UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one) |
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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
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For the quarterly period ended June 30, 2014 |
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or |
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o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from__________ to __________ Commission file number: 000-08447 |
(Exact name of registrant business issuer as specified in its charter)
Wyoming |
| 83-0219465 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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1000 5th Street, Suite 200, Miami, Florida |
| 33139 |
(Address of principal executive offices) |
| (zip code) |
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(305) 704-3294 | ||
(Registrant’s telephone number, including area code) | ||
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Not applicable. | ||
(Former Name, former address and former fiscal year, if changed since last report) |
Copies of Communications to:
Laura Anthony, Esq.
Legal & Compliance, LLC
330 Clematis Street, Suite 217
West Palm Beach, FL 33401
(561) 514-0936
Fax (561) 514-0832
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. Yesx Noo
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). Yesx Noo
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. (Check one):
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o | 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). Yeso Nox
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of July 31, 2014 there were 53,828,343 shares of the Registrant's Common Stock issued and outstanding.
2
OMEGA COMMERCIAL FINANCE CORPORATION AND SUBSIDIARIES
For The Quarterly Period Ended June 30, 2014
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION |
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4 | |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 21 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 25 |
26 | |
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PART II - OTHER INFORMATION |
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26 | |
27 | |
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds | 27 |
28 | |
28 | |
28 | |
28 | |
28 |
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
OMEGA COMMERCIAL FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2014 AND DECEMBER 31, 2013
| June 30, |
| December 31, | ||
ASSETS | 2014 |
| 2013 | ||
| (unaudited) |
| (audited) | ||
CURRENT ASSETS: |
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Cash | $ | 50,164 |
| $ | 28,401 |
Other receivables |
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| 110,000 |
Deposits |
| 919 |
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TOTAL CURRENT ASSETS |
| 51,083 |
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| 138,401 |
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LONG TERM ASSETS |
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Furniture, fixtures & equipment (net of depreciation of $40,926 at June 30, 2014 and $422 at December 31, 2013, respectively) | $ | 40,926 |
| $ | 422 |
TOTAL LONG TERM ASSETS |
| 40,926 |
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| 422 |
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OTHER ASSETS |
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Trade securities |
| 7,500 |
| $ | - |
TOTAL OTHER ASSETS |
| 7,500 |
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| - |
TOTAL ASSETS | $ | 99,509 |
| $ | 138,823 |
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) |
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CURRENT LIABILITIES |
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Accounts payable and accrued expenses | $ | 49,956 |
| $ | 39,293 |
Customer deposits |
| 3,540 |
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| 9,540 |
Note payable – REIT |
| 2,000,000 |
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Judgments payable |
| 2,300,948 |
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| 2,300,948 |
Derivative liability | $ | 1,997,440 |
| $ | 464,993 |
Debt issuance costs |
| (143,179) |
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| (9,031) |
Convertible debentures payable, net |
| 157,033 |
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| 73,738 |
TOTAL CURRENT LIABILITIES | $ | 6,365,738 |
| $ | 2,879,482 |
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STOCKHOLDERS' (DEFICIT) |
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Common stock ($.01 par value, unlimited shares authorized; 29,843 and approximately 14,252 common shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively). |
| 298 |
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| 143 |
Preferred stock, Series A Redeemable Cumulative ($5.00 par value, 5,000,000 shares authorized; 271,998 issued and outstanding) |
| 1,359,990 |
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| 1,359,990 |
Preferred stock, Series A Redeemable - to be issued |
| 3,510 |
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| 3,510 |
Preferred stock, Series C Redeemable, Cumulative ($5.00 par value, 500,000 shares authorized, 500,000 shares issued and outstanding) |
| 2,500,000 |
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| 2,500,000 |
Preferred stock, Series C Redeemable, reserves |
| (2,500,000) |
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| (2,500,000) |
Preferred stock, Series D Convertible ($5.00 par value,500,000 shares authorized, 100,000 shares issued and outstanding) |
| 500,000 |
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| 500,000 |
Preferred stock, Series E Redeemable Cumulative ($200.00 par value, 25,000 shares authorized, -0- shares issued and outstanding) |
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Preferred stock, Series F Cumulative Redeemable ($100.00 par value, 500,000 shares authorized, 80,000 and -0- shares issued and outstanding as of June 30, 2014 and December 31, 2013 respectively) |
| 8,000,000 |
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| - |
Preferred stock, Series G Convertible ($1.00 par value, 1,000,000 shares authorized, 1,000,000 and -0- shares issued and outstanding as of June 30, 2014 and December 31, 2013. respectively) |
| 1,000,000 |
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Subscriptions receivable |
| (43,642,694) |
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| (43,642,694) |
Options (1,283 and -0- issued and outstanding at June 30, 2014 and December 31, 2013, respectively) |
| 4,500,950 |
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| 4,500