UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to ______________
Commission File Number: 000-54403
POWERSTORM CAPITAL CORP.
(Name of registrant as specified in its charter)
| DELAWARE | 45-3733512 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2321 Rosecrans Avenue, Suite 4265
El Segundo, CA 90245
(Address of principal executive offices) (Zip Code)
(310) 297-6807
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
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 (§232.405 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 ¨ No x
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 | ¨ | Small Reporting Company | x |
(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨No x
As of August 12, 2013, there were 19,858,984 shares of common stock issued and outstanding.
TABLE OF CONTENTS
| PART I. - FINANCIAL INFORMATION | ||
| Page | ||
| Item 1. | Financial Statements. | 1 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations. | 9 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 13 |
| Item 4. | Controls and Procedures. | 13 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | 14 |
| Item 1A. | Risk Factors. | 14 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 14 |
| Item 3. | Defaults Upon Senior Securities. | 14 |
| Item 4. | Mine Safety Disclosures. | 14 |
| Item 5. | Other Information. | 14 |
| Item 6. | Exhibits. | 14 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
| Balance Sheets as of June 30, 2013 and December 31, 2012 (Unaudited) | 2 |
| Statements of Operations for the Three and Six Months Ended June 30, 2013 and for the period from October 10, 2011 (Inception) through June 30, 2013 (Unaudited) | 3 |
| Statements of Cash Flows for the Six Months Ended June 30, 2013 and for the period from October 10, 2011 (Inception) through June 30, 2013 (Unaudited) | 4 |
| Notes to the Financial Statements (Unaudited) | 5 |
| 1 |
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
(Unaudited)
June 30, 2013 | December 31, 2012 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 4,213 | $ | 3,559 | ||||
| Prepaid expenses and other current assets | 749 | 255 | ||||||
| Total current assets | 4,962 | 3,814 | ||||||
| Furniture and office equipment, net | 5,610 | 5,269 | ||||||
| Trademarks | 5,199 | 4,570 | ||||||
| Deposits | 1,400 | 1,400 | ||||||
| TOTAL ASSETS | $ | 17,171 | $ | 15,053 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 33,301 | $ | 14,644 | ||||
| Advances from related party | - | 13,780 | ||||||
| Total liabilities | 33,301 | 28,424 | ||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Preferred stock, par value $0.01 per share, 5,000,000 shares authorized, none issued and outstanding | - | - | ||||||
| Common stock, par value $0.001 per share, 300,000,000 shares authorized; 19,758,984 and 19,226,000 shares issued and outstanding at June 30, 2013 and at December 31, 2012, respectively | 19,759 | 19,226 | ||||||
| Additional paid-in capital | 122,150 | 69,385 | ||||||
| Deficit accumulated during the development stage | (158,039 | ) | (101,982 | ) | ||||
TOTAL STOCKHOLDERS ' DEFICIT | (16,130 | ) | (13,371 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS ' DEFICIT | $ | 17,171 | $ | 15,053 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
| 2 |
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
(Unaudited)
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2012 | Six Months Ended June 30, 2013 | Six Months Ended June 30, 2012 | From October 10, 2011 (Inception) Through June 30, 2013 | ||||||||||||||||
| REVENUES | $ | 4,400 | $ | - | $ | 6,600 | $ | - | $ | 6,600 | ||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||
| General and administrative | 34,540 | 19,824 | 62,397 | 36,656 | 163,506 | |||||||||||||||
| Depreciation expense | 281 | 238 | 530 | 397 | 1,403 | |||||||||||||||
| Total operating expenses | 34,821 | 20,062 | 62,927 | 37,053 | 164,909 | |||||||||||||||
| Loss from operations | (30,421 | ) | (20,062 | ) | (56,327 | ) | (37,053 | ) | (158,309 | |||||||||||
| Other income | - | - | 270 | - | 270 | |||||||||||||||
| NET LOSS | $ | (30,421 | ) | $ | (20,062 | ) | $ | (56,057 | ) | $ | (37,053 | ) | $ | (158,039 | ||||||
| Loss per common share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||
| Weighted average number of common shares outstanding - basic and diluted | 19,449,461 | 18,719,148 | 19,344,371 | 18,695,275 | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 3 |
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, 2013 | Six Months Ended June 30, 2012 | From October 10, 2011 (Inception) through June 30, 2013 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (56,057 | ) | $ | (37,053 | ) | $ | (158,039 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Share-based compensation | - | 6,706 | 32,286 | |||||||||
| Depreciation expense | 530 | 397 | 1,403 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaid expenses and other current assets | (494 | ) | 597 | (749 | ) | |||||||
| Accounts payable | 18,657 | 4,607 | 33,301 | |||||||||
