Document_and_Entity_Informatio
Document and Entity Information (USD $) | 3 Months Ended | |
Mar. 31, 2014 | 14-May-14 | |
Document and Entity Information: | ' | ' |
Entity Registrant Name | 'EFACTOR GROUP CORP. | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0001158694 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 62,114,829 |
Entity Public Float | ' | $62,114,829 |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'No | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
ASSETS | ' | ' |
Cash | $63,900 | $43,377 |
Accounts receivable, net of allowance for doubtful accounts of $6,318 as of March 31, 2014 and December 31, 2013 respectively. | 46,063 | 75,071 |
Other current assets | -18,929 | 8,878 |
Total current assets | 137,770 | 127,326 |
Property, website and equipment, net of accumulated depreciation of $1,232,709 and $1,102,939 as of March 31, 2014 and December 31, 2013 respectively. | 465,711 | 461,499 |
Goodwill | 3,646,994 | 3,646,994 |
Deferred financing costs | 278,442 | 347,764 |
TOTAL ASSETS | 4,528,917 | 4,583,583 |
Accounts payable | 34,397 | 1,085,122 |
Accounts payable - related party | -64,531 | 657,806 |
Accrued expenses | 154,973 | 882,758 |
Operating line of credit | 1,110,005 | 1,110,005 |
Deferred revenue | -4,613 | 71,836 |
Current portion of notes payable - third parties, net of discount | 226,831 | 318,711 |
Convertible notes payable - third parties, net of discount | 969,367 | 650,762 |
Notes payable - related parties, net of discount | 287,036 | 285,860 |
Total current liabilities | 5,379,781 | 5,062,860 |
Other long-term obligation, net of current portion | 120,659 | 155,895 |
Non-current portion of notes payable - third parties | 11,819 | 13,598 |
Total non-current liabilities | 132,478 | 169,493 |
TOTAL LIABILITIES | 5,512,259 | 5,232,353 |
Preferred stock, $0.001 par value, 20,000,000 shares authorized, 2,500,000 issued and outstanding as of March 31,2014 and December 31, 2013, respectively | 2,500 | 2,500 |
Common stock, $0.001 par value, 175,000,000 shares authorized, 63,112,000 and 59,573,174 issued and outstanding at March 31, 2014 and December 31, 2013, respectively | 63,112 | 59,573 |
Accumulated other comprehensive income | -25,223 | -5,244 |
Additional paid-in capital | 20,570,139 | 16,978,361 |
Accumulated deficit | -21,593,870 | -17,683,960 |
Total stockholders' equity (deficit) | -983,342 | -648,770 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $4,528,917 | $4,583,583 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Revenues {1} | ' | ' |
Net revenues | $116,545 | $188,762 |
Cost of revenue | 31,206 | 30,435 |
Sales and marketing | 55,326 | 105,625 |
General and administrative | 2,286,532 | 833,039 |
Depreciation and amortization | 55,638 | 178,395 |
Total operating expenses | 2,428,702 | 1,147,494 |
Loss from operations | -2,312,157 | -958,732 |
Interest expense | -987,935 | -168,386 |
Derivative loss | -559,892 | ' |
Loss on conversion of debt | -49,926 | ' |
Total other income (expense), net | -1,597,753 | -168,386 |
Net loss | -3,909,910 | -1,127,118 |
Gain (loss) on foreign exchange | -19,979 | ' |
Comprehensive (loss) | ($3,929,889) | ($1,127,118) |
Basic and diluted net loss per common share | ($0.06) | ($0.05) |
Weighted average common shares outstanding - basic and diluted | 62,326,733 | 23,147,577 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($3,909,910) | ($1,127,118) |
Depreciation and amortization | 55,638 | 178,395 |
Stock option expense | 33,935 | 93,310 |
Loss on conversion of debt | 49,926 | ' |
Derivative loss | 559,892 | ' |
Amortization of debt discount and deferred financing fees | 939,686 | 83,910 |
Stock compensation expense | 1,355,598 | 150,000 |
Accounts receivables | 29,008 | -90,854 |
Other current assets | -18,929 | 1,966 |
Accounts payable | 34,397 | 136,126 |
Accounts payable - related party | -64,531 | -4,115 |
Accrued expenses | 154,973 | 173,402 |
Deferred revenue | -4,613 | 113,438 |
Net cash used in operating activities | -784,930 | -291,540 |
Cash acquired in reverse merger with Standard Drilling | ' | 851 |
Cash acquired in acquisition of MCC | ' | 23,593 |
Cash paid for acquisition of property, website and equipment | -59,850 | -78,411 |
Net cash used in investing activities | -59,850 | -53,967 |
Proceeds from notes payable | 885,282 | 195,573 |
Proceeds from issuance of shares | ' | 127,002 |
Repayment of notes payable | ' | -1,206 |
Net cash provided by financing activities | 885,282 | 321,369 |
NET EFFECT OF EXCHANGE RATES ON CASH | -19,979 | 4,541 |
NET INCREASE (DECREASE) IN CASH | 20,523 | -19,597 |
CASH, BEGINNING BALANCE | 43,377 | 46,870 |
CASH, ENDING BALANCE | 63,900 | 27,273 |
Cash paid for interest | 5,392 | 26,630 |
