UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| [X] | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2013 | |
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
| For the transition period from _________ to ________ | |
| Commission file number: 333-165692 | |
| Co-Signer, Inc. |
| (Exact name of registrant as specified in its charter) |
| Nevada | 27-1963282 |
(State or other jurisdiction of incorporation or organization)
| (I.R.S. Employer Identification No.) |
8275 S. Eastern Avenue, Suite 200-661 Las Vegas, NV | 89123 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number:(855) 267-4461 |
Securities registered under Section 12(b) of the Exchange Act:
| |
| Title of each class | Name of each exchange on which registered |
| None | not applicable |
Securities registered under Section 12(g) of the Exchange Act:
| |
| Title of each class | |
| Common stock, par value of $0.001 | |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes [ ] No [X]
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 232.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.[ ]
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes [ ] No [X]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. Approximately $11,271,349 as of June 30, 2013.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.170,102,882as of April 14, 2014.
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PART I
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| Item 1. | Business | 3 |
| Item 2. | Properties | 4 |
| Item 3. | Legal Proceedings | 4 |
| Item 4. | Mine Safety Disclosures | 4 |
PART II
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| Item 5. | Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities | 5 |
| Item 6. | Selected Financial Data | 6 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 6 |
| Item 8. | Financial Statements and Supplementary Data | 9 |
| Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 10 |
| Item 9A. | Controls and Procedures | 10 |
| Item 9B. | Other Information | 10 |
PART III
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| Item 10. | Directors, Executive Officers and Corporate Governance | 10 |
| Item 11. | Executive Compensation | 12 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 15 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 16 |
| Item 14. | Principal Accountant Fees and Services | 16 |
PART IV
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| Item 15. | Exhibits, Financial Statement Schedules | 17 |
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PART I
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Company Overview
On August 12, 2013, we acquired all of the issued and outstanding common stock of Co-Signer.com, Inc., a private Nevada corporation (“Co-Signer.com”). As a result of the acquisition, we divested our former consumer electronics business and began to focus on the business of Co-Signer.com, Inc. as our primary line of business. The Company reserves the right to explore and pursue other opportunities that may be presented to its management and provide additional revenues, market share, or value for the Company and its shareholders. Co-Signer.com was incorporated on December 16, 2011 as a closely held Nevada corporation for the purpose of providing real estate financial services to tenants that were required to have a cosigner for their residential lease due to either no, poor or bad credit. The service is marketed as an added-value proposition for tenant screening services, property management associations or as a direct service to property management companies and landlords willing to accept commercialized cosigning services for “good people with less than perfect” credit.”
We are based in the Greater Las Vegas area in Nevada.
Services
Co-Signer.com provides credit-challenged tenants with a cosigner while providing residential landlords a contracted rent payment guarantee for a specified number of months within the 12 month lease period for their specified properties, one lease at a time. This lease payment assurance program remains flexible with defaulted rent paid for either a 3-month or 6-month period of time within the 12-month contract period, depending upon the requirement or election of the landlord.
Co-Signer.com was established as a result of the 2008 financial and housing crises. Since the summer of 2007 to today, a large number of Americans have lost their jobs, their homes and/or their businesses resulting in having their personal wealth and credit scores severely reduced and damaging their credit history. Over this same time period, circumstances and events have occurred leaving more and more people unable to qualify for a residential lease. A survey by the Associated Press (July 2013) states that 80% of all adult Americans will experience near poverty or unemployment in their lifetime while a recent report by Experian stated that America is becoming more of a renter nation out of choice, and as such, the need for residential cosigning of leases will only grow. As a result of these circumstances, the need to have someone cosign for a residential lease has increased. In the case of many tenants, the family and friends who would have cosigned for them a few years ago are now unable to do so.
Co-Signer.com seeks to meet the increased need for lease cosigners with the concept of commercializing residential rent guarantees (cosigning) as a professional financial service on a tenant-fee paid basis. Our service replaces the traditional need to rely on family and friends to cosign on a lease with an affordable and professional service that benefits both tenant and landlord; similar to the very same type of service that has been a mainstay in Australia’s residential leasing industry for over the past twenty years. This surety service product directly benefits the landlord and those responsible for the collection of residential rents while being paid for by an independent second party, the tenant. Instead of looking for an individual to be their guarantor or co-signer, or having to pay a significantly larger security deposit or prepaid rent, a renter may qualify to purchase a lease guarantee from Co-Signer.com to satisfy the landlord's financial and credit requirements. Additional benefits are available to the paying tenant, including a credit reporting option on the tenant’s rent payments during the contract period.
Over the past thirty (30) months, Co-Signer.com has continued to develop, refine and field-test its business model and rent guarantee programs in targeted markets across the United States. Upon the close of the third quarter of fiscal year 2013, Co-Signer.com’s management believes that the Company has a unique service ready to be distributed in the top twenty-five U.S. rental markets. Co-Signer.com utilizes special underwriting parameters through its proprietary online application and processing service, and provides a friendly and easy online landlord relations platform. Co-Signer.com seeks to be the premiere solution for residential cosigning services and provides this service line under Co-Signer.com brand name.
Based upon the acceptance by the real estate industry it has experienced to date, the management of Co-Signer.com believes its business model is sustainable whether the contracted service is for a residential lease for a single family home or an apartment lease in a multiple unit complex. Co-Signer.com’s growth strategy is based on the expansion of its residential lease payment program and on bundling this program with tenant screening and residential placement services online. The Company’s goal is to make the use of commercial rent assurance the U.S. industry standard and to focus its resources and market awareness efforts on landlords and property managers, educating them on the simplicity and value of the Company’s service that facilitates housing for tenants and maximizes occupancy rates and cash flow for landlords. With almost 39,000,000 rental units in the United States and 1 out of every 4 adults having poor, bad, or no credit, the demand for commercialized cosigning services provides a real growth opportunity.
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Suppliers and Service Providers
In an exclusive website, database and IT services contract, Co-Signer.com retained Imagine Media Group, LLC, a high-level security approved U.S. military and government IT services provider, to develop and maintain its online presence, including database development, application processing and evaluation and an integrated tenant screening, sales and marketing program with all proprietary rights retained by Co-Signer.com. Imagine Media Group has been an experienced web site, database, and process developer for the banking, military and financial services industries for over the past 15 years. The agreement with Imagine Media Group was executed by LetUsCosign.com, Inc., a company previously acquired by Co-Signer.com. A renewed agreement was executed on July 1, 2013 for three years.
In an affiliate agreement dated February 14, 2012, Co-Signer.com contracted with National Tenant Network, Inc. (“NTN”) to provide tenant screening information and services through NTN’s online portal, www.NTNOnline.com and to exclusively market each other’s services to their clients and to the public. This annual agreement provides that Co-Signer.com will be the only rent guarantee service to be promoted by NTN through all of its marketing channels, including all online affiliates nationwide, while providing daily online tenant screening ratings to assist in the evaluation of tenants applying for Co-Signer.com’s services. This agreement is cancelable with a 30 day written notice. NTN is recognized as a leading tenant screening service for the single-family residential leasing business throughout the United States, and it has been awarded for its marketing campaigns at industry events and for its presence online within the property management industry. Co-Signer.com’s written agreement with NTN has formally expired. Co-Signer.com entered an agreement on January 6, 2014 with Contemporary Information Corporation (CIC), the nation's highest rated credit information service bureau, which provides comprehensive tenant screening services to over 10,000 property managers nationwide and mutual marketing agreements on February 27, 2014.
In April of 2013, Co-Signer.com signed a consulting agreement with a marketing architect to lead the final development and deployment of its sales and marketing strategy and expand its brand recognition in the top twenty-five U.S. rental markets. The marketing consultant has over 15 years of experience helping private investors and business owners audit, develop and manage their portfolio of business brands.
Expansion and Development
Co-Signer.com currently has provided services to over sixty tenant clients and approximately three dozen landlords and property management companies in targeted U.S. metropolitan markets. Co-Signer.com has developed a multi-level marketing plan to promote, sell and distribute its services to the following marketplaces and audiences:
| · | Real estate brokers and realtors in the top 25 U.S. rental markets; |
| · | All realtors who service specialize in single-family and multi-residential short sales; |
| · | The top 500 property management companies in the U.S.; |
| · | The apartment association for each of the 50 U.S. states and the local chapters in the top 25 U.S. rental markets; and Association of Real Property Managers, an association specializing in the single-family home leasing industry. |
We rent approximately 4,100 square feet of office space in Las Vegas, Nevada on a monthly basis. We currently pay rent that escalates quarterly and culminates in a monthly rate of $2,500.
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is quoted under the symbol “COSR” on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting. Our reporting is presently current and, since inception, we have filed our SEC reports on time.
The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| Fiscal Year Ending December 31, 2013 | ||||||||||
| Quarter Ended | High $ | Low $ | ||||||||
| March 28, 2013 | 0.8000 | 0.0800 | ||||||||
| June 28, 2013 | 0.1100 | 0.0420 | ||||||||
| September 30, 2013 | 0.1500 | 0.0310 | ||||||||
| December 31, 2013 | 0.1700 | 0.0210 | ||||||||
| Fiscal Year Ended December 31, 2012 | ||||||||||
| Quarter Ended | High $ | Low $ | ||||||||
| March 30 | 0.46000 | 0.22000 | ||||||||
| June 30 | 1.0000 | 0.38000 | ||||||||
| September 30 | 0.7500 | 0.4000 | ||||||||
| December 31 | 0.5500 | 0.2000 | ||||||||
As of April 14, 2014, the last trading price for our common stock was $0.0256 per share.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
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Holders of Our Common Stock
As of April 14, 2014, we had fifty-four (54) holders of record of our common stock.
Dividends
There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes (the “NRS”) provides that a corporation may pay dividends out of surplus, out the corporation's net profits for the preceding fiscal year, or both provided that there remains in the stated capital account an amount equal to the par value represented by all shares of the corporation's stock raving a distribution preference.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
To date, we have not adopted a stock option plan or other equity compensation plan and have not issued any stock, options, or other securities as compensation.
Recent Sales of Unregistered Securities
On August 12, 2013, we issued 23,000,000 shares of common stock and 1,173,041 shares of preferred stock pursuant to our merger agreement with Co-Signer,com, Inc. Pursuant to the merger agreement upon closing, 30,555,560 shares of common stock held by a former officers and directors were canceled and returned to treasury.
