322,703 | ) | 77,032 |
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Net cash flow used in investing activities: |
| (322,703 | ) | 77,032 |
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Financing activities: |
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Proceeds from sale of common stock |
| 933,811 |
| — |
| ||
Net cash flow from financing activities: |
| 933,811 |
| — |
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Net increase in cash flow |
| 494 |
| — |
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Beginning Cash |
| — |
| — |
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Ending Cash |
| $ | 494 |
| $ | — |
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Supplemental disclosures by financing activites |
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Interest Expense |
| $ | 1,686 |
| $ | 7,009 |
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The attached notes are an integral part of these financial statements
F-4
Bancorp International Group, Inc.
Statement of Stockholders’ Deficit
|
| Common Stock |
| Preferred Stock Series A |
| Paid in |
| Accumulated |
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| Shares |
| Par |
| Shares |
| Par |
| Capital |
| Deficit |
| Total |
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Balance December 31, 2005 |
| 4,030,078 |
| $ | 403 |
| — |
| $ | — |
| $ | 3,792,314 |
| $ | (4,586,312 | ) | $ | (793,595 | ) |
Expenses paid by Stockholders in exchange for equity |
| 251,231,084 |
| 25,123 |
| — |
| — |
| 11,802 |
| — |
| 36,925 |
| |||||
Conversion of debt payable to Stockholders |
| — |
| — |
| 15,000,000 |
| 1,500 |
| 446,747 |
| — |
| 448,247 |
| |||||
Settlement of lawsuit - January 15, 2006 |
| 244,748,000 |
| 24,475 |
| — |
|
|
| 424,164 |
| — |
| 448,639 |
| |||||
Net Loss - September 30, 2006 |
| — |
| — |
| — |
| — |
| — |
| (363,562 | ) | (363,562 | ) | |||||
September 30, 2006 (unaudited) |
| 500,009,162 |
| $ | 50,001 |
| 15,000,000 |
| $ | 1,500 |
| $ | 4,675,027 |
| $ | (4,949,874 | ) | $ | (223,346 | ) |
The attached notes are an integral part of these financial statements
F-5
BANCORP INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2006
1. THE COMPANY
N.E.C. Properties, Inc. (“NEC”) was incorporated on September 16, 1995, under the laws in the State of Nevada. NEC was organized with no operations or plan of business. On September 30, 1995 the Company issued 18,600 shares of its then no par value and 25,000 authorized common stock, for $1,860 in cash. On November 19, 1998 the State of Nevada approved NEC’s restated Articles of Incorporation, which increased their authorized common shares from 25,000 to 25,000,000, and established a par value of $.001 per share of common stock. In addition, in November 1998 NEC approved a forward stock split of 100:1, thus increasing the number of then outstanding common shares to 1,860,000. In addition, at that time the Company also authorized a 1.77-for-1 forward stock split in anticipation of merger transaction with March Indy International, Inc. (“March” or “March Indy”). The previously issued 1,860,000 common shares were now 3,613,249 common shares.
On November 10, 1999, NEC acquired all the outstanding stock of March for 7,706,575 shares of NEC. March was incorporated in Delaware on November 24, 1998 (“inception”). For accounting purposes, the transaction has been accounted for as a reverse acquisition under the purchase method for business combinations, and accordingly the transaction has been treated as a recapitalization of March, with March as the acquirer. The shares issued in the Transaction were treated as being issued for cash and have been shown as outstanding for all periods presented in the same manner as for a stock split.
On June 17, 2000 the Company declared a one-for-three (1:3) reverse stock split, effective June 26, 2000. The financial statements herein give retroactive effect to this, and all the above, related equity transactions transaction. March had intended to engage in the business of designing, building and racing motor cars for Formula One, Cart and Indy competition both in the United States and abroad. March has also planned to develop an Internet website in order to merchandise products related to its racing efforts. From the time of its inception March had been a development stage enterprise through September 30, 2000. Subsequent to September 30, 2000, the management of March determined that due to its inability to successfully organize an Indy car race team and to compete in the 2000 Indianapolis 500 race in the second quarter of the year ended December 31, 2000, that the Company’s operations, as intended, would cease to operate. Due to the cessation of operations, management has determined that they are no longer a development stage enterprise commencing from the third quarter ended September 30, 2000.