| Net cash used in operating activities | (37,364 | ) | (24,746 | ) | (91,798 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Purchases of property and office equipment | (871 | ) | (6,142 | ) | (7,013 | ) | ||||||
| Acquisition of trademarks | (629 | ) | (1,225 | ) | (2,274 | ) | ||||||
| Net cash used in investing activities | (1,500 | ) | (7,367 | ) | (9,287 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Issuances of common stock for cash | 15,000 | 10,000 | 25,000 | |||||||||
| Advances from related party | 24,518 | 31,944 | 80,298 | |||||||||
| Net cash provided by financing activities | 39,518 | 41,944 | 105,298 | |||||||||
| Net change in cash | 654 | 9,831 | 4,213 | |||||||||
| Cash at beginning of period | 3,559 | - | - | |||||||||
| Cash at end of period | $ | 4,213 | $ | 9,831 | $ | 4,213 | ||||||
| Supplemental disclosure of cash flows information: | ||||||||||||
| Cash paid during the period for: | ||||||||||||
| Interest | $ | - | $ | - | $ | - | ||||||
| Income taxes | $ | - | $ | - | $ | - | ||||||
| Non-cash investing and financing activities: | ||||||||||||
| Shares issued for prepaid expenses | $ | - | $ | - | $ | 2,800 | ||||||
| Shares issued for capitalized trademarks | $ | - | $ | 2,925 | $ | 2,925 | ||||||
| Shares issued for other assets | $ | - | $ | 1,400 | $ | 1,400 | ||||||
| Shares issued to pay for the related party advances | $ | 38,298 | $ | - | $ | 80,298 | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 4 |
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Notes To Financial Statements
(Unaudited)
NOTE 1 – GENERAL ORGANIZATION AND BUSINESS OPERATIONS
Powerstorm Capital Corp. (the “Company”) is a development stage company incorporated in Delaware on October 10, 2011 and is located in El Segundo, California. The Company was formed solely for the purpose of identifying and entering into business acquisitions within the telecommunications infrastructure space. To date, the Company has not entered into any discussions or negotiations with any companies it would intend to acquire. The Company’s management intends to focus on targets located primarily in Asia, South America, and Western and Eastern Europe, as it believes that businesses with operating history and growth potential in these locations would benefit significantly from access to the United States capital markets and may offer the potential for capital appreciation stemming from the economic growth in such emerging markets.
NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim financial statements as of June 30, 2013, for the three and six months ended June 30, 2013 and for the period from October 10, 2011 (inception) through June 30, 2013 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and on the same basis as the annual audited financial statements. In the opinion of management, these financial statements include all adjustments, which, unless otherwise disclosed, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented.
The results for interim periods are not necessarily indicative of results for the entire year. The balance sheet at December 31, 2012 has been derived from audited financial statements; however, the notes to the financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. The accompanying unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto for the period from October 10, 2011 (inception) to December 31, 2012 included in Form S-1/A filed with SEC on April 12, 2013.
Development Stage Activities
The Company is presently in the development stage, with insignificant revenues. Accordingly, all of the Company’s operating results and cash flows reported in the accompanying financial statements are considered to be those arising from the development stage activities and represent the ”cumulative from inception” amounts from its development stage activities.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Intangible Assets
The Company’s intangible assets consist of trademarks with indefinite life. The Company capitalizes the filing and legal fees related to the trademark registrations, which totaled $5,199 and $4,570 as of June 30, 2013 and December 31, 2012, respectively.
The Company reviews its indefinite-lived intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses recoverability by reference to future cash flows from the products underlying these intangible assets. If these estimates change in the future, the Company may be required to record impairment charges for these assets. As of June 30, 2013, no impairment was recorded.
| 5 |
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Notes To Financial Statements
(Unaudited)
Furniture and Office Equipment
Furniture and office equipment is stated at cost and depreciated using the straight-line method over 7 years, the estimated life of the asset. Computers and software developed or obtained for internal use are depreciated using the straight-line method over the estimated useful life of 5 years. Repairs and maintenance are charged to expense as incurred.