On September 16, 2013, we issued 2,000,000 shares of common stock for services. The shares were issued at $0.085 per share based on the market value of the common stock on the date of authorization for a total non-cash expense of $170,000.
On October 31, 2013, we issued 266,667 shares of common stock for total cash proceeds of $20,000.
On November 7, 2013, we issued 3,000,000 shares of common stock for services. The shares were issued at $0.075 per share based on the market value of the common stock on the date of authorization for a total non-cash expense of $225,000.
On November 7, 2013, we issued 446,500 shares of common stock for services. The shares were issued at $0.07 per share based on the market value of the common stock on the date of authorization for total a total non-cash expense of $225,000.
On November 7, 2013, we issued 2,222,222 shares of common stock for services. The shares were issued at $.08 per share based on the market value of the common stock on the date of authorization for a total non-cash expense of $177,778.
On December 1, 2013, we issued 500,000 shares of common stock for services. The shares were issued at $0.0399 per share based on the market value of the common stock on the date of authorization for a total non-cash expense of $5,000.
On December 9, 2013, we issued 1,000,000 shares of common stock for future services to Edmund Arguelles, a member of our Board of Directors, vested on a quarterly basis over the next 24 months. The shares were issued at $0.0398 per share based on the market value of the common stock on the date of authorization for a total non-cash expense of $225,000.
Item 6. Selected Financial Data
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations for the Years Ended December 31, 2013 and December 31, 2012.
Revenue
During the year ended December 31, 2013, revenue was $62,991, as compared to $35,096 for the year ended December 31, 2012.
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Operating Expenses
Professional fees for the year ended December 31, 2013 were $191,738, as compared to $56,338 for the year ended December 31, 2012. Professional fees mainly consist of legal, auditor and other fees associated with the Company’s quarterly filings and year end audit. The increase in the current period can be attributed to an increase in fees associated with the recent merger.
Salaries and wage expense for the year ended December 31, 2013 was $128,568, compared to $109,667 for the year ended December 31, 2012.
Advertising and promotion expense for the year ended December 31, 2013 was $149,647, as compared to $70,281 for the year ended December 31, 2012. The large increase is due to increased efforts to promote the business. Much of the expense was non cash as it was paid for with the issuance of common stock.
General and administrative expense for the year ended December 31, 2013 were $213,733, compared to $229,845 for the year ended December 31, 2012.
Finally, we incurred stock compensation expense of $421,149 for the year ended December 31, 2013, which represents the value of stock paid to compensate employees and various consultants.
Other income and expense
During the year ended December 31, 2013 we incurred $201,643 of expense for amortization of debt discount, $91,357 of derivative expense, and had a gain on the change in fair value of our derivative liability of $44,769, none of which we had in the prior year. These new gains and losses are a result of the derivative accounting required for the issuance of convertible debt. There was also a loss on the extinguishment of debt of $235,937 and interest expense of $110,247 both of which were $0 in the prior period.
Net Loss
Overall we recorded a net loss of $1,636,259 for the year ended December 31, 2013, as compared to a net loss of $608,952 for the year ended December 31, 2012. As discussed above the increase in net loss can in part attributed to stock issued for services, and an increase in the amortization of debt discount, interest expense and the loss on extinguishment of debt.
As we continue to develop out business we expect that both our operating expenses and our gross revenues will continue to increase.
Liquidity and Capital Resources
As of December 31, 2013, we had an accumulated deficit of $2,358,670 and a working capital deficit of $1,425,543. We had cash of $1,792 and total current assets of $26,244. Our current liabilities were $1,451,787 and consisted of convertible notes net of discounts in the amount of $941,515, accounts payable of $279,040, derivative liabilities of $121,588, notes payable of $44,300, accrued interest of $24,954, accrued liabilities of $24,030, and notes payable to related parties of $16,360.
For the year ended December 31, 2013, net cash used in operating activities was $89,366 and we received $109,200 in cash from financing activities. We also used $19,058 for investing activities.
On June 29, 2012, we issued a $488,489 Convertible Promissory Note and Security Interest in favor of a trade creditor representing the past due invoices of the creditor for professional fees. During the year ended December 31, 2013, the creditor advanced a total of $8,006 for payment of our operating expenses whereby increasing the principal balance of the note to $491,465. The note is collateralized through the granting of a Security Interest in all the current and future assets of the Company until such time the note is fully satisfied. The Security Interest was subsequently perfected by the holder through filing. As amended, the Convertible Promissory Note is now due in full on or before May 31, 2014. The conversion price of the Note, amended, is $0.075 per share. Additionally, certain accounts payable and accrued expenses of $278,962 due to the creditor for services provided subsequent to the issuance of the original obligation were added to the Note, making the current balance of the Note $812,249.
In connection with our recent acquisition of Co-Signer.com., Inc, we also issued a total of $51,440 in 8% Secured Notes to a total of ten former shareholders of Co-Signer.com. The 8% Secured Notes are due in five years and accrue interest at an annual rate of eight percent (8%). Interest accrued under the 8% Secured Notes is due in semi-annual payments. All payments of interest due under the 8% Secured Notes may, at our option, be paid in shares of our common stock valued at a price per share equal to the average of the closing market prices for our common stock during five trading days immediately preceding the due date for such payment. Our obligations under the 8% Secured Notes are secured by a lien on all of our assets granted under Article 9 of the Uniform Commercial Code.
In connection with our acquisition of Co-Signer.com, Inc., we also we agreed to assume the following promissory notes previously issued by Co-Signer.com:
Chiles Valley, LLC Promissory Note - $25,000.This $25,000 note dated October 25, 2012 was due within six months and does not bear interest. As of December 31, 2013, the balance owed was $20,000.
Finiks Capital, LLC Convertible Promissory Note - $65,000. This $65,000 note dated February 1, 2013, bears interest at a rate of five percent (5%) per year, and is due on or before February 1, 2015. All principal and interest is due at maturity and we may pre-pay the note without penalty upon 30 days written notice. The note is convertible to common stock at a price of $0.0065 per share at the option of the holder. Finiks has made additional advances under the note. As of December 31, 2013, the balance was $77,760.
Argent Offset, LLC 90 Day Promissory Note - $10,000. This $10,000 note is dated May 23, 2013 bears interest at annual rate of twelve percent (12%) and is due within ninety days of its funding. Subsequent to August 31, 2013, the loan and all accrued interest was repaid in full.
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John Neal 8% Convertible Promissory Note - $10,000. This $10,000 note is dated June 3, 2013, bears interest at an annual rate of eight percent (8%), and is due on or before June 3, 2016. All principal and interest is due at maturity and we may pre-pay the note without penalty. The note is convertible to a total of 1,500,000 shares of common stock at the option of the holder.
Charles J. Kalina III Convertible Promissory Note - $5,000. This $5,000 note dated June 10, 2013, bears interest at a rate of eight percent (8%) per year, and is due on or before June 10, 2015. All principal and interest is due at maturity and we may pre-pay the note without penalty upon 30 days written notice. The note is convertible to common stock at a price of $0.00667 per share at the option of the holder. Subsequent to November 30,2013 the note holder converted the full principle and accrued interest into shares of common stock.
Robert and Suzanne Roysden Promissory Note - $15,000. This $15,000 Promissory note is dated June 12, 2013 and is due on or before August 12, 2013. The note does not bear interest but its principal balance includes a loan fee of $5,000 on funds in the amount of $10,000 actually advanced. As of December 31, 2013, the balance due was $10,000.
On September 23, 2013, we entered into a $400,000 Promissory Note (the “Note”) with JMJ Financial (“JMJ”). The face amount of the Note includes an original issue discount of $40,000. The initial advance to be made under the Note by JMJ is $50,000. JMJ may, after making this initial advance, lend us additional sums under the terms of the Note in such amounts and at such dates as it chooses. The Note matures in one year from the date of issue. If repaid within ninety (90) days from the date of issue, the Note will not bear interest. Upon ninety days after the date of issue, a one-time interest charge of twelve percent (12%) of the principal amount will be applied. JMJ may convert all or part of the Note, at its discretion, into shares of our common stock. The conversion price is sixty percent (60%) of the lowest trading price for our common stock in the twenty-five trading days immediately preceding the conversion date.
On November 1, 2013, we entered into a 9% Convertible Promissory Note with Charles J. Kalina III. The note bears interest at 9% and matures in two years. The loan is convertible at any time into shares of common stock at $0.075 per share beginning one year from the date of the note. In addition, the note requires the issuance of warrants to purchase 400,000 shares of common stock at a price of $1.25, exercisable for three years.
Also on November 1, 2013, we entered into a 9% Convertible Promissory Note with Stephen J. Smith for $20,000. The note bears interest at 9% and matures in two years. In addition, the note requires the issuance of warrants to purchase 2666,667 shares of common stock at a price of $1.25, exercisable for three years.
On November 4, 2013, we obtained short term financing from a Lender under a 9% Convertible Note in the amount of $70,000 (the “Short-Term Note”). The Short-Term Note features an original issue discount of $6,700. The $63,300 in funding received from the Lender was used to pay off and retire a prior Convertible Promissory Note issued to Asher Enterprises, Inc., dated April 9, 2013. The Short-Term Note accrues interest at a rate of nine percent (9%) per year, with all principal and interest due in full within thirty days from the date of issue. At any time, the Short-Term Note may be converted, in whole or in part at the option of the holder, at a price of $0.075 per share.
We have also received short term financing from Asher Enterprises, Inc. (“Asher”) under a series of Securities Purchase Agreements (the “SPAs”) and a Convertible Promissory Notes (the “Notes”) The Notes bear interest at an annual rate of 8%, with principal and interest coming due approximately nine (9) months from issue. The Note may be converted in whole or in part, at the option of the holder, to shares of our common stock, par value $0.001, at any time following 180 days after the issuance dates of the Notes. The conversion price under the Note is a 42% discount to the Market Price of our common stock on the conversion date.
