UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
ACT OF 1934 | |
For the quarterly period ended: | |
March 31, 2009 | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
ACT OF 1934 | |
For the transition period from: _____________ to _____________ |
EXPLORATIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 000-49864 | 65-1089222 |
(State or Other Jurisdiction | (Commission | (I.R.S. Employer |
of Incorporation) | File Number) | Identification No.) |
777 South Flagler Drive Suite 800-West Tower
West Palm Beach, Florida 33401
(Address of Principal Executive Office) (Zip Code)
(561) 515-6113
(Registrant’s telephone number, including area code)
34 Fifteenth Street, Brooklyn, NY 11215
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No | |||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer., or a smaller reporting company. | |||||||
Large accelerated filer | o | Accelerated filer | o | ||||
Non-accelerated filer | o | Smaller reporting company | þ | ||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes þ No | |||||||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. | |||||||
As of May 15, 2009 there were 30,000,000 shares of common stock outstanding. | |||||||
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY | |||||||
PROCEEDINGS DURING THE PRECEDING FIVE YEARS: | |||||||
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. o Yes o No |
PART I
ITEM 1. FINANCIAL STATEMENTS
EXPLORATIONS GROUP, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
March 31, 2009 | September 30, 2008 | |||||||
(Unaudited) | (Audited) | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 22,901 | $ | 230,731 | ||||
Total assets | $ | 22,901 | $ | 230,731 | ||||
Liabilities and stockholders’ (deficit) | ||||||||
Current Liabilities: | ||||||||
Accrued expenses | 4,500 | 16,000 | ||||||
Officers' Loans Payable | 168,047 | |||||||
Total liabilities | 172,547 | 16,000 | ||||||
Stockholders' Equity: | ||||||||
Preferred stock-B ($0.01 par value, 500,000 shares authorized, 67,500 issued and outstanding) | 675 | - | ||||||
Common stock ($0.01 par value 100,000,000 shares authorized, 30,000,000 issued and outstanding) | 300,000 | |||||||
Additional paid in capital | 15,665,067 | 15,493,900 | ||||||
Deficit accumulated | (16,115,388 | ) | (15,279,169 | ) | ||||
Total stockholders' equity (deficit) | (149,646 | ) | 214,731 | |||||
Total liabilities and stockholders' (deficit) | $ | 22,901 | $ | 230,731 |
See accompanying notes to financial statements.
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EXPLORATIONS GROUP, INC. AND SUBSIDIARIES | |||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
For The Three Months Ended March 31, | ||||||||
2009 | 2008* | |||||||
(unaudited) | ||||||||
Revenues | $ | - | $ | - | ||||
Expenses: | ||||||||
Officers' salary | 130,000 | |||||||
General and administrative | 295,628 | - | ||||||
Total operating expenses | 425,628 | - | ||||||
Net (loss) | $ | (425,628 | ) | $ | - | |||
Net (loss) per share | $ | (0.02 | ) | $ | 0.00 |
* | The Company did not commence business operations until August, 2008 |
See accompanying notes to financial statements.
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EXPLORATIONS GROUP, INC. AND SUBSIDIARIES | |||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||
(unaudited) |
For The Three Months Ended March 31, | ||||||||
2009 | 2008 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net (loss) | $ | (425,628 | ) | $ | - | |||
Adjustment to Reconcile Net (Loss) to Net Cash | ||||||||
(Used in) Operating Activities: | ||||||||
Changes in assets and liabilities | ||||||||
Accrued Expenses | 4,500 | |||||||
Officers' Loans Payable | 117,343 | - | ||||||
Net cash (used in) operating activities | (303,785 | ) | ||||||
Cash Flows From Financing Activities: | ||||||||
Sale of common stock | 343,827 | - | ||||||
Net Cash Provided by Financing Activities | 343,827 | |||||||
Net increase in cash and cash equivalents | 40,042 | - | ||||||
Cash and cash equivalents - beginning of period | (17,141 | ) | - | |||||
Cash and cash equivalents - end of period | $ | 22,901 | $ | - |
See accompanying notes to financial statements.
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EXPLORATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2009
Note 1 – Nature of Business:
As of September, 2004, the Company, through its operating subsidiary Parking Pro, Inc. operated parking garages in New York City. During 2008, the Company decided to pursue a new business direction and on February 19, 2009, the Company acquired Hawk Biometric Technology, Inc., a Florida corporation. Hawk Biometrics is a developer of innovative fingerprint authentication technology that offers high degrees of security, convenience, and ease of use in applications such as automobile locks and identity theft protection. This technology can also be used in banking, healthcare, hotel/casino operations, employee time clock and attendance, stadium security, sporting and gaming applications where identity management is required.