Income Taxes
The Company uses the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. A valuation allowance, if necessary, is provided against deferred tax assets, based upon management’s assessment as to their realization.
Stock-Based Compensation
The Company expenses the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the service period.
Equity instruments issued to parties other than employees for acquiring goods or services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.
Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the diluted weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. There were no potentially dilutive securities as of June 30, 2013 and 2012.
Subsequent Events
The Company evaluates subsequent events through the date when financial statements are issued for disclosure consideration.
New Accounting Pronouncements
The Company does not expect adoption of the new accounting pronouncements will have a material effect on the Company’s financial statements.
NOTE 3 – GOING CONCERN
The accompanying financial statements were prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and depends upon the Company’s ability to establish itself as a profitable business. The Company is a development stage company and has incurred an accumulated loss of $158,039 since inception. The Company has negative working capital of $28,339 and will require additional funds to finance its business plan for the next twelve months. Due to the start-up nature of the Company, the Company expects to incur additional losses in the immediate future. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. To date, the Company’s founders have provided funding for operations until the Company raises sufficient capital to provide for the first-year operating expenses.
| 6 |
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Notes To Financial Statements
(Unaudited)
The Company is planning to obtain financing either through the issuance of equity or debt. To the extent that funds generated from any private placements, public offerings, and/or bank financings are insufficient, the Company will have to raise additional working capital through other sources.
NOTE 4 – FURNITURE AND OFFICE EQUIPMENT
| June 30, 2013 | December 31, 2012 | |||||||
| Furniture and equipment | $ | 4,830 | $ | 4,830 | ||||
| Computers and software | 2,183 | 1,312 | ||||||
| Accumulated depreciation | (1,403 | ) | (873 | ) | ||||
| Furniture and office equipment, net | $ | 5,610 | $ | 5,269 | ||||
During the three months ended June 30, 2013 and 2012, the Company recorded depreciation expense of $281 and $238, respectively. During the six months ended June 30, 2013 and 2012, the Company recorded depreciation expense of $530 and $397, respectively.
NOTE 5 – RELATED PARTY TRANSACTIONS
As of June 30, 2013, a related party entity advanced to the Company and made payments to several of the Company’s vendors on behalf of the Company for a total of $80,298, of which $24,518 were advanced during the six months period ended June 30, 2013. The Company’s President and Chairman of the Board of Directors serves as the president of this related party entity. The advances are due on demand and bear no interest.
On October 15, 2012, the Company issued 420,000 shares of common stock to this related party entity as a reimbursement for the advances and payments made and on behalf of the Company. The shares were valued at the fair value of the expense reimbursement of $42,000.
On March 22, 2013, the Company issued 137,800 shares of common stock to this related party entity as a reimbursement for the advances and payments made and on behalf of the Company. The shares were valued at the fair value of the expense reimbursement of $13,780.
On June 30, 2013, the Company issued 245,184 shares of common stock to this related party entity in full reimbursement for the advances and payments made and on behalf of the Company. The shares were valued at the fair value of the expense reimbursement of $24,518.
As of June 30, 2013 and December 31, 2012, the Company owed to this related party entity $0 and $13,780, respectively.
NOTE 6 – EQUITY
The Company is authorized to issue 305,000,000 shares of capital stock. These shares are divided into two classes with 300,000,000 shares designated as common stock at $0.001 par value and 5,000,000 shares designated as preferred stock at $0.01 par value.
| 7 |
POWERSTORM CAPITAL CORP.
(A DEVELOPMENT STAGE COMPANY)
Notes To Financial Statements
(Unaudited)
During the six months ended June 30, 2013, the Company issued:
| - | On March 22, 2013 - 137,800 shares of common stock to a related party entity for advances to the Company and payments made on behalf of the Company. These shares were valued at the fair value of the expense reimbursement and assets purchased of $13,780. |
| - | On May 2, 2013 - 50,000 shares of common stock to a third party for cash proceeds of $5,000. |
| - | On May 17, 2013 - 100,000 shares of common stock to a third party for cash proceeds of $10,000. |
| - | On June 30, 2013 - 245,184 shares of common stock to a related party entity for advances to the Company and payments made on behalf of the Company. These shares were valued at the fair value of the expense reimbursement and assets purchased of $24,518. |
During the period from October 10, 2011 (inception) through December 31, 2012, the Company issued:
| - | 51,000 shares of common stock to third-party providers for legal and consulting services received. These shares were valued at their grant date fair value of $5,100. |
| - | 100,000 shares of common stock to third-party investors for cash proceeds of $10,000. |
| - | 420,000 shares of common stock to a related party entity for advances to the Company and payments made on behalf of the Company. These shares were valued at the fair value of the expense reimbursement and assets purchased of $42,000. |
| - | 15,000,000 shares of common stock to its founders at par value of $0.001 per share. |
| - | 25,000 shares of common stock to one of its executive officers and a third party vendor for services provided to the Company. These shares were recorded at their fair value of $113. |
| - | 3,630,000 shares of common stock to Key Media Management for payments made on behalf of the Company. These shares were valued at the fair value of the expense reimbursement and assets purchased of $16,398. |
NOTE 7 – SUBSEQUENT EVENTS
On July 20, 2013, the Company issued 100,000 shares of common stock to a third party for cash proceeds of $10,000.