Our financings to date with Asher are as follows:
| Date | Due Date | Principal Amount | ||||||
| November 25, 2013 | August 27, 2014 | $ | 42,500 | |||||
| January 9, 2014 | October 10, 2014 | $ | 32,500 | |||||
| March 3, 2014 | December 5, 2014 | $ | 37,500 | |||||
| Total | $107,500.00 | |||||||
Entered short term loan dated January 3, 2014 from our director and former CEO, Darren Magot, for $15,000.00 at 10% simple interest per annum and a $750.00 loan fee per week until all principal and interest is paid in full. This note had an initial due date of January 14, 2013 and was extended until January 31, 2014. On January 27, 2014, we issued an 8% Convertible Promissory Note to Darren Magot for $37,500. This Note consolidates the short term bridge loan on January 3, 2014 along with two more installments received as of this date of $22,500. The Note is convertible into common shares of our common stock stock at $.04 per share. In addition, we issued Mr. Magot warrants to purchase 10,000,000 shares of our common stock at $.05 per share, exercisable for three years.
On February 13, 2014, we issued a Convertible Promissory Note to Black Mountain Equities at a face amount of $250,000.00, with the first funding installment being $25,000. The note features a $25,000 original issue discount, a one-time interest charge of ten percent (10%) and is due in one year. This note is convertible into shares of our common stock at the lesser of $0.025 per share, or sixty percent (60%) of our lowest trading price occurring in the twenty-five consecutive trading days immediately preceding the conversion.
On or about February 26, 2014, we entered into a Convertible Promissory Note in the amount of $72,500 with GCEF Opportunity Fund, LLC. The note featured an original issue discount of $7,500, bears twelve percent (12%) interest, and is due in one year, and is callable at any time after ninety days, upon ninety days written notice. The note is convertible to our common stock at a price equal to fifty percent (50%) of the average bid price for our common stock over the ten trading days immediately preceding the conversion. As additional consideration to the lender, we issued 5,000,000 shares of our common stock.
| 8 |
On March 2, 2014, we entered into a Convertible Promissory Note with Hanover Holdings I, LLC for $35,000.00. The note bears interest at a rate of twelve percent (12%) and is due in eight months. The note is convertible to shares of our common stock at the lower of $0.04 per share, or a 45% discount from our lowest trading price in the five trading days prior to the conversion. The note also features prepayment penalties ranging from 15% to 45%, depending on the time or prepayment.
We currently have little operating capital and will dependent on fundraising in order to expand our operations and market our services to a wider group of potential customers. We can offer no assurance that we will obtain financing in the near future or on terms that are acceptable to us. Additional financing through public or private equity financings or other financing sources may not be available on acceptable terms, or at all.
Going Concern
We have negative working capital and have incurred losses since inception. These factors create substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.
Our ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these efforts.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material.
Purchase or Sale of Equipment
We do not expect to purchase or sell any plant or significant equipment in the coming fiscal year.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
| 9 |
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Co-Signer, Inc.
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of Co-Signer, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Co-Signer, Inc. as of December 31, 2013 and 2012, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that Co-Signer, Inc. will continue as a going concern. As discussed in Note 12 to the financial statements, the Company has incurred losses from operations, has negative working capital, and is in need of additional capital to grow its operations so that it can become profitable. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 12. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Silberstein Ungar, PLLC
Bingham Farms, Michigan
April 15, 2014
| F-1 |
CO-SIGNER, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 1,792 | $ | 1,016 | ||||
| Accounts receivable | 483 | — | ||||||
| Notes receivable, related party | — | 21,000 | ||||||
| Other receivable | 322 | 597 | ||||||
| Prepaid expenses | 23,647 | — | ||||||
| Total Current Assets | 26,244 | 22,613 | ||||||
| Deposits | 2,150 | |||||||
| Property and equipment, net | 25,411 | 4,959 | ||||||
| Intangible assets, net | 17,746 | 29,199 | ||||||
| Total Assets | $ | 71,551 | $ | 56,771 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 279,040 | $ | 69,708 | ||||
| Accrued liabilities | 24,030 | 190 | ||||||
| Accrued interest | 24,954 | — | ||||||
| Derivative liability | 121,588 | — | ||||||
| Notes payable, related party | 16,360 | — | ||||||
| Notes payable | 44,300 | — | ||||||
| Convertible notes payable, net of discounts of $60,234 and $0, respectively | 941,515 | 47,000 | ||||||
| Total Current Liabilities | 1,451,787 | 116,898 | ||||||
| Long Term Liabilities: | ||||||||
| Notes payable | 51,440 | — | ||||||
| Convertible notes payable, related party net of discounts of $37,682 and $0, respectively | 40,078 | — | ||||||
| Convertible notes payable, related party net of discounts of $16,856 and $0, respectively | 39,144 | — | ||||||
| Total Liabilities | 1,582,449 | 116,898 | ||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Preferred stock, $0.001 par value, 8,5000,000 authorized, no shares issued and outstanding | — | |||||||
| Series A preferred stock; $0.001 par value, 1,500,000 shares authorized, 1,173,041 and 0 shares issued and outstanding, respectively | 1,173 | — | ||||||
| Common stock; $0.001 par value, 440,000,000 shares authorized, 113,740,949 and 32,720,000 issued and outstanding, respectively | 113,741 | 32,720 | ||||||
| Additional paid in capital | 919,607 | 683,688 | ||||||
| Deferred stock compensation | (186,749 | ) | — | |||||
| Accumulated deficit | (2,358,670 | ) | (776,535 | ) | ||||
| Total Stockholders’ Deficit | (1,510,898 | ) | (60,127 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 71,551 | $ | 56,771 | ||||
The accompanying notes are an integral part of these financial statements.
| F-2 |
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Year Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
| Revenue | $ | 62,991 | $ | 35,096 | ||||
| Expenses: | ||||||||
| Professional fees | 191,738 | 56,338 | ||||||
| Salaries and wages | 128,568 | 109,677 | ||||||
| Advertising and promotion | 149,647 | 70,281 | ||||||
| Stock-based compensation expense | 421,149 | — | ||||||
| General and administrative | 213,733 | 229,845 | ||||||
| Total operating expenses | 1,104,835 | 466,141 | ||||||
| Loss from operations | (1,041,844 | ) | (431,045 | ) | ||||
| Other income and (expense): | ||||||||
| Interest expense | (110,247 | ) | — | |||||
| Amortization of debt discount | (201,643 | ) | — | |||||
| Change in fair value of derivative liability | 44,769 | — | ||||||
| Derivative expense | (91,357 | ) | — | |||||
| Impairment of note and interest receivable | — | (177,907 | ) | |||||
| Loss on extinguishment of debt | (235,937 | ) | — | |||||
| Total other income (expense) | (594,415 | ) | (177,907 | ) | ||||
| Loss before Provision for Income Taxes | (1,636,259 | ) | (608,952 | ) | ||||
| Provision for Income Taxes | — | — | ||||||
| Net Loss | $ | (1, 636,259 | ) | $ | (608,952 | ) | ||
| Loss per share | ||||||||
| Basic | $ | (0.03 | ) | $ | (0.02 | ) | ||
| Weighted average shares outstanding, basic | 62,282,697 | 28,453,060 | ||||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
| Preferred Stock | Common Stock | Additional | Deferred Stock | Subscription | Stock Accumulated | Total Stockholders’ | ||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Paid-in Capital | Compensation | Receivable | Deficit | Deficit | ||||||||||||||||||||
| Balance, December 31, 2011 | — | — | 13,115,000 | $ | 13,115 | $ | 254,185 | — | (119,300 | ) | $ | (167,583 | ) | $ | (19,583 | ) | ||||||||||||
| Common stock issued for cash | — | — | 21,705,000 | 21,705 | 412,395 | — | — | — | 434,100 | |||||||||||||||||||
| Collection of subscription receivable | — | — | — | — | — | — | 119,300 | — | 119,300 | |||||||||||||||||||
| Repurchase and cancellation of common stock | — | — | (1,100,000 | ) | (1,100 | ) | (20,900 | ) | — | — | — | (22,000 | ) | |||||||||||||||
| Return and cancellation of common stock | — | — | (1,000,000 | ) | (1,000 | ) | 1,000 | — | — | — | — | |||||||||||||||||
| Contributed capital | — | — | — | — | 10,000 | — | — | — | 10,000 | |||||||||||||||||||
| Forgiveness of accrued salary | — | — | — | — | 27,008 | — | — | — | 27,008 | |||||||||||||||||||
| Net loss for the year ended December 31, 2012 | — | — | — | — | — | — | — | (608,952 | ) | (608,952 | ) | |||||||||||||||||
| Balance, December 31, 2012 | — | — | 32,720,000 | 32,720 | 683,688 | — | — | (776,535 | ) | (60,127 | ) | |||||||||||||||||
| Contributed capital | — | — | — | 8,000 | — | — | — | 8,000 | ||||||||||||||||||||
| Recapitalization/Merger | — | — | 111,111,120 | 111,111 | (596,614 | ) | — | — | 54,124 | (431,379 | ) | |||||||||||||||||
| Share cancellation | — | — | (30,555,560 | ) | (30,556 | ) | 30,556 | — | — | — | — | |||||||||||||||||
| Debt discounts | — | — | — | — | 72,388 | — | — | — | 72,388 | |||||||||||||||||||
| Conversion of common stock to preferred stock, notes payable and warrants | 1,173,041 | 1,173 | (12,720,000 | ) | (12,720 | ) | (39,893 | ) | — | — | — | (51,440 | ) | |||||||||||||||
| Common stock issued for services | — | — | 9,168,722 | 9,169 | 659,615 | (186,749 | ) | — | — | 482,035 | ||||||||||||||||||
| Common stock issued for conversion of debt | — | — | 750,000 | 750 | 29,100 | — | — | — | 29,850 | |||||||||||||||||||
| Common stock issued for cash and warrants | — | — | 3,266,667 | 3,267 | 58,733 | — | — | — | 62,000 | |||||||||||||||||||
| Issuance of warrants | — | — | — | — | 14,034 | — | — | — | 14,034 | |||||||||||||||||||
| Net loss for the year ended December 31, 2013 | — | — | — | — | — | — | — | (1, 636,259) | (1, 636,259) | |||||||||||||||||||
| Balance, December 31, 2013 | 1,173,041 | 1,173 | 113,740,949 | $ | 113,741 | $ | 919,607 | $ | (186,749 | ) | $ | — | $ | (2,358,670 | ) | $ | (1,510,898 | ) | ||||||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Year Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss for the year | $ | (1, 636,259 | ) | (608,952 | ) | |||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Depreciation and amortization | 13,602 | 8,098 | ||||||
| Impairment of note and interest receivable | — | 177,907 | ||||||
| Stock-based compensation | 482,038 | — | ||||||
| Derivative expense | 91,357 | — | ||||||
| Loss on extinguishment of debt | 235,937 | — | ||||||
| Change in fair value of derivative liability | (44,769 | ) | — | |||||
| Amortization of debt discount | 201,643 | — | ||||||
| Change in assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable | (483 | ) | 429 | |||||
| (Increase) in interest receivable, related party | — | (7,281 | ) | |||||
| (Increase) decrease in other receivable | 275 | (597 | ) | |||||
| Increase in accounts payable and accruals | 567,293 | 12,768 | ||||||
| Net cash used in operating activities | (89,366 | ) | (417,628 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (12,998 | ) | (1,946 | ) | ||||
| Purchase of intangible assets | — | (34,310 | ) | |||||
| Issuance of note receivable, related party | — | (126,019 | ) | |||||
| Repayment of note receivable, related party | (6,060 | ) | 2,800 | |||||