Debt discount due to beneficial conversion feature | 396,912 | 45,000 |
Debt discount due to shares issued with debt | 233,904 | ' |
Debt discount credited to derivative liability | 267,417 | ' |
Shares issued for conversion of debt | $697,735 | $214,000 |
Note_1_Organization_and_Basis_
Note 1. Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 1. Organization and Basis of Presentation | ' |
Note 1. Organization and Basis of Presentation | |
The accompanying consolidated unaudited interim financial statements of EFactor Group Corp. formerly known as Standard Drilling, Inc., (the “Company,” “we” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto of The E-Factor Corp. (“EFactor”) contained in the Company’s Form 10-K filed with the SEC on March 10, 2014. | |
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the fiscal year ended December 31, 2013 as reported in the Company’s Form 10K have been omitted. | |
Description of Business | |
EFactor Group is a holding company with the following operations; | |
· EFactor.com provides a full-featured social network for entrepreneurs. EFactor.com provides a platform that enables access to a network of contacts, registration for networking events, advisory consulting, various business tools and a broad range of services and information. | |
· EQmentor is an online professional development company organized in 2007 that provides working professionals 24/7 access to a custom-matched mentor, a global cross-industry peer community, and repositories of knowledge to empower high performance in the workplace. | |
· MCC International (“MCC”), a public relations and communications agency. MCC was founded in 1988. The agency is based in the United Kingdom and promotes through enhancement of company's reputation utilizing print and social media news outlets, focusing on upper tier emerging technology and science companies, as well as professional service organizations, from entrepreneur start-ups and spin-offs to global consumer brands. | |
The Company currently maintains its corporate office in San Francisco, California. |
Note_2_Going_Concern
Note 2. Going Concern | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 2. Going Concern | ' |
Note 2. Going Concern | |
The Company's financial statements are prepared using generally accepted accounting principles, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. Because the business is new and has no history and relatively few sales, no certainty of continuation can be stated. The accompanying consolidated financial statements for the three month period ended March 31, 2014 and 2013 have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. | |
The Company has suffered losses from operations and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management is taking steps to raise additional funds to address its operating and financial cash requirements to continue operations in the next twelve months. Management has devoted a significant amount of time in the raising of capital from additional debt and equity financing. However, the Company’s ability to continue as a going concern is dependent upon raising additional funds through debt and equity financing and generating revenue. There are no assurances the Company will receive the necessary funding or generate revenue necessary to fund operations. The financial statements contain no adjustments for the outcome of this uncertainty. |
Note_3_Notes_Payable_and_Line_
Note 3. Notes Payable and Line of Credit | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes | ' | ||||||||
Note 3. Notes Payable and Line of Credit | ' | ||||||||
Note 3. Notes Payable and Line of Credit | |||||||||
Notes payable | |||||||||
During the three months ended March 31, 2014 the Company issued sixteen convertible unsecured short term notes payable to individuals totaling$885,282. These notes bear annual interest of 12%, mature within a period ranging from two (2) months to ten (10) months from issuance and are convertible into common shares at prices ranging from $0.50 to $2.00 per common share. A total of 224,353 shares were issued with the notes and the relative fair value of the shares amounting to $233,904 was recognized as a debt discount and amortized over the term of the notes. The Company evaluated the embedded conversion features within the convertible debt under ASC 815 “Derivatives and Hedging” and determined the embedded conversion feature should be classified as equity, except for those relating to two convertible notes, as further discussed below. Additionally, the instruments were evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. The Company determined a beneficial conversion feature for the convertible notes amounting to $389,674 which was also recognized as a debt discount and amortized over the term of the notes. | |||||||||