| 8 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion is intended to assist you in understanding our business and results of operations together with the Company’s present financial condition. This section should be read in conjunction with our historical combined and consolidated financial data included elsewhere in this Memorandum. Statements in the Company’s discussion may be forward-looking statements. These forward-looking statements involve risks and uncertainties. The Company cautions that a number of factors could cause future production, revenues and expenses to differ materially from our expectations. Please see “Cautionary Note Regarding Forward-Looking Statements.”
Overview
Powerstorm Capital Corporation is a development stage company formed solely for the purpose of identifying and consulting with companies related to telecommunications infrastructure. We intend to focus on targets based primarily in Asia, South America, and Europe for two reasons. First, we believe that businesses with an operating history and growth potential in these locations would benefit significantly from access to the United States markets. Second, companies in emerging markets may offer the potential of capital appreciation as those markets experience economic growth.
Our Strategy
We intend to capitalize on the continued increase in the use of wireless communication services and the resulting infrastructure requirements for current and future generations of wireless communication technologies. To that end, we are focusing on three segments of the telecom infrastructure market:
| · | New andrefurbished telecom equipment |
| · | Spare part and asset management solutions |
| · | Telecom tower and hybrid power solutions |
Due to the continued increase in subscribers for wireless personal communication and phone services, we expect wireless carriers will need to add a significant number of cell sites to maintain the performance of their networks in the areas they currently cover and to extend service to new markets. In addition, we believe that as wireless data services, such as e-mail, Internet access, and video, are deployed on a widespread basis, wireless carriers will need to augment the cell density of their existing networks. The widespread deployment of those services also may necessitate an overlay of new technology equipment and increase the demand for geographic expansion of network coverage.
The telecom tower business in particular is experiencing explosive growth, requiring substantial investment. Smaller companies are finding it difficult to commit the necessary resources. We believe that, rather than constructing and operating their own towers and maintaining their own tower service and development capabilities, wireless carriers increasingly will outsource their tower infrastructure needs in order to improve existing service coverage, implement new technology, accelerate access to their markets, and preserve capital. We see a clear market opportunity and growth for Powerstorm to address these needs if we can acquire and integrate the right mix of companies to complement our expertise in telecommunications infrastructure.
| 9 |
Results of Operations
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2012 | Six Months Ended June 30, 2013 | Six Months | From October 10, 2011 (Inception) Through June 30, 2013 | ||||||||||||||||
| Revenues | $ | 4,400 | $ | - | $ | 6,600 | $ | - | $ | 6,600 | ||||||||||
| Total operating expenses | (34,821 | ) | (20,062 | ) | (62,927 | ) | (37,053 | ) | (164,909 | ) | ||||||||||
| Other Income | - | - | 270 | - | 270 | |||||||||||||||
| Net loss | $ | (30,421 | ) | $ | (20,062 | ) | $ | (56,327 | ) | $ | (37,053 | ) | $ | (158,039 | ) | |||||
For the Three Months Ended June 30, 2013 and 2012
Revenues
We are still in our development stage and have generated insignificant revenues from consulting services of $4,400 during the three months ended June 30, 2013 and $0 revenues during the three months ended June 30, 2012.
Operating Expenses
We incurred total operating expenses of $34,821 and $20,062 for the three months ended June 30, 2013 and 2012, respectively. These expenses primarily consisted of general and administrative expenses incurred in connection with the day-to-day operation of our business which were comprised of audit and accounting fees of $6,908 and $10,375, legal fees of $9,525 and $0, filing fees of $8,595 and $0, rent expense of $4,668 and $4,240, marketing expenses of $3,250 and $0, stock-based compensation of $0 and $2,100, and other expenses totaling $1,875 and $3,347 for the three months ended June 30, 2013, and 2012, respectively.