| Net cash used in investing activities | (19,058 | ) | (159,475 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from notes payable, net | 39,200 | 22,000 | ||||||
| Contributed capital, related party | 8,000 | 10,000 | ||||||
| Proceeds from the sale of common stock | 62,000 | 434,100 | ||||||
| Collection of subscription receivable | — | 119,300 | ||||||
| Repurchase of common stock | — | (22,000 | ) | |||||
| Net cash provided by financing activities | 109,200 | 563,400 | ||||||
| Net increase (decrease) in cash | 776 | (13,703 | ) | |||||
| Cash at beginning of period | 1,016 | 14,719 | ||||||
| Cash at end of period | $ | 1,792 | $ | 1,016 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid for interest | $ | — | $ | — | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| Non-Cash Investing and Financing Information: | ||||||||
| Convertible note issued to extinguish a note payable totaling $491,945, account payable of $223,530 and accrued expenses of $183,999 | $ | 812,249 | $ | — | ||||
| Forgiveness of related party accrued liabilities | $ | — | $ | 27,008 | ||||
| Notes payable, preferred stock and common stock warrants issued for cancellation of common stock in connection with merger | $ | 56,588 | $ | — | ||||
| Common stock issued for conversion of debt | $ | 29,850 | $ | — | ||||
| Issuance of common stock warrants in connection with debt | $ | 14,034 | $ | — | ||||
| Beneficial conversion feature recorded in connection with convertible debt | $ | 72,388 | $ | — | ||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Co-Signer, Inc. (“Co-Signer” or the “Company”) was incorporated in Nevada on February 23, 2010 as Southern Products, Inc. and was doing business as SIGMAC USA. On August 12, 2013, the Company acquired all of the issued and outstanding common stock of Co-Signer.com, Inc., a private Nevada corporation (“Co-Signer.com”). As a result of the acquisition, we divested our former consumer electronics business and began to focus on the business of Co-Signer.com, Inc. as our primary line of business.
On August 12, 2013, the Company completed its merger with Co-Signer.com and its wholly-owned subsidiary, Co-Signer Acquisition Corp. Under the Merger Agreement the Company merged with and into Co-Signer Acquisition Corp. In connection with the closing of this transaction, Co-Signer, Inc., acquired all of the issued and outstanding shares of the Company, which resulted in the Company becoming a wholly-owned subsidiary of Co-Signer, Inc. In exchange for all of the issued and outstanding shares of the Company’s stock, the shareholders received a total of 1,173,041 shares of the newly-designated Series A Convertible Preferred Stock, $51,440 in newly-issued 8% Secured Notes, warrants to purchase a total of 51,440 shares of common stock an exercise price of $0.25 per share, and 23,000,000 newly-issued shares of common stock.
The closing of the transaction has been characterized as a reverse capitalization; therefore, the historical financial statements are the financial statements of Co-Signer.com, Inc. which have been presented to retroactively reflect the historic capitalization of the accounting acquiree.
Basis of Presentation
The accompanying financial statements 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"). In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The Company has adopted a December 31 year end.
Reclassification
Certain reclassifications have been made to conform the period year information to the 2013 classifications for comparative purposes.
Principles of consolidation
The consolidated financial statements include the accounts of Co-Signer, Inc. and Co-Signer.com, Inc. All significant intercompany balances and transactions have been eliminated. Co-Signer, Inc. and Co-Signer.com, Inc., will be collectively referred herein to as the “Company”.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. There were no cash equivalents as of December 31, 2013 and 2012.
Basic Loss per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
Concentrations of Credit Risk
The Company maintains its cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are provided utilizing the straight-line method over the related asset’s estimated useful life of three years.
Maintenance and repairs are charged to expense as incurred; renewals and improvements that extend the useful life of the assets are capitalized. Upon retirement or disposal, the asset cost and the related accumulated depreciation and amortization are eliminated from the respective accounts and a resulting gain or loss, if any, is included in the results of operations.
Fair Value of Financial Instruments
For certain of the Company’s non-derivative financial instruments, including cash and cash equivalents, receivables, accounts payable, and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. The estimated fair value of long-term debt is based primarily on borrowing rates currently available to the Company for similar debt issues. The fair value approximates the carrying value of long-term debt.
| F-6 |
Intangible Assets
The Company classifies intangible assets into three categories: (1) intangible assets with definite lives subject to amortization, (2) intangible assets with indefinite lives not subject to amortization and (3) goodwill. The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors the Company considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company’s strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized, on a straight-line basis, over their useful lives of three years.
Stock-Based Compensation
We account for equity instruments issued in exchange for the receipt of goods or services from non-employees. Costs are measured at the fair market value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of the date on which there first exists a firm commitment for performance by the provider of goods or services or on the date performance is complete. The Company recognizes the fair value of the equity instruments issued that result in an asset or expense being recorded by the company, in the same period(s) and in the same manner, as if the Company has paid cash for the goods or services.
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation - Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services ,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.
Advertising and marketing costs
The Company expenses all costs of advertising as incurred. During the year ended December 31, 2013 and 2012, there was $149,647 of and $70,281 in advertising and marketing costs.
Income Taxes
Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carry-forwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence; it is more likely than not such benefits will be realized. The Company’s deferred tax assets were fully reserved at December 31, 2013 and 2012.
The Company accounts for its income taxes using the Income Tax topic of the FASB ASC 740, which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of at December 31, 2013 and 2012, there have been no interest or penalties incurred on income taxes.
Revenue Recognition
Revenue from services and related costs of are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable, and (iv) collectability is reasonably assured. These terms are typically met upon the completion of the application process.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued, that might have a material impact on its financial position or results of operations.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31:
| 2013 | 2012 | |||||||
| Computer equipment | $ | 6,446 | $ | 6,446 | ||||
| Property & equipment | 22,600 | — | ||||||
| Less: accumulated depreciation | (3,635 | ) | (1,487 | ) | ||||
| Property and equipment, net | $ | 25,411 | $ | 4,959 | ||||
Depreciation expense for the years ended December 31, 2013 and 2012 was $2,148 and $1,487, respectively.
| F-7 |
NOTE 3 - INTANGIBLE ASSETS
Intangible assets consisted of the following as of December 31:
| 2013 | 2012 | |||||||
| Website design | $ | 34,310 | $ | 34,310 | ||||
| Domain name | 1,500 | 1,500 | ||||||
| Less: accumulated amortization | (18,064 | ) | (6,611 | ) | ||||
| Intangible assets, net | $ | 17,746 | $ | 29,199 | ||||
Amortization expense for the years ended December 31, 2013 and 2012 was $11,453 and $5,716, respectively.
NOTE 4 - NOTES PAYABLE
On June 29, 2012, the Company issued a $488,489 Convertible Promissory Note and Security Interest in favor of a trade creditor representing the past due invoices of the creditor for professional fees. During the year ended December 31, 2013, the creditor advanced a total of $8,006 for payment of the Company’s operating expenses whereby increasing the principal balance of the note to $491,465. The note is collateralized through the granting of a Security Interest in all the current and future assets of the Company until such time the note is fully satisfied. The Security Interest was subsequently perfected by the holder through filing. The note bears interest at a rate of 12% per annum and required monthly installments of $15,000 per month until paid in full commencing on July 10, 2012. Further, at the sole option of the holder, demand for payment could be made with a thirty-day written notice of such demand. In the event of default, the unpaid balance would accrue interest at a default rate of 18% per annum. Also pursuant to the terms of the note, it was convertible into shares of the Company’s common stock at the option of the holder at any time in whole or in part at a conversion rate of $0.10. On the commitment date, management evaluated the conversion feature with respect to the benefit of the holder and determined the value of the conversion feature to be equal to the face value of the note, $488,489. This amount has been recorded as a discount against the outstanding balance of the note. The discount is amortized to interest expense over the estimated life of the debt using the effective interest method. On November 5, 2013, the Company executed the Second Amendment to the Convertible Promissory Note. In this amendment the creditor has agreed to waive the default in the payment of monthly installments and to waive all accrued default interest. The Note is now due in full on or before May 31, 2014. The conversion price of the Note has been amended to $0.075 per share. Additionally, certain accounts payable and accrued expenses of $278,962 due to the creditor for services provided subsequent to the issuance of the original obligation were added to the Note, making the current balance of the Note $812,249. As a result of retiring the old debt and including it in the new note the expensing of the remaining debt discount of $270,502 was accelerated which resulted in a loss on extinguishment of debt of $183,877. Interest relating to the amortization of the debt discount for the year ended December 31, 2013 amounted to $69,772. As of December 31, 2013 there is $15,221 of accrued interest on the new note.
On April 9, 2013, the Company issued a Convertible Promissory Note to Asher Enterprises, Inc. in the amount of $42,500. The note bears interest at a rate of 8% per annum, is unsecured and matured on January 15, 2014. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 42% discount to the 10-day average trading price prior to the conversion date. The Company recorded a discount in the amount of $42,500 in connection with the initial valuation of the derivative liability of the note to be amortized utilizing the interest method of accretion over the term of the note. In November 2013 total principle and accrued interest of $44,728 was paid in full. As a result of paying off the note the Company recognized a gain on the derivative liability of $49,745 and a loss on the extinguishment of debt of $18,572. In addition the expensing of the remaining debt discount of $6,957 was accelerated which resulted in an additional loss on extinguishment of debt of $6,957.