Basis of Presentation
On February 19, 2009, the Company acquired Hawk Biometric Technology, Inc., a Florida corporation (“Hawk Biometric”). Hawk Biometric is considered the accounting acquiror. Thus, the financial statements have been prepared as if Hawk Biometric was the reporting company for the periods shown. In addition, for the three month period ended March 31, 2008, Hawk Biometric has yet to commence business activities.
Note 2 – Summary of Significant Accounting Policies:
The Company prepares it financial statements in conformity with generally accepted accounting principles.
Revenue Recognition:
The Company currently has not had any revenues, but intends to recognize revenue in the future when earned, there is a fixed and determinable price for its product and collectibility is reasonably assured when title passes.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company does not have cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of March 31, 2009.
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EXPLORATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2009
Note 2 – Summary of Significant Accounting Policies (Continued)
Accounting 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 gains and losses at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical estimates include management’s judgments associated with revenue recognition, concentration of credit risk, goodwill and income taxes. Actual results could differ from those estimates.
Long-Lived Assets
In accordance with SFAS NO. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets in question may not be recoverable. An impairment would be recorded in circumstances where undiscounted cash flows expected to be generated by an asset are less then the carrying value of that asset.
Income Taxes
The Company accounts for income taxes under SFAS No. 109, “Accounting for Income Taxes”. SFAS 109 requires and asset and liability approach for financial reporting for incomes taxes. Under SFAS 109, deferred taxes are provided for temporary differences between the carrying values of the assets and liabilities for financial reporting and tax purposes at the enacted rates at which these differences are expected to reverse.
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and tax basis of assets and liabilities using enacted rates in effect in the years in which the differences are expected to reverse.
Because the Company has an uncertainty regarding it as a going concern, a 100% valuation allowance has been set up for any deferred tax item.
Going Concern
The Company’s financial statements have been presented on a basis that it is a going concern. The Company has experienced a loss for the period ended March 31, 2009, has negative working capital and a stockholders’ deficit in the amount of $145,146 and the Company’s continued existence is in doubt.
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EXPLORATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2009
Note 3 – Patents
In May 2008, the Company issued approximately 23,000,000 shares of its common stock on a one for one basis to the shareholders of Hawk Biometrics of Canada, Inc. in exchange for that Company’s existing patents. The transaction accounted for on a fair market value basis recognized the patent value at $15,000,000. Subsequently, it was determined that the patents were impaired in accordance with SFAS # 144, as the expected cash flows to be generated were currently $-0-.
As part of the stock transaction, the Company also received approximately $210,000, which is reflected in paid in capital.
Note 4 – Acquisition of Hawk Biometric
On February 19, 2009, pursuant to the terms of the agreement and plan of merger by and between the Company, a newly formed subsidiary Hawk Acquisition Corp., and Hawk Biometric Technologies, Inc. (the merger Agreement) the Company acquired Hawk Biometric Technologies, Inc. Shareholders of Hawk Biometrics received a total 600,000 shares of the Company’s series “B” Preferred Stock, each share of which is convertible into 100 shares of the Company’s common stock, at any time after the anticipated one for six reverse stock split of the Company’s common stock.
Note 5- Related Party Transactions
David Coriaty, the Company’s President loaned the company $168,047 as of March 31, 2009, which is expected to be paid back with-in twelve months. The loan is a demand loan and is without interest.
Note 6 – Subsequent Events
On April 21, 2009, the Company announced that it signed a non-binding letter of intent to acquire ME2 Security, LLC for $1.6 million to be paid in a combination of cash, stock and debt. ME2 is a Pennsylvania based software and development company that provides command and control security software and hardware products. The Company expects to be able to promptly consummate the transaction, subject to due diligence, the execution of definitive agreements, and other conditions to closing. There is no assurance that a definitive agreement providing for the transaction as contemplated by the Letter of Intent will be executed or that the transaction will be consummated.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION
OVERVIEW
As of September, 2004, the Company, through its operating subsidiary Parking Pro, Inc. operating parking garages in New York City. During 2008, the Company decided to pursue a new business direction and on February 19, 2009, the Company acquired Hawk Biometric Technology, Inc., a Florida corporation. Hawk Biometrics is a developer of innovative fingerprint authentication technology that offers high degrees of security, convenience, and ease of use in applications such as automobile locks and identity theft protection. This technology can also be used in banking, healthcare, hotel/casino operations, employee time clock and attendance, stadium security, sporting and gaming applications where identity management is required.
Critical accounting policies and estimates:
Our financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates we use to prepare the consolidated financial statements. We base our estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.
We do not participate in, nor have we created, any off-balance sheet special purpose entities or other off-balance sheet financing.
We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations.
Principles of consolidation - The accompanying consolidated financial statements include the accounts of Explorations Group Inc. and its wholly owned subsidiaries (collectively, the "Company"). All significant inter company transactions have been eliminated.
Functional currency - The currency of the primary economic environment in which we operate are conducted is the U.S. dollar, which is used as the Company's functional and reporting currency.