Two of the notes issued during the three months ended March 31, 2014 included reset provisions on the conversion price if certain events occur. Specifically, the terms of the agreement provided that the conversion price on the notes of $1.00 will reset to $0.50 if the Company’s securities offering will fall below $1.00 per share or if the securities offering is not completed by February 28, 2014. This resulted in a derivative liability being recognized at issuance date amounting to $525,632 with a corresponding charge to debt discount for the full amount of the notes amounting to $267,417 and the balance of $258,215 to derivative loss On February, 28, 2014, the reset provision was triggered and the conversion price reset to $0.50 per share. Consequently, the derivative liability was marked to market on such date and an additional derivative loss of $301,677 was recognized. The fair value of the derivative liability at the re-measurement date amounting to $827,309 was credited to additional paid in capital. The derivative liability was valued using the Black-Scholes model and using the following assumptions: | |||||||||
At issuance date | At termination date | ||||||||
Market value of stock on measurement date | $ | 2.25 | $ | 1.9 | |||||
Risk-free interest rate | 0.04 | % | 0.05 | % | |||||
Dividend yield | 0 | % | 0 | % | |||||
Volatility factor | 655 | % | 319 | % | |||||
Term | 0.16 years | 0.25 years | |||||||
During the three months ended March 31, 2014, the Company issued 1,477,408 shares to convert $631,358 of convertible debt. The Company recognized a loss on conversion for the three months ended March 31, 2014 of $49,926 | |||||||||
During the three months ended March 31, 2014 the Company recognized $939,686 of interest expense due to the amortization of debt discounts on all convertible and unsecured short term notes. | |||||||||
A summary of activity for notes payable during the three months ended March 31, 2014 is set forth below: | |||||||||
Balance at December 31, 2013 | $ 975,900 | ||||||||
Proceeds from convertible notes | 885,282 | ||||||||
Proceeds from notes payable | - | ||||||||
Repayments of notes payable | - | ||||||||
Conversion of convertible notes to equity | (631,358) | ||||||||
Debt discount on new convertible notes and shares issued with debt | (890,995) | ||||||||
Amortization of debt discount | 869,188 | ||||||||
Balance at March 31, 2014 | 1,208,017 | ||||||||
Less: | |||||||||
Convertible notes payable | (969,367) | ||||||||
Current portion of notes payable – third parties | (226,831) | ||||||||
Non-current portion of notes payable – third parties | $ 11,819 | ||||||||
Odom Line of Credit | |||||||||
On June 7, 2013, the Company entered into a Revolving Line of Credit Agreement (the “Agreement”) with Charles Odom, the lender, in the amount of $750,000. Pursuant to the Agreement, the lender shall make loans to the Company from time to time commencing on the date of the Agreement and shall continue for a period of twenty four (24) months thereafter ending June 7, 2015. As of December 31, 2013, the Company has drawn $475,000 from the line leaving a current available balance of $275,000. There was no activity on the Odom line of credit during the three months ended March 31, 2014. As required by the Agreement, the Company also issued 118,750 shares to the lender, proportionate to amounts drawn, which was recognized as deferred financing fees of $475,000 and amortized over the term of the line of credit. For the three months ended March 31, 2014, $69,322 was amortized into interest expense. As of March 31, 2014, $196,558 has been amortized into interest expense. All amounts drawn from the line of credit are subject to annual interest of 15% and will mature within a period of 12 months or within 14 days after the Company has a capital raise with proceeds of $10 million, whichever is earlier. The line of credit is secured by all of the assets of the Company. We have been advised by the lender that, due to extenuating circumstances, it is not currently able to provide us with additional advances under the line of credit. | |||||||||
Wells Fargo - Line of Credit | |||||||||
As part of the acquisition of EQmentor, Inc. the Company obtained an operating line of credit from Wells Fargo, secured by assets of the former majority shareholder of EQmentor, Inc. The amount of the line of credit is $500,000 with a provision for over-limit drawdowns. The current over-limit drawdown at March 31, 2014 is $135,005. Interest is charged at a rate of 3.5% per annum. We have drawn down $635,005 as of March 31, 2014. There was no activity on the line of credit during the three months ended March 31, 2014. | |||||||||