On June 3, 2013, the Company executed a convertible promissory note for $10,000. The note bears interest at 8% and matures in three years. The loan is convertible at any time into shares of common stock at $0.0067 per share. As a result of the conversion feature the Company has recorded a debt discount of $4,925, $949 of which has been amortized to interest expense. As of December 31, 2013, there is $462 of accrued interest on this note.
On June 10, 2013, the Company executed a convertible promissory note for $5,000. The note bears interest at 8% and matures in two years. The loan is convertible at any time into shares of common stock at $0.0067 per share. As a result of the conversion feature the Company recorded a debt discount of $2,463, all of which was amortized to interest expense upon conversion. The note holder converted the full principle and accrued interest into shares of common stock. The conversion resulted in a loss on conversion of $24,660
On June 12, 2013, the Company executed a promissory note for $10,000. The loan has no stated interest rate and was due August 12, 2013. The note does not bear interest but its principal balance includes a loan fee of $5,000. Subsequent to December 31, 2013, the loan was extended with no specific terms of repayment.
On September 23, 2013, we entered into a $400,000 Promissory Note (the “Note”) with JMJ Financial (“JMJ”). The face amount of the Note includes an original issue discount of $40,000. The initial advance to be made under the Note by JMJ is $50,000. JMJ may, after making this initial advance, lend us additional sums under the terms of the Note in such amounts and at such dates as it chooses. The Note matures in one year from the date of issue. If repaid within ninety (90) days from the date of issue, the Note will not bear interest. Upon ninety (90) days after the date of issue, a one-time interest charge of twelve percent (12%) of the principal amount will be applied. JMJ may convert all or part of the Note, at its discretion, into shares of our common stock. The conversion price is sixty percent (60%) of the lowest trading price for our common stock in the twenty-five trading days immediately preceding the conversion date. As of December 31, 2013, this note as accrued $1,067 in interest and has a derivative liability of $88,312.
On November 1, 2013, the Company executed a convertible promissory note for $30,000. The note bears interest at 9% and matures in two years. The loan is convertible at any time into shares of common stock at $0.075 per share beginning one year from the date of the note. In addition, the note required the issuance of warrants to purchase 400,000 warrants. The aggregate fair value of these warrants totaled $14,034 based on the Black Scholes Merton pricing model. This amount has been recorded as a debt discount and will be amortized utilizing the interest method of accretion over the term of the note. As of December 31, 2013, $1,154 of the discount has been amortized to interest expense and there is $444 of accrued interest.
| F-8 |
On November 1, 2013, the Company executed a promissory note for $20,000. The note bears interest at 9% and matures in two years. As of December 31, 2013, there is $237 of accrued interest.
On November 4, 2013, we obtained short term financing from a Lender under a 9% Convertible Note in the amount of $70,000 (the “Short-Term Note”). The Short-Term Note features an original issue discount of $6,700. The $63,300 in funding received from the Lender was used to pay off and retire the Convertible Promissory Note issued to Asher Enterprises, Inc., dated April 9, 2013. The Short-Term Note accrues interest at a rate of nine percent (9%) per year, with all principal and interest due in full within thirty days from the date of issue. At any time, the Short-Term Note may be converted, in whole or in part at the option of the holder, at a price of $0.075 per share. As of December 31, 2013 there is $984 of accrued interest. The note was reviewed for a beneficial conversion feature and it was determined that none existed as the fair market price of the stock was in excess of the conversion price on the date of the note.
On November 25, 2013, the Company issued a Convertible Promissory Note to Asher Enterprises, Inc. in the amount of $42,500. The note bears interest at a rate of 8% per annum, is unsecured and matures on August 27, 2014. The Note is convertible into common stock in whole or in part 180 days after funding at a variable conversion price equal to a 42% discount to the average of the lowest three trading prices in the 10-day trading price prior to the conversion date. As of December 31, 2013, there is $335 of accrued interest on this note.
As of December 31, 2013 the Company owed Chiles Valley, LLC, $20,000. The loan has no stated interest rate and is due on demand.
The maturities of these notes and the related party notes below, net of discounts for the next five years are:
| Year Ended December 31, | ||||||
| 2014 | $ | 1,002,173 | ||||
| 2015 | 73,198 | |||||
| 2016 | 6,026 | |||||
| 2017 | — | |||||
| 2018 | 51,440 | |||||
| Total Future Maturities | $ | 1,132,837 | ||||
A summary of the status of the Company’s derivative liabilities and the inputs used for the Black Scholes model to calculate those derivative liabilities are as follows:
| Derivative Liabilities | Initial Valuation | Revaluation on 12/31/2013 | Change in fair value of Derivative | |||||||||
| JMJ – October 2, 2013 | $ | 129,184 | $ | 88,314 | $ | 40,870 | ||||||
| JMJ – December 9, 2013 | 37,173 | 33,274 | 3,899 | |||||||||
| $ | 166,357 | $ | 121,588 | $ | 44,769 | |||||||
| Derivative Liabilities | Stock price | Exercise price | Years to maturity | Volatility | Risk free rate | |||||||||||||||
| JMJ – Octobe r 2, 2013 Initial Valuation | $ | 0.097 | $ | 0.033 | 1 | 176.72 | 0.11 | |||||||||||||
| Revaluation on December 31, 2013 | $ | 0.029 | $ | 0.126 | .75 | 157.76 | 0.13 | |||||||||||||
| JMJ – December 9, 2013 Initial Valuation | $ | 0.0398 | $ | 0.0168 | 1 | 186.91 | 0.13 | |||||||||||||
| Revaluation on December 31, 2013 | $ | 0.029 | $ | 0.0126 | .92 | 157.76 | 0.13 | |||||||||||||
| F-9 |
NOTE 6 - RELATED PARTY TRANSACTIONS
Notes Payable
On May 23, 2013, the Company executed a promissory note for $10,000 with a related party. The note bears interest at 12% and was due August 21, 2013. As of December 31, 2013, an additional $8,500 was loaned and $2,200 of fees were added to the loan. $10,900 has been repaid on the note and there is $706 of accrued interest. The fees added to the note were for a forbearance agreement that extended the repayment terms to January 15, 2014.
On February 1, 2013, the Company executed a convertible promissory note for $65,000 with a related party. The note bears interest at a rate of 5% per annum, is unsecured and matures in two years. The loan is convertible at any time into shares of common stock at $0.0065 per share. The Company recorded a discount in the amount of $65,000 in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the interest method of accretion over the term of the note. As a result of the conversion feature the Company has recorded a debt discount of $65,000, $27,318 of which has been amortized to interest expense. As of December 31, 2013, there is $3,548 of accrued interest on this note and an additional $12,760 has been loaned to the Company with an 5% interest rate and no other specific terms.
As of December 31, 2013, the Company owed a related party $16,360 for cash advances to assist in covering operating expenses. The loan is unsecured, due on demand, and has no stated interest rate.
NOTE 7 - FAIR VALUE MEASUREMENT
ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| · | Level 1. Observable inputs such as quoted prices in active markets; | ||
| · | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; | ||
| · | Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. | ||
The following presents the gross value of assets and liabilities that were measured and recognized at fair value, as ofDecember 31, 2013.
| Level I | Level II | Level III | Fair Value | |||||||||||||
| Convertible notes payable | — | $ | 1,020,737 | — | $ | 1,020,737 | ||||||||||
| Derivative liability | — | 121,588 | — | 121,588 | ||||||||||||
| — | $ | 1,142,325 | — | $ | 1,142,325 | |||||||||||
| F-10 |
NOTE 8 - STOCKHOLDERS’ DEFICIT
The Company is authorized to issue up to 10,000,000 shares of $0.001 par value preferred stock, of which 1,500,000 shares have been designated as Series “A” convertible preferred. In addition the Company is authorized to issue up to 440,000,000 shares of $0.001 par value common stock.
On August 12, 2013, the Company issued 23,000,000 shares of common stock and 1,173,041 shares of preferred stock pursuant to its merger agreement with Co-Signer,com, Inc. Pursuant to the merger agreement, upon closing, 30,555,560 shares of common stock held by a former officer and director, were canceled.
On May 15, 2013, the Company issued 446,500 shares of common stock for services. The shares were issued at $0.07 based on the market value of the common stock on the date of authorization for total non cash expense of $31,256.
On September 16, 2013, the Company issued 2,000,000 shares of common stock for services. The shares were issued at $0.085 based on the market value of the common stock on the date of authorization for total non cash expense of $170,000.
On November 1, 2013, the Company issued 2,222,222 shares of common stock for services. The shares were issued at $0.08 based on the market value of the common stock on the date of authorization for total non cash expense of $177,778, $148,148 of which has been booked to deferred stock compensation expense.
On November 7, 2013, the Company issued 3,000,000 shares of common stock for services. The shares were issued at $0.075 based on the market value of the common stock on the date of authorization for total non cash expense of $225,000.
On December 1, 2013, the Company issued 500,000 shares of common stock for services. The shares were issued at $0.03 based on the market value of the common stock on the date of authorization for total non cash expense of $15,050.
On December 9, 2013, the Company issued 1,000,000 shares of common stock to a Director for services. The shares were issued at $0.0398 based on the market value of the common stock on the date of authorization for total non cash expense of $39,800, $38,601 of which has been booked to deferred stock compensation expense.
On December 10, 2013, a note for $5,000 dated June 10, 2013, plus $190 of accrued interest was converted into 750,000 shares of common stock. The shares were converted at the market price on the date of conversion of $0.0398, which resulted in a loss on conversion of $24,660.
During the year ended December 31, 2013, the Company issued 3,266,667 shares of common stock for total cash proceeds of $62,000.
NOTE 9 - WARRANTS
Pursuant to the terms and conditions of the merger agreement dated August 12, 2013, the Company issued 51,440 warrants. The aggregate fair value of the warrants totaled $3,975 based on the Black Scholes Merton pricing model using the following estimates: 1.39% risk free rate, 207% volatility and expected life of the warrants of 5 years.