Net Loss
During the three month ended June 30, 2013 and 2012, we incurred a net loss of $30,421 and $20,062, respectively.
For the Six Months Ended June 30, 2013 and 2012
Revenues
We are still in our development stage and have generated insignificant revenues from consulting services of $6,600 during the six months ended June 30, 2013 and $0 revenues during the three months ended June 30, 2012.
Operating Expenses
We incurred total operating expenses of $62,927 and $37,053 for the six months ended June 30, 2013 and 2012, respectively. These expenses primarily consisted of general and administrative expenses incurred in connection with the day-to-day operation of our business and were comprised of audit and accounting fees of $24,789 and $15,875, legal fees of $9,525 and $0, filing fees of $10,837 and $0, rent expense of $9,406 and $7,757, marketing expenses of $3,925 and $0, stock-based compensation of $0 and $5,100, and other expenses totaling $4,445 and $8,321 for the six months ended June 30, 2013, and 2012, respectively.
| 10 |
Net Loss
During the six month ended June 30, 2013 and 2012, we incurred a net loss of $56,327 and $37,053, respectively.
From October 20, 2011 (Inception) through June 30, 2013
Revenues
For the period from October 10, 2011 (Inception) to June 30, 2013, we generated insignificant revenues from consulting services of $6,600.
Operating Expenses
We incurred total operating expenses of $164,909 for the period since inception on October 10, 2011 to June 30, 2013, which consisted primarily of general and administrative expenses. Our general and administrative expenses were comprised of audit and accounting fees of $55,974, legal fees of $28,354, rent expense of $26,340, stock-based compensation to our founders and third-party service providers of $20,213, filing fees of $13,089, marketing expenses of $4,225, and other expenses totaling $16,714. The legal fees were primarily incurred in connection with the preparation and filing of the registration statement with the SEC.
Net Loss
We had a net loss of $158,039 for the period from October 10, 2011 (Inception) to June 30, 2013 due to incurred operating expenses and insignificant revenues.
Liquidity and Capital Resources
Our financial condition as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 2013 and 2012 is summarized as follows:
Working Capital:
| June 30, 2013 | December 31, 2012 | |||||||
| Current assets | $ | 4,962 | $ | 3,814 | ||||
| Current liabilities | (33,301 | ) | (28,424 | ) | ||||
| Working capital (deficit) | $ | (28,339 | ) | $ | (24,610 | ) | ||
Cash Flows:
| Six Months Ended June 30, | From October 10, 2011 (Inception) through | |||||||||||
| 2013 | 2012 | June 30, 2013 | ||||||||||
| Cash used in operating activities | $ | (37,364 | ) | $ | (24,746 | ) | $ | (91,798 | ) | |||
| Cash used in investing activities | (1,500 | ) | (7,367 | ) | (9,287 | ) | ||||||
| Cash provided by financing activities | 39,518 | 41,944 | 105,298 | |||||||||
| Net increase in cash | $ | 654 | $ | 9,831 | $ | 4,213 | ||||||
| 11 |
We are a development stage company and have incurred an accumulated loss of $158,039 since inception. Powerstorm has working capital deficit of $28,339 at June 30, 2013, which is not sufficient to finance its business plan for the next twelve months. Our independent auditors have issued an audit opinion for us for the financial statements ended December 31, 2012 and the period than ended, which includes a statement expressing substantial doubt as to our ability to continue as a going concern due to our limited liquidity and our lack of revenues.
We have minimal operating expenses at the present time due to our limited business activities. To date, our founders have provided funding for our operations. We will, however, be required to raise additional capital over the next twelve months to meet our current administrative expenses.
We are planning to obtain financing either through the issuance of equity or debt. To the extent that funds generated from any private placements, public offerings, and/or bank financings are insufficient, we will have to raise additional working capital through other sources.
We didn’t have sufficient resources to effectuate our business plan from October 10, 2011 (Inception) through the period ended June 30, 2013. We expected to incur a minimum of $150,000 in expenses during the next 12 months of operations.