Note_4_Other_Longterm_Obligati
Note 4. Other Long-term Obligation | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 4. Other Long-term Obligation | ' |
Note 4. Other long-term obligation | |
In connection with the acquisition of MCC, the Company acquired a long term liability related to a previous recapitalization of MCC. Specifically, MCC entered into an arrangement with its creditors during 2010, in what is referred as a “Company Voluntary Arrangement” (“CVA”), in order to protect MCC from any creditor action. In connection with the arrangement, the Company is required to make monthly fixed payments to a trustee of $2,275 (£1,500 GBP).These payments are scheduled to end in February 2019. | |
Note_5_Related_Parties_and_Rel
Note 5. Related Parties and Related Party Transactions | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Notes | ' | ||||
Note 5. Related Parties and Related Party Transactions | ' | ||||
Note 5. Related Parties and Related Party Transactions | |||||
Accounts Payable – Related Party | |||||
As of March 31, 2014, two of our executive officers, Adriaan Reinders, and Marion Freijsen had unreimbursed expenses and unpaid management fees of $257,932 and 197,594, respectively. The remaining balance of $137,749 represents amounts due to members of our board of directors for board meeting fees, out of pocket expenses and consulting fees. | |||||
Notes Payable – Related Parties | |||||
A summary of activity for notes payable – related parties for the three months ended March 31, 2014 are set forth below: | |||||
Balance at December 31, 2013 | $ 285,860 | ||||
Amortization of debt discount | 1,176 | ||||
Balance at March 31, 2014 | $ 287,036 | ||||
Note_6_Stockholders_Equity
Note 6. Stockholders' Equity | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 6. Stockholders' Equity | ' |
Note 6. Stockholders’ Equity | |
Common Stock | |
During the three months ended March 31, 2014: | |
- the Company issued 1,477,408 shares of common stock to convert $631,358 of convertible debt. | |
- the Company issued 224,353 shares of common in connection with the convertible notes resulting in a debt discount of $233,904 | |
- the Company issued 795,121 shares of common stock for services with a fair value of $1,355,598. | |
- The Company issued 10,000 shares of common stock as payment of $20,000 of accounts payable. | |
Stock Options | |
During the three months ended March 31, 2014, the Company recognized $33,935 of stock option expense related to options granted in prior periods. | |
Note_7_Subsequent_Events
Note 7. Subsequent Events | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 7. Subsequent Events | ' |
Note 7. Subsequent Events | |
The Company issued three twelve percent (12%) interest bearing promissory notes during April 2014 aggregating $194,000 to three nonaffiliated investors. One of the promissory notes for $50,000 is convertible to shares of common stock of the Company at $0.50 per share at the election of the noteholder. In connection with the issuance of the $50,000 promissory note, the Company issued 30,000 shares of common stock to the noteholder. The remaining notes matures 180 days from the issuance date. The Company also issued 288,000 shares with the notes, of which 237,067 may be returned to the Company if the note is paid in full on the maturity date. | |
On May 8, 2014, EFactor Group Corp. entered into a placement agent agreement with Monarch Bay Securities, LLC pursuant to which Monarch Bay agreed to act as the Company’s exclusive placement agent and use its commercially reasonable best efforts to arrange for the sale of up to an aggregate of 8.0 million shares of the Company’s common stock, par value $.001 per share at a price of $0.75 per share. There is no minimum offering amount required as a condition to closing of the Offering. The Placement Agent Agreement contains customary representations, warranties and covenants of the Company and Monarch Bay. The Company has agreed to pay Monarch Bay a cash fee up to 8.0% of the gross proceeds received by investors who purchase shares in the Offering. The Company will also issue to Monarch Bay warrants to purchase the number of shares of Common Stock equal to 8.0% of the aggregate number of shares of Common Stock sold in the Offering at an exercise price of $0.825 per share. In addition, the Company has agreed to reimburse Monarch Bay for its expenses in connection with the Offering, up to an aggregate of $120,000. | |
The shares of Common Stock are being offered by the Company pursuant to a registration statement on Form S-1, as amended, which was initially filed by the Company with the Securities and Exchange Commission on November 27, 2013 and declared effective on May 8, 2014. |