Pursuant to the terms and conditions of the purchase agreement dated November 2, 2013, the Company issued 400,000 warrants. The aggregate fair value of the warrants totaled $14,034 based on the Black Scholes Merton pricing model using the following estimates: .61% risk free rate, 169% volatility and expected life of the warrants of 3 years.
Pursuant to the terms and conditions of the common stock purchase agreement dated November 2, 2013, the Company issued 266,667 warrants. The aggregate fair value of the warrants totaled $17,580 based on the Black Scholes Merton pricing model using the following estimates: ..61% risk free rate, 169% volatility and expected life of the warrants of 3 years.
A summary of the status of the Company’s outstanding stock warrants as of November 30, 2013 and changes during the periods is presented below:
| Warrant | Weighted Average Price | |||||||||
| Outstanding, December 31, 2012 | — | $ | — | |||||||
| Issued | 718,107 | 0.21 | ||||||||
| Exercised | — | — | ||||||||
| Forfeited | — | — | ||||||||
| Expired | — | — | ||||||||
| Outstanding, December 31, 2013 | 718,107 | $ | 0.21 | |||||||
| Exercisable, December 31, 2013 | 51,440 | $ | 0.21 | |||||||
| Outstanding | Exercisable | |||||||||||||||||||||
| Range of Exercise Prices | Number Outstanding at 12/31/2013 | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable at 12/31/2013 | Weighted Average Exercise Price | |||||||||||||||||
| $ | 0.25 - 0.125 | 718,107 | 3.1 Years | $ | 0.13 | 718,107 | $ | 0.13 | ||||||||||||||
| F-11 |
NOTE 10 - INCOME TAXES
For the year ended December 31, 2013, the Company has incurred a net loss of $1,636,259 and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $2,359,000 at December 31, 2013, and will expire beginning in the year 2032.
The provision for Federal income tax consists of the following for the years ended December 31, 2013 and 2012:
| 2013 | 2012 | |||||||
| Federal income tax benefit attributable to: | ||||||||
| Current operations | $ | 556,328 | $ | 207,043 | ||||
| Less: valuation allowance | (556,328 | ) | (207,043 | ) | ||||
| Net provision for Federal income taxes | $ | — | $ | — | ||||
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of December 31, 2013 and 2012:
| 2013 | 2012 | |||||||
| Deferred tax asset attributable to: | ||||||||
| Net operating loss carryover | $ | 820,350 | $ | 264,022 | ||||
| Valuation allowance | (820,350 | ) | (264,022 | ) | ||||
| Net deferred tax asset | $ | — | $ | — | ||||
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $1,412,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
ASC Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company's financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes. As of December 31, 2013, the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction and in the state of Nevada.
NOTE 11 – COMMITMENTS
We rent approximately 4,100 square feet of office space in Las Vegas, Nevada on a month-to-month basis. We currently pay rent that escalates quarterly and culminates in a monthly rate of $2,500. Rent expense for the year ended December 31, 2013 was $19,270.
NOTE 12 - GOING CONCERN
As of December 31, 2013, the Company has a working capital deficit of $1,425,543, limited revenue and an accumulated deficit of $2,358,670. The financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The Company’s management plans on raising cash from public or private debt or equity financing, on an as needed basis and in the longer term, upon achieving profitable operations through its business activities.
| F-12 |
NOTE 13 - SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2013 through the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described below.
On January 3, 2014, the Company’s Board of Directors approved through a Unanimous Consent Resolution a short term bridge loan from Darren Magot, a Board Member, for $15,000.
On January 6, 2014, Co-Signer.com entered an exclusive contract to provide tenant screening and background information services with Contemporary Information Corporation (CIC). CIC is the nation’s leading tenant screening provider and supersedes the National Tenant Networks (NTN) as the exclusive service provider. On February 27, 2014, impressed with the Company’s service products and commitment to service prospective tenant clients and landlords, both companies entered mutual agreements to marketing tenant and employment screening services provided by CIC and residential rent assurance provided by Co-Signer.com.
On January 9, 2014, the Company’s Board of Directors approved issuance of an 8% Convertible Promissory Note for additional funding from Asher Enterprises for $32,500 in principal for the same terms as in November 2013 for $42,500. This funding was received by the Company immediately upon the filing of its 10Q report for the period ending November 30, 2013.
On January 11, 2014, the Company’s Board of Directors met and approved changing the fiscal year end date of the Company to a calendar year end date of December 31.
On January 11, 2014, the Company’s Board of Directors met and granted 175,000 shares of common stock, vested immediately, each to Anne Bove and Rebecca Eli, granted 500,000 shares of common stock, vested immediately, to Joseph Spaziano and 3,000,000 shares of common stock, vested immediately, to James P. Hodgins, President of Co-Signer.com, Inc. as additional compensation for services previously rendered.
On January 11, 2014, the Company’s Board of Directors met and authorized the establishment of an Employee Stock Option Plan for all employees of the Company and its subsidiaries. The Company’s CEO is to present for approval a detail plan (ESOP COSR 2014) at the next meeting of the Company’s Board of Directors in February 2014.
On January 11, 2014, the Company’s Board of Directors met and authorized an employment agreement for Darren Magot, its immediate past CEO, President, Treasurer, Chairman of the Board of Directors and current Director. The agreement grants Mr. Magot 250,000 shares of common stock, vested immediately, with options for 1,000,000 shares of common stock at $.08 per share for 10 years with varying monthly paid compensation from August 13 through December 15 as CEO and President ($1,500/mo.) and as Chairman and Treasurer ($500/mo.), and as a member of the Board of Directors ($500/mo).
On January 11, 2014, the Company’s Board of Directors met and approved the business consulting agreement with an interested party (Charles J. Kalina, III) granting 2,000,000 warrants, vested immediately, for shares of common stock, convertible at $.05 per share for 5 years, for services to be rendered starting January 2, 2014 over the next 12 months.
On January 11, 2014, the Company’s Board of Directors met and approved the business consulting agreement with an interested party (Steven J. Smith) granting 2,500,000 shares of common stock, vested immediately, and 2,000,000 warrants, vested immediately, of which 1,000,000 warrants are convertible at $.075 per share for 5 years and 1,000,000 warrants are convertible at $.10 per share for 7 years, for shares of common stock, for services to be rendered starting January 2, 2014 over the next 12 months.
On January 11, 2014, the Company’s Board of Directors met and approved the business consulting agreement with an interested party (Michael A. Chernine) granting 1,000,000 shares of common stock, vested immediately, for services to be rendered starting January 2, 2014 over the next 12 months.
On January 27, 2014, the Company’s Board of Directors approved through a Unanimous Consent Resolution issuance of an 8% Convertible Promissory Note with Darren Magot, a Board Member, for $37,500. This Note consolidates the short term bridge loan on January 3, 2014 along with two more installments received as of this date of $22,500. The Note is convertible into common shares of the Company stock at $.04 per share and issued 10,000,000 warrants at $.05 per share for 3 years.
On January 27, 2014, the Company’s Board of Directors approved through a Unanimous Consent Resolution a Memorandum of Understanding (MOU) for a joint venture to be named later between the Company, TAS Media Group, Inc. and Darren M. Magot, a Board Member. The MOU directs issuance of up to 200,000 common shares of the Company to Darren M. Magot for services to be rendered.
On February 3, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution the issuance of the certificate to be issued by Empire Stock Transfer transferring from Finiks Capital to Strategic IR the Convertible Promissory Note issued to Finiks Capital for $65,000 in February 2013 and authorizing the conversion of the Note into the common shares of the Company’s stock.
On February 13, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution the issuance of the 10% Convertible Promissory Note with Black Mountain Equities for $250,000.00, convertible into common shares of the Company with the first funding installment $25,000.
On February 13, 2014, the Company’s Board of Directors approved through a Unanimous Consent Resolution the Employment Agreement with Kurt A. Kramarenko that grants 1,000,000 common shares of the Company as a signing bonus, immediately fully vested, and issuing an option for 4,000,000 common shares of the Company stock at $.05 per share, with 500,000 shares vested per quarter, along with paid annual compensation of $72,000 and other incentives.
| F-13 |
On February 17, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution the issuance of 250,000 options each to Rebecca Eli and Anne Bove for past employment service at .05 for 3 years and 1,500,000 common shares to Gary R. Gottlieb for successful completion of August 13, 2013 merger and filing of Form 10Q for period ending August 31, 2013 and completion of its associated review.
On February 26, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution the issuance of the 12% Convertible Promissory Note with GCEF Opportunity Fund, LLC for $72,500, with an original interest discount of $7,500. Additional consideration of 5,000,000 common shares of the Company stock will be issued immediately, fully vested.
On February 26, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution the Consulting Agreement for one year with Strategic IR, LLC for compensation of 3,500,000 common shares of the Company stock, fully vested immediately.
On February 26, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution the Consulting Agreement for one year with Joseph W. Abrams for compensation of 3,500,000 common shares of the Company stock, fully vested immediately.
On February 27, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution two marketing agreements for two years with Contemporary Information Corporation (CIC), exclusively, for tenant and employment screening services and other background information products provided by CIC and exclusively, residential rent assurance programs provided by Co-Signer.com.
On March 1, 2014, James P. Hodgins resigns as President, Vice President and Treasurer of Co-Signer.com, Inc. while remaining a member of the Board of Directors for Co-Signer.com, Inc.. Kurt A. Kramarenko is immediately appointed President and Treasurer of Co-Signer.com, Inc. by the Company’s Board of Directors through a Unanimous Consent Resolution.
On March 1, 2014, Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution a consulting agreement for one year with Gary Patterson and issuance of 500,000 common shares of the Company stock, fully vested immediately.
On March 3, 2014, the Company’s Board of Directors approved issuance of an 8% Convertible Promissory Note for additional funding from Asher Enterprises for $32,500 in principal for the same terms as in November 2013 for $42,500.
On March 6, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution the issuance of the 12% Convertible Promissory Note with Hanover Holdings, LLC for $38,000 convertible into common shares of the Company stock.
On March 27, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution an exclusive Service Agreement with HerbCentral.com to provide sales and marketing for their online cannabis service portal business for both commercial and consumer transactions. This is the first venture by the Company to maximize its Call Center with third party revenue generation.