During the quarter ended September 30, 2001, March changed its name to Bancorp International Group, Inc. (“Bancorp”) in an attempt to effect a merger with a financial service oriented business. Bancorp has not merged with any financial service business. Henceforth NEC, March or Bancorp are to be referred to as the “Company”, unless reference is made to the respective company for reference to events surrounding their acquisition by the Company.
The Company is subject to the reporting obligations under Section 12(g) of the Securities Exchange Act of 1934. The Company has not complied with the reporting obligations since December 31, 2001. The Company is in the process of become current.
F-6
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in 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 revenue and expenses during the reporting period. Critical estimates include management’s judgments associated with other asset valuations and accrued expenses. Actual results could differ from those estimates.
(b) Cash and Cash Equivalents – The Company considers cash in banks, commercial paper and other highly liquid investments with insignificant interest rate risk and maturities if three months or less at the time of acquisition to be cash and cash equivalents. The Company’s Cash and Cash Equivalents balance as of June 30, 2006 includes $495.00 held by a commercial bank in Spain.
(c) Loss Per Share - Basic earnings (loss) per share (“EPS”) is determined by dividing net loss for the period by the weighted average number of common shares outstanding during the same period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, which would then share in the earnings of the Company. As of December 31, 2005 there were no potentially dilutive outstanding that could be exercised or converted into common stock. In January 2006 the Company issued 15,000,000 share of convertible preferred stock. The potential dilutive effect has not been disclosed because the impact on earnings per share would be anti-dilutive.
(d) Impairment of Long-Lived Assets - The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. The recoverability of assets held and used in operations is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of June 30, 2006 and December 31, 2005 all Long-Lived assets have been deemed impaired and written down to -0-.
(e) Fair Value of Financial Instruments - The Company’s financial instruments consists of accounts payable and accrued expenses. The carrying amount of the financial instruments reported in the consolidated balance sheet approximates fair value based on the short-term maturity of these instruments.
(f) Income Taxes - The Company accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement carrying amounts and the tax bases of the assets and liabilities, using the effective tax rates in the years in which the differences are expected to reverse. A valuation allowance related to the deferred tax asset is also recorded when it is probable that some or all of the deferred tax asset will not be realized. Income tax expense consists of the tax payable for the period and the change during the period in deferred tax assets and liabilities.
The following is a reconciliation of income tax expense computed using the statutory Federal rate:
| September 30, |
| December 31, |
| |||
|
| 2006 |
| 2005 |
| ||
|
|
|
|
|
| ||
Income tax benefit computed at statutory rate |
| $ | 4,949,874 |
| $ | 4,586,312 |
|
Changes in valuation allowance |
| (4,949,874 | ) | (4,586,312 | ) | ||
Deferred tax Assets |
| — |
| — |
| ||
F-7
| September 30, |
| December 31, |
| |||
|
| 2006 |
| 2005 |
| ||
Net Loss as of |
| $ | 4,949,874 |
| $ | 4,586,312 |
|
Tax benefit at federal statutory rate of 15% |
| 742,481 |
| 687,947 |
| ||
Increases in valuation allowance |
| (742,481 | ) | (687,947 | ) | ||
Deferred Taxes |
| $ | 0 |
| $ | -0- |
|
3. LEGAL ACTONS
(a) On January 11, 2006, the presiding Judge in a Civil Litigation regarding fraudulent sales of common stock of the Company by unauthorized agents entered an Order Approving a binding Settlement Agreement (the “Order”). As a result of issuance of the Order the Company and some Defendants (the “Settling Defendants”) and the parties bringing suit were bound to the agreement with an effective date of December 8, 2005.
In accordance with the Settlement Agreement, the Company’s claims against the Settling Defendants and the claims of the Settling Defendants against the Company were resolved by the exchange of release of claims, a release of the wrongfully issued shares and payments to the Company in the aggregate sum of $171,546 from funds held by one of the Interveners and the further agreement to pay an additional $277,093. Furthermore, the claims of the Interveners against the Company were exchanged for the issuance of 25,025,000 shares of the Company’s common stock to one of the Interveners and 219,723,000 shares of the Company’s common stock to the other Intervener for an aggregate sum of 244,748,000 common stock shares (the “Newly Issued Shares”). The Newly Issued Shares are required to be deposited with DTC by the Interveners in satisfaction of their short positions with vendors through which securities purchase and sale transactions are cleared on behalf of the Interveners. The Newly Issued Shares were issued in accordance with the registration exemption afforded under Section 3(a)(10) of the Securities Act of 1933.