We indicated that we would have to raise the funds to pay for these expenses. We may have to borrow money from founders or shareholders, issue debt or equity, or enter into a strategic arrangement with a third party. There is no assurance that we will secure additional capital. There currently are no agreements, arrangements, or understandings that would enable Powerstorm to obtain funds through bank loans, lines of credit, or any other source. If we are unable to raise funds for acquisitions it will have a severe negative impact on our ability to execute our business.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to select appropriate accounting policies and to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Estimates
In preparing our financial statements, we make estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methods. In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment. We periodically evaluate our estimates and judgments that are most critical in nature. We believe that the following discussion of critical accounting policies address all important accounting areas where the nature of accounting estimates or assumptions is material due to the levels of subjectivity and judgment. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.
Intangible Assets
The Company’s intangible assets consist of trademarks with indefinite life. The Company capitalizes the filing and legal fees related to the trademark registrations, which totaled $5,199 and $4,570 as of June 30, 2013 and December 31, 2012, respectively. The Company reviews its indefinite-lived intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. The Company assesses recoverability by reference to future cash flows from the products underlying these intangible assets. If these estimates change in the future, the Company may be required to record impairment charges for these assets. As of June 30, 2013, no impairment was recorded.
| 12 |
Stock-Based Compensation
The Company expenses the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the service period.
Equity instruments issued to parties other than employees for acquiring goods or services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.
Recent Accounting Pronouncements
The Company does not expect adoption of the new accounting pronouncements will have a material effect on the Company’s financial statements.
Subsequent Events
On July 20, 2013, the Company issued 100,000 shares of common stock to a third party for cash proceeds of $10,000. The issuance of shares is exempt from registration, pursuant to Section 4(2) of the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these stockholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
| Item 4. | Controls and Procedures. |
Disclosure of Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer have reviewed the effectiveness of our disclosure controls and procedures as of June 30, 2013 and, based on his evaluation, and has concluded that the disclosure controls and procedures were not effective due to the material weaknesses, which is that we did not sufficiently segregate duties over incompatible functions at our corporate headquarters.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2013 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 13 |
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 2, 2013 the Company issued 50,000 shares of common stock to a third party for cash proceeds of $5,000.
On May 17, 2013 the Company issued 100,000 shares of common stock to a third party for cash proceeds of $10,000.
On June 30, 2013, the Company issued 245,184 shares of common stock to this related party entity in full reimbursement for the advances and payments made and on behalf of the Company. The shares were valued at the fair value of the expense reimbursement of $24,518.
The above issuances of shares are exempt from registration, pursuant to Section 4(2) of the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these stockholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other information
On June 1, 2013, Anamaria Pruteanu resigned as Chief Executive Officer of the Company and Michel Freni resigned as President of the Company. Ms. Pruteanu and Mr. Freni’s resignations are not a result of any disagreement with the Company or its executive officers, or any matter relating to the Company’s operations, policies or practices. On the same day, the Company’s Board of Directors (the “Board”) appointed Michel Freni, the Company’s Chief Financial Officer and Chairman of the Board to serve as Chief Executive Officer of the Company and Anamaria Pruteanu to serve as President of the Company.
Biographical information for Mr. Freni and Ms. Pruteanu has previously been disclosed on the Company’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 12, 2013.
Family Relationships
The Company’s Chief Executive Officer and Chief Financial Officer, Michel Freni, is married to our President, Anamaria Pruteanu.
Related Party Transactions
Related party transactions with Mr. Freni and Ms. Pruteanu have previously been disclosed on the Company’s Registration Statement on Form S-1, filed with the Securities and Exchange Commission on April 12, 2013.
Employment Agreement
There is no employment agreement between the Company and Mr. Freni or Ms. Pruteanu.
Item 6. Exhibits
| 14 |
| Exhibits | |
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1* | Certification of Principal Executive Officer and Principal Financial Officer of the Registrant pursuant to 18U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS ** | XBRL Instance Document |
| 101.SCH ** | XBRL Taxonomy Schema |
| 101.CAL ** | XBRL Taxonomy Calculation Linkbase |
| 101.DEF ** | XBRL Taxonomy Definition Linkbase |
| 101.LAB ** | XBRL Taxonomy Label Linkbase |
| 101.PRE ** | XBRL Taxonomy Presentation Linkbase |
*In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
** Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| POWERSTORM CAPITAL CORP. | |||
| Date: August 14, 2013 | |||
| By: | Michel Freni | ||
| Michel Freni | |||
Chief Executive Officer and Chief Financial Officer (Duly Authorized, Principal Executive Officer and | |||
| 15 |