On March 27, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution conversion of John R. Neal Convertible Promissory Note of $10,000 of June 2013 into 1,593,240 shares including earned interest as granted in the Note.
On April 2, 2014, the Company’s Board of Directors approved and authorized through a Unanimous Consent Resolution a Posting Agreement with YouFunding, Inc. to conduct a crowd funding capital raise with a minimum funding target of $250,000 raised to a maximum of $1,250,000.
| F-14 |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and treasurer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2013. Based on his evaluation, he concluded that our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures were due to a lack of segregation of duties.
Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed by, or under the supervision of, our chief executive officer and chief financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management, including our chief executive officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation under the criteria established in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was ineffective as of December 31, 2013. Management determined that the material weaknesses that resulted in controls being ineffective are primarily due to lack of resources and number of employees. Material weaknesses exist in the segregation of duties required for effective controls and various reconciliation and control procedures not regularly performed due to the lack of staff and resources.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
During the most recently completed fiscal year, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table contains information concerning our directors and executive officers as of March 31, 2014.
| Name | Age | Position(s) and Office(s) Held | ||||||
| Kurtis A. Kramarenko | 51 | President, Chief Executive Officer, Interim Chief Financial Officer | ||||||
| Gary R. Gottlieb | 57 | Secretary and Director | ||||||
| Darren M. Magot | 44 | Director | ||||||
| Ed Arguelles | 48 | Director |
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Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.
Kurtis A. Kramarenko, our President and CEO, has been the principal of Autasha, LLC since November of 2007 and has been the head of business development for Ayers Basement Systems since November of 2011. In addition, he has been a member of the board of directors of Conceivex, Inc. since 2008. From June of 2000 to September of 2008, Mr. Kramarenko served as a senior specialty medical representative for Tap Pharmaceuticals, Inc. While at Tap Pharmaceuticals Inc., he led the company in national sales for three consecutive years and successfully launched several new drugs to the market. Mr. Kramarenko was the owner/operator of Double K Feeds, Pet & Ranch Supplies from 1997 to 2000. He was the National Sales Director for DeVries & Company from January of 1994 to September of 1995. Mr. Kramarenko was the Department Head - Fixed Income Desk at North American Financial from April of 1993 to November of 1993. He was the founder and President of Ashford Investments, Inc. from 1990 to 1993, the Investment Portfolio Manager for Mutual Savings Bank from 1988 to 1990, a Financial Consultant at First of Michigan Corporation from 1987 to 1988, and a Financial Consultant at Merrill Lynch from 1986 to 1987. At Mutual Savings Bank, whose assets totaled more than $1.2 billion, Mr. Kramarenko sat on the Asset/Liability Committee and was responsible for managing the institution’s $750 million portfolio. Some of his most significant accomplishments were the identification and recovery of $1 million in delinquent investment payments previously written off by the financial institution, and the reduction of its cost of funds on the reverse repurchase agreement portfolio by 200 basis points through direct negotiations, saving the institution $6 to 8 million dollars annually. Kurt holds a degree of Bachelor of Science in Business Administration from Michigan State University with a strong emphasis in finance, marketing and interpersonal communications. He has also preformed post graduate studies in business at both Central Michigan and Princeton University.
Gary R. Gottlieb, our Secretary and Director, has served as the President of ID Brandz, Inc. since December of 2011. Mr. Gottlieb was Secretary and a Director of LetUsCoSign, Inc. from June of 2001 through November of 2011. In the past, Mr. Gottlieb has worked with various private firms specializing in the nutraceuticals, IT Consulting, media, and marketing industries. Mr. Gottlieb has a BS in Business Administration from California State University in Northridge with an emphasis in Accounting and Management.
Edmund Arguelles, our Director, has been the Executive Vice President of Imagine Media Group, LLC for the past nine years. Prior to joining Imagine Media Group, he spent fifteen years working in marketing, retail and wholesale in the electronics and communications industries. Mr. Arguelles has experience in information technology services for the Department of Defense, and in managing I.T. service contracts for the U.S. Navy and Marine Corps. He has background experience in electronic engineering technology and information technology. Mr. Arguelles also current serves as the executive director of Prime Motivation, Inc., a non-profit corporation which creates educational experiences for youths.
Darren M. Magot is a Director and has former served as our President and CEO. Mr. Magot has nearly 20 years of selling experience leading teams in the accounting, utilities, and market research spaces. He is currently an AVP with United Sample where he has been for a year and a half. Before United Sample, Mr. Magot worked with Research Panel Asia for a year and Global Market Insight for five years ramping up their sales divisions. Mr. Magot has long been active with emerging companies, and has owned a number of business leveraging his sales and finance experience. Mr. Magot has a Finance degree from California State University, Chico and is active in many organizations in Southern California.
Directors
Our bylaws authorize no less than one (1) and no more than twelve (12) directors. We currently have three directors.
All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.
Committees of the Board
We do not currently have a compensation committee, executive committee, or stock plan committee.
Audit Committee
We do not have a separately-designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an “audit committee financial expert” within the definition of Item 407(d)(5)(ii) of Regulation S-K.
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Nomination Committee
Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.
When evaluating director nominees, our directors consider the following factors:
| The appropriate size of our Board of Directors; | |
| Our needs with respect to the particular talents and experience of our directors; | |
| The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board; | |
| Experience in political affairs; | |
| Experience with accounting rules and practices; and | |
| The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members. |
Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Code of Ethics
We have adopted a Code of Ethics for financial executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Business Conduct and Ethics was filed as Exhibit 14.1 to Quarterly Report on Form 10-Q filed on July 20, 2011.
Item 11. Executive Compensation
Compensation Discussion and Analysis
Our President and CEO, Kurtis A. Kramarenko, has been paid a salary of $42,000 per year. Subsequent to the reporting period, and effective February 13, 2014, we entered into an Executive Employment Agreement with Mr. Kramarenko (the “Agreement”). The Agreement provides him with a base salary of $72,000 per year, together with a signing bonus of 1 million shares of the Company’s common stock fully vested immediately, and annual bonuses in the discretion of the Board. The initial term of the Agreement is for one year, subject to annual renewal by the Board. The Agreement contains various other terms and conditions and should be reviewed in its entirety for more information. The goals of the Agreement are to continue to retain Mr. Kramarenko with a cash salary commensurate with his experience and responsibilities, while also providing him an incentive to maximize shareholder value by vesting him with significant stock ownership. Mr. Kramarenko was also granted 1,000,000 shares of common stock as a bonus, together with warrants to purchase 4,000,000 shares of common stock at a price of $0.05, to be vested quarterly over two (2) years.
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Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for our last two completed fiscal years for all services rendered to us.
| SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||||||||
| Name and principal position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||
| Kurtis A. Kramarenko, CEO, Interim CFO | 2013 2012 | $ | 72,000 n/a | $ | — $ n/a | $ | — $ n/a | $ | — $ n/a | $ | — $ n/a | $ | — n/a | $ | — n/a | $ | 72,000 n/a | |||||||||||||||
| Gary R. Gottlieb, Secretary, Director | 2013 2012 | $ | 500 n/a | $ | — $ n/a | $ | — $ n/a | $ | — $ n/a | $ | — $ n/a | $ | — n/a | $ | — $ n/a | 500 n/a | ||||||||||||||||
| Darren M. Magot, former officer, Director | 2013 2012 | $ | 11,250 n/a | $ | — n/a | $ | — $ n/a | $ | — $ n/a | $ | — $ n/a | $ | — — | $ | — n/a | 11,250 n/a | ||||||||||||||||
| Edward Meadows, former officer* | 2013 2012 | $ | $69,000 $73,000 | $ | — — | $ | — — | $ | — — | $ | — — | $ | — — | $ | 425,000 — | 494,900 73,000 | ||||||||||||||||
| Edward Wang, former officer* | 2013 2012 | $ | $60.062 $40,500 | $ | — — | $ | — — | $ | — — | $ | — — | $ | — — | $ | 170,957 — | 231,019 40,000 | ||||||||||||||||
Narrative Disclosure to the Summary Compensation Table
During the year ended December 31, 2013, we paid $72,000 in cash compensation to our CEO, Kurtis Kramarenko. Our former CEO, Darren Magot, received $11,250 in compensation during the fiscal year. The stock and warrants granted to Mr. Kramarenko, as discussed above, were issued after December 31, 2014. Our Secretary, Mr. Gottlieb, received a grant of 1,500,000 shares of common stock subsequent to the fiscal year end.
* Figures for former officers Edward Meadows and Edward Wang relate to our former fiscal year ended February 28, and are for the former fiscal years ended February 28, 2013 and February 28, 2012.
Stock Option Grants
As discussed above, we granted our President and CEO, Mr. Kramarenko, warrants to purchase 4,000,000 shares of common stock at a price of $0.05, to be vested quarterly over two (2) years.
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Outstanding Equity Awards At Fiscal Year-end Table
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year.
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||||
| OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Shares of Stock That Have Not Vested (#) | Market Value of Shares or Shares of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Shares or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Shares or Other Rights That Have Not Vested (#) | |||||||||||||||||||||||||||
| Kurtis A. Kramarenko, CEO, Interim CFO | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Gary R. Gottlieb, Secretary, Director | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Darren M. Magot, former officer, Director | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Compensation of Directors Table
The table below summarizes all compensation paid to our directors for our last completed fiscal year.
| DIRECTOR COMPENSATION | ||||||||||||||||||||||||||||
| Name | Fees Earned or Paid in Cash ($) |
Stock Awards ($) |
Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) | |||||||||||||||||||||
| Gary R. Gottlieb | — | — | — | — | — | — | — | |||||||||||||||||||||
| Darren Magot | — | — | — | — | — | — | — | |||||||||||||||||||||
| Edmund Arguelles | — | — | — | — | — | — | — | |||||||||||||||||||||
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Narrative Disclosure to the Director Compensation Table
Our director Edmund Arguelles was granted 1,000,000 shares of common stock as compensation for the next two years of director service. The stock granted to Mr. Arguelles vests quarterly and, as of December 31, 2013, no shares were vested. Our director Darren Magot has entered into an employment agreement with us under which he was granted 250,000 shares of common stock as a signing bonus and options to purchase 1,000,000 share of common stock at a price of $0.08 per share, vested at a rate of 250,000 per quarter. These shares and options were issued after the end of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of our capital stock by each executive officer and director, by each person known by us to beneficially own more than 5% of any class of stock and by the executive officers and directors as a group. Except as otherwise indicated, all Shares are owned directly and the percentage shown is based on 170,102,882 shares common stock issued and outstanding as of April 14, 2014.