Cash - We maintain cash in bank accounts which may, at times, exceed federally insured limits. We have not experienced any loss on these accounts.
Accounts receivables - Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. We estimate doubtful accounts based on historical bad debts, factors related to specific customers' ability to pay, and current economic trends. We write off accounts receivable against the allowance when a balance is determined to be uncollectible.
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Property and equipment - Depreciation of property and equipment is provided for by the straight-line method over the estimated useful lives of the related assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
Intangible assets - Intangible assets are carried at cost less accumulated amortization. Amortization is computed on the straight-line method over the ten-year estimated useful life of the assets. We periodically review the carrying value of our intangible assets to determine whether impairment may exist. We consider relevant cash flow and profitability information, including estimated future operating results, trends and other available information, in assessing whether the carrying value of the intangible assets can be recovered. If it is determined that the carrying value of the intangible assets will not be recovered from the undiscounted future cash flows, the carrying value of the assets would be considered impaired. An impairment charge is measured as any deficiency in the amount of estimated fair value of the intangible assets over carrying value.
Revenue Recognition - The Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition in Financial Statements”. Under SAB No.104, the Company recognizes revenue when the following criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed and determinable, no significant Company obligations remain and collection of the related receivable is reasonable assured.
Recently Issued Accounting Pronouncements - In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 123R "Share Based Payment". This statement is a revision of SFAS Statement No. 123, "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. SFAS 123R addresses all forms of share based payment ("SBP") awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. Under SFAS 123R, SBP awards result in a cost that will be measured at fair value on the awards' grant date, based on the estimated number of awards that are expected to vest and will be reflected as compensation expense in the financial statements. This statement is effective for public entities that file as small business issuers - as of the beginning of the first interim or annual reporting period that begins after December 15, 2005, and as adopted by the Company commencing January 1, 2006.
Management does not believe that any recent issued, but not yet effective, accounting standards if currently adopted would have a material affect on the accompanying financial statement
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RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2009 TO THE THREE MONTHS ENDED MARCH 31, 2008
We had no revenue for the three month period ended March 31, 2009 as well as for the comparable period in 2008, as a result of the Company’s products not yet being available for sales and licensing.
Operating Expenses
Our operating expenses are comprised of costs of salaries and general and administrative expenses.
For the three month period ended March 31, 2009, our operating expenses were $425,628 as compared to $0 for the comparable period in 2008, an increase of $425,628. The increase in operating expenses was primarily the result of the commencement of the Company’s product development operations after the end of the first quarter of 2008.
Net Profit
Our net profit or loss is computed as our total revenues less expenses. For the three month period ended March 31, 2009, our net loss was $425,628 as compared to a net loss of $0 in the same period in 2008, an increase of $425,628. The increase in net loss is primarily attributed to the result of the commencement of the Company’s product development operations after the end of the first quarter of 2008.
LIQUIDITY AND CAPITAL RESOURCES
Our continuation as a going concern, is dependent upon, among other things, our ability to obtain additional financing when and as needed and to generate sufficient cash flow to meet our obligations on a timely basis. No assurance can be given that we will be able to obtain such financing on acceptable terms. Our independent registered public accounting firm, in their reports on our financial statements for the year ended September 30, 2008 expressed substantial doubt about our ability to continue as a going concern. These circumstances could complicate our ability to raise additional capital. Our financial statements do not include any adjustments to the carrying amounts of our assets and liabilities that might result from the outcome of this uncertainty.
In the event that we require additional capital, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. The incurrence of indebtedness would result in an increase in our fixed obligations and could result in borrowing covenants that would restrict our operations. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If financing is not available when required or is not available on acceptable terms, we may be unable to develop or enhance our products or services, or, we may potentially not be able to continue business activities. Any of these events could have a material and adverse effect on our business, results of operations and financial condition.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not required for Smaller Reporting Companies.
ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer, who also acts as our Chief Financial Officer, the Company evaluated the effectiveness of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The evaluation considered the procedures designed to provide assurance to ensure that information required to be disclosed by us in the reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures were effective at that reasonable assurance level, as of March 31, 2009.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the three months ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
LIMITATIONS OF EFFECTIVENESS OF INTERNAL CONTROLS
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of internal control is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.
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PART II. OTHER INFORMATION
We are not a party to any material legal proceeding.
ITEM 1A. RISK FACTORS
Not applicable.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
Not Applicable.
Not Applicable.
ITEM 6. EXHIBITS
Exhibits | |
31 | Certification of Principal Executive Officer and Principal Financial Accounting Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. |
32 | Certification of Principal Executive Officer and Principal Financial Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Signature | Capacity | Date | ||
/s/ David Coriaty David Coriaty | Chief Executive Officer, President and Principal Financial Accounting Officer | May 20, 2009 |
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