On August 11, 2014, the Company issued a five-for-one stock dividend, where each shareholder at the close of business on July 21, 2014 received four additional shares of common stock for every share held on the record date. The stock dividend was approved by our Board of Directors and stockholders holding a majority of our voting shares. Ten millions shares of preferred stock were also authorized.
During the six months ended December 31, 2014 the Company issued convertible notes payable. At the time of the conversion, we recorded a discount to convertible notes payable to reflect the beneficial conversion feature of the note.
The Company evaluated the terms of the new note in accordance with ASC Topic No. 815 - 40,Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion features did not meet the definition of a liability and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized beneficial conversion features as show in the table above. The beneficial conversion features were recorded as an increase in additional paid-in capital and a discount to the Convertible Notes Payable. Discounts to the Convertible Notes Payable are amortized to interest expense over the life of the note.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Changing Technologies, Inc., a Florida corporation, was incorporated on June 18, 2013. The Company’s year-end is June 30.
Overview
Changing Technologies, Inc.(the “Company”), a Florida corporation, was formed to develop apps primarily focused on improving personal and business productivity and health and fitness monitoring. To date, our only business activity has been the formation of our corporate entity, initiating the designing of our logo, and developing our business plan. The Company was incorporated on June 18, 2013 (Date of Inception) with its corporate headquarters located in Estero, Florida. Our year-end is June 30. We are a development stage company.
On June 2, 2014, Bordesley Group Corp. (“Bordesley”), a Panama corporation, purchased 45,000,000 shares from the holders of our common stock, leading to a change in control of the Company. As a result of this purchase, Bordesley controlled 75% of the Company’s common stock.
On June 25, 2014 we formed a new subsidiary, 6th Dimension Technologies, Inc. (“6th Dimension”), a Texas corporation, to pursue opportunities in the 3D printing market.
On July 25, 2014, 6th Dimension purchased SumLin Technologies, LLC (“SumLin”), a North Carolina corporation, for $150,000, to be paid over a five-month period. As of December 31, 2014, we have made cash payments of $105,000 for this acquisition. SumLin specializes in personalizing 3D printing for consumer end use. As a result of the acquisition of SumLin, the Company is no longer a shell company as of July 25, 2014.
On July 27, 2014, the Board of Directors authorized for ten millions share of preferred stock to be issued. As of October 14, 2014, there are no preferred shares issued or outstanding.
On August 11, 2014, the Company issued a five-for-one stock dividend, where each shareholder at the close of business on July 21, 2014 received four additional shares of common stock for every share held on the record date. The stock dividend was approved by our Board of Directors and stockholders holding a majority of our voting shares. Ten millions share of preferred stock were also authorized.
On September 4, 2014, the Company signed a service agreement with a third party to create a website which will be used to sell 3D printed models. The website will allow various model creators to upload 3D printing models. Those models will be available to the public to printed versions of those models. The website remains under development.
Critical Accounting Policies
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended June 30, 2014 on Form 10-K.
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Results of Operations
Six months ended December 31, 2014 compared to the six months ended December 31, 2013.
General and Administrative Expenses
We recognized general and administrative expense in the amount of $223,898 and $12,485 for the six months ended December 31, 2014 and 2013, respectively. The increase was due to increased professional fees as a result of expanding our operations.
Interest Expense
Interest expense increased from $0 for the six months ended December 31, 2013 to $8,652 for the six months ended December 31, 2014. Interest expense for the six months ended December 31, 2014 included amortization of discount on convertible notes payable in the amount of $4,811, compared to $0 for the comparable period of 2013. The remaining amount is interest accrued on the Company’s convertible debt.
Net Loss
We incurred a net loss of $232,550 for the six months ended December 31, 2014 as compared to $12,485 for the comparable period of 2013. The increase in the net loss was driven by the increase in general and administrative expenses discussed above.
Three months ended December 31, 2014 compared to the three months ended December 31, 2013.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $127,203 and $11,223 for the three months ended December 31, 2014 and ended 2013, respectively. This change is the result of increased professional fees as a result of expanding our operations.
Interest Expense
Interest expense increased from $0 for the three months ended December 31, 2013 to $8,652 for the three months ended December 31, 2014. This was due to interest on the company’s convertible notes and amortization of the discount on these notes.
Net Loss
We incurred a net loss of $135,855 for the three months ended December 31, 2014 as compared to $11,223 for the comparable period of 2013. The increase in the net loss was due to the increase in general and administrative expenses explained above.
Liquidity and Capital Resources
As of December 31, 2014, we had cash on hand of $14,793 and negative working capital of $96,436. Net cash used in operating activities for the six months ended December 31, 2014 was $140,856. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of December 31, 2014.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
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, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2014. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2014, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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| 1. | As of December 31, 2014, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. |
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| 2. | As of December 31, 2014, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness. |
Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Change in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
Not applicable to a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of unregistered equity securities during the six months ended December 31, 2014.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to the Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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3.1 | Articles of Incorporation (1) |
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3.2 | Bylaws (1) |
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21 | Subsidiaries of the Registrant (2) |
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31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (2) |
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32.1 | Section 1350 Certification of principal executive officer and principal financial accounting officer. (2) |
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101 | XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (2),(3) |
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(1) | Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on September 23, 2010. |
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(2) | Filed or furnished herewith. |
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(3) | In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.” |
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.
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| Changing Technologies, Inc. |
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Date: February 13, 2015 | BY: /s/ Omar Durham |
| Omar Durham |
| CEO, Chairman |
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