Title of class | Name and address of beneficial owner | Amount of beneficial ownership | Percent of class | |||||||||
| Common | Kurtis A. Kramarenko 1450 Biscayne Way Haslett, MI 48840 | 2,000,000(1) | 1.18 | % | ||||||||
| Common | Gary R. Gottlieb 3625 W. MacArthur Blvd. #301 Santa Ana, CA 92704 | 1,500,000 | 0.88 | % | ||||||||
| Common | Darren M. Magot 9061 Niguel Circle Huntington Beach, CA 92646 | 750,000(2) | 0.44 | % | ||||||||
| Common | Edmund Arguelles 265-1/2 Broadway Chula Vista, CA 91910 | 2,500,000 | 1.47 | % | ||||||||
| All Officers and Directors as a Group | 6,750,000 | 3.97 | % | |||||||||
| Other 5% owners | ||||||||||||
| Common | Finiks Capital, LLC(3) 6250 Mountain Vista St., #C1 Henderson, NV 89014 | 20,000,000 | 11.76 | % | ||||||||
| Common | MCKEA Holdings, LLC(4) P.O. Box 3587 Tustin, CA 92781 | 26,555,560 | 15.61 | % | ||||||||
(1)Includes 1,000,000 shares of common stock, together with vested options to purchase 1,000,000 shares of common stock (out of a total award of 4,000,000 options) at a price of $0.05 per share.
(2)Includes 250,000 shares of common stock, together with vested options to purchase 500,000 shares of common stock (out of a total award of 1,000,000 options) at a price of $0.08 per share.
(3)James P. Hodgins is the Managing Member of Finiks Capital, LLC and, in that capacity, has the authority to make voting and investment decisions regarding its common stock.
(4)Kristine L. Ault is the Managing Member of MCKEA Holdings, LLC and, in that capacity, has the authority to make voting and investment decisions regarding its common stock.
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Securities Authorized for Issuance Under Equity Compensation Plans
To date, we have not adopted a stock option plan or other equity compensation plan and have not issued any stock, options, or other securities as compensation.
Disclosure of Commission Position of Indemnification for Securities Act Liabilities
In accordance with the provisions in our articles of incorporation, we will indemnify an officer, director, or former officer or director, to the full extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of us in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as set forth below,none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us:
1. Mr. Gottlieb, our Secretary and a Director, was formerly the Secretary, Director and Co-Founder of LetUsCoSign, Inc. Our wholly-owned subsidiary, Co-Signer.com, Inc. acquired the assets of LetUsCoSign, Inc. on January 1, 2012. Subsequently, on August 13, 2013, we acquired all of the issued and outstanding stock of Co-Signer.com, Inc.
2. Mr. Arguelles, a Director, is the Executive Vice President of Imagine Media Group, Inc. Imagine Media Group has contracted to develop and maintain our online presence. Its responsibilities include database development, application processing and evaluation, and developing and maintaining an integrated tenant screening, sales and marketing program. Our relationship with Imagine Media Group is governed by Client Service Contract dated July 1, 2013, a copy of which was filed with our Current Report on Form 8-K filed August 15, 2013.
3. Darren Magot, our former CEO and a Director, has entered into an employment agreement with us under which he was granted 250,000 shares of common stock as a signing bonus and options to purchase 1,000,000 share of common stock at a price of $0.08 per share, vested at a rate of 250,000 per quarter.
4. We entered short term loan dated January 3, 2014 with our director and former CEO, Darren Magot, for $15,000.00 at 10% simple interest per annum and a $750.00 loan fee per week until all principal and interest is paid in full. This note had an initial due date of January 14, 2013 and was extended until January 31, 2014. On January 27, 2014, we issued an 8% Convertible Promissory Note to Darren Magot for $37,500. This Note consolidates the short term bridge loan on January 3, 2014 along with two more installments received as of this date of $22,500. The Note is convertible into common shares of our common stock at $.04 per share. In addition, we issued Mr. Magot warrants to purchase 10,000,000 shares of our common stock at $.05 per share, exercisable for three years.
5. Effective February 13, 2014, we entered into an Executive Employment Agreement with Kurt Kramarenko, our President and CEO (the “Agreement”). The Agreement provides him with a base salary of $72,000 per year, together with a signing bonus of 1 million shares of the Company’s common stock fully vested immediately, and annual bonuses in the discretion of the Board. The initial term of the Agreement is for one year, subject to annual renewal by the Board. The Agreement contains various other terms and conditions and should be reviewed in its entirety for more information. The goals of the Agreement are to continue to retain Mr. Kramarenko with a cash salary commensurate with his experience and responsibilities, while also providing him an incentive to maximize shareholder value by vesting him with significant stock ownership. Mr. Kramarenko was also granted 1,000,000 shares of common stock as a bonus, together with warrants to purchase 4,000,000 shares of common stock at a price of $0.05, to be vested quarterly over two (2) years.
6. We are party to a $65,000 note dated February 1, 2013 with Finiks Capital, LLC. Finiks is the owner of approximately 11.76% of our common stock. The note bears interest at a rate of five percent (5%) per year, and is due on or before February 1, 2015. All principal and interest is due at maturity and we may pre-pay the note without penalty upon 30 days written notice. The note is convertible to common stock at a price of $0.0065 per share at the option of the holder. Finiks has made additional advances under the note. As of December 31, 2013, the balance was $77,760.
Director Independence
We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The NASDAQ Stock Market, Inc., we do not have any independent directors.
Item 14. Principal Accounting Fees and Services
Below is the table of Audit Fees (amounts in US$) billed by our auditor in connection with the audit of the Company’s annual financial statements and quarterly reviews for the years ended:
| Financial Statements for the Year Ended | Audit Services | Audit Related Fees | Tax Fees | Other Fees | ||||||||||||
| December 31, 2013 | $ | 22,000 | $ | 11,500 | $ | 0 | $ | 3,000 | ||||||||
| February 29, 2013 | $ | 14,000 | $ | 7,500 | $ | 0 | $ | 0 | ||||||||
| February 28, 2012 | $ | 18,000 | $ | 5,500 | $ | 0 | $ | 0 | ||||||||
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PART IV
Item 15. Exhibits, Financial Statements Schedules
| (a) | Financial Statements and Schedules |
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
| (b) | Exhibits |
| Exhibit Number | Description |
| 2.1 | Merger Agreement(5) |
| 3.1 | Articles of Incorporation(1) |
| 3.2 | Bylaws(1) |
| 3.3 | Certificate of Amendment to Articles of Incorporation(5) |
| 3.4 | Certificate of Designation for Series A Convertible Preferred Stock(5) |
| 10.1 | Agreement of Conveyance, Transfer and Assignment of Subsidiary and Assumption of Obligations(4) |
| 10.2 | Form of 8% Secured Note(5) |
| 10.3 | Form of $0.25 Warrant(5) |
| 10.4 | Client Service Contract with Imagine Media Group, LLC(5) |
| 10.5 | Lease Agreement for facility at 6250 Mountain Vista Street, Suite C-1(5) |
| 10.6 | Promissory Note issued to Chiles Valley, LLC(5) |
| 10.7 | 8% Convertible Promissory Note issued to John Neal(5) |
| 10.8 | $400,000 Promissory Note with JMJ Financial(6) |
| 10.9 | Promissory Note issued to Robert and Suzanne Roysden(5) |
| 10.10 | 8% Convertible Promissory Note issued to Finiks Capital, LLC(5) |
| 10.11 | 9% Convertible Note(7) |
| 10.12 | Asher Enterprises Promissory Note Dated November 25, 2013(8) |
| 10.13 | Asher Enterprises Securities Purchase Agreement November 25, 2013(8) |
| 10.14 | Promissory Note with Darren M. Magot Dated January 3, 2014(8) |
| 10.15 | Asher Enterprises Promissory Note Dated January 9, 2014(8) |
| 10.16 | Asher Enterprises Securities Purchase Agreement January 9, 2014(8) |
| 10.17 | Darren Magot Employment Agreement(8) |
| 10.18 | Charles K. Kalina, III Consulting Agreement(8) |
| 10.19 | Steven J. Smith Consulting Agreement(8) |
| 10.20 | Michael A. Chernine Consulting Agreement(8) |
| 10.21 | Convertible Promissory Note with Cane Clark LLP dated June 29, 2012(3) |
| 10.22 | First Amendment to Convertible Promissory Note with Cane Clark LLP, dated November 30, 2012(3) |
| 10.23 | Second Amendment to Convertible Promissory Note with Cane Clark LLP(7) |
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(1)Incorporated by reference to Registration Statement on Form S-1/A filed June 10, 2010.
(2)Incorporated by reference to Quarterly Report on Form 10-Q filed July 20, 2011.
(3)Incorporated by reference to Annual Report on Form 10-K filed July 11, 2013.
(4)Incorporated by reference to Current Report on Form 8-K filed August 5, 2013.
(5)Incorporated by reference to Current Report on Form 8-K filed August 15, 2013.
(6)Incorporated by reference to Current Report on Form, 8-K filed September 27, 2013.
(7)Incorporated by reference to Current Report on Form 8-K filed November 8, 2013.
(8)Incorporated by reference to Quarterly Report on Form 10-Q filed January 21, 2013.
** Provided hereto
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Co-Signer, Inc.
| By: | /s/ Kurtis A. Kramarenko |
Kurtis A. Kramarenko President, Chief Executive Officer, and Interim Chief Financial Officer
| |
| April 15, 2014 |
In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| By: | /s/ Kurtis A. Kramarenko |
Kurtis A. Kramarenko President, Chief Executive Officer, and Interim Chief Financial Officer
| |
| April 15, 2014 |
| By: | /s/ Gary R. Gottlieb |
Gary R. Gottlieb Secretary and Director
| |
| April 15, 2014 |
| By: | /s/ Darran M. Magot |
Darren M. Magot Director
| |
| April 15, 2014 |
| By: | /s/ Edmund Argulles |
Edmund Arguelles Director
| |
| April 15, 2014 |
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