In addition, some of the Settling Defendants agreed to indemnify and hold harmless the Company against all actions, suits, proceedings, demands, and assessments brought by any past, present or future holder of the shares of common stock of the Company in connection with the Settlement Agreement and the various claims of the Company settled in the Settlement Agreement and any associated judgments, attorney’s fees, costs and expenses.
Two of the Defendants did not execute or participate in the Settlement Agreement and accordingly did not settle the claims asserted against them in the Civil Litigation (“Non-Settling Defendants”). The Company was granted judgments against the Non-Settling Defendants and the Company is negotiating settlements of the judgments with the Non-Settling Defendants, the outcome of which is uncertain as of the date of this report.
(b) The Company has been informed by the US Securities and Exchange Commission (the “Commission”) that the Commission intends to institute proceedings against the Company pursuant to Section 12(j) of the Securities Act of 1934 (the “Exchange Act”). The Commission is alleging violations of Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 the consequence of which could result in the suspension or revocation of the Company’s ability to trade.
The Company is currently in the process of curing the above referenced violations.
F-8
4. STOCKHOLDER’S EQUITY
On August 19, 2005, the Company’s Board of Directors approved and adopted Certificate of Designation Preferences and Right of Preferred Stock (the “Certificate of Designation”). The Certificate of Designation sets forth the preferences and rights of the Company’s 15,000,000 authorized shares of preferred stock, $.0001 par value, to be designated as the Series A Convertible Preferred Stock (the “Series A Preferred Stock”).
The holders of shares of the Series A Preferred Stock have the right, at their option, to convert the Series A Preferred Stock into shares of the Company’s common stock at a ratio of 1 share of Series A Preferred for 100 shares of common stock. The Series A Preferred are entitled to receive dividends of every kind declared and paid to holders of the Company’s common stock, at a rate equal to the set conversion rate of 1:100. In addition, the Preferred A have a right to have their shares adjusted in the event of future issuances of common shares that would have a dilutive effect on the Preferred A. The holder’s of the Preferred Series A have voting rights equal to the number of shares of common stock that the Preferred A are convertible into, whether or not converted. In the event of the Company’s liquidation or dissolution or winding up, voluntary or involuntary, the holders of the outstanding Series A Preferred Stock will be entitled to receive liquidation benefits identical to those received by holders of common stock, provided that each share of the Series A Preferred Stock will be treated as if equal to 100 shares of common stock.
On August 21, 2005, the Company amended their Articles of Incorporation. This amendment increased the number of our authorized shares of common stock from 25,000,000 to 500,000,000 and reduced the par value to $0.0001, and authorized 15,000,000 shares of preferred stock, par value of $0.0001. The holders of 90.8% of the outstanding common stock shares approved this amendment at a shareholders meeting held on August 19, 2005.
On January 6, 2006, the Company amended their Articles of Incorporation. This amendment increased the number of authorized shares of common stock, par value of $.0001, from 500,000,000 to 2,000,000,000. The holders of 90.8% of the outstanding common stock shares approved this amendment at a shareholders meeting held on August 19, 2005.
On January 4, 2006, the Company’s Board of Directors authorized the following:
· 251,231,084 common stock shares to Thomas Megas in reimbursement of $36,925 of costs incurred by Mr. Megas on our behalf in his capacity as our Chairman and Chief Executive Officer. These costs consisted of $33,000 paid to consultants for professional services including accounting and legal services and $3,925 for travel expenses. The shares represented payment in full for the above expenses and had a market value of $25,123, the difference between market value and the total advance was recorded as paid in capital to the Company.
· 7,500,000 shares of Series A Preferred Stock to Mr. Megas as settlement of outstanding debt incurred by the Company to Mr. Megas, between the periods of January 1, 2000 and December 31, 2005. The converted debt had an outstanding value of $223,247.
· 7,500,000 shares of Series A Preferred Stock to a major investor as settlement of outstanding debt incurred by the Company to the investor, between the periods of January 1, 2000 and December 31, 2005. The converted debt had an outstanding value of $225,000.
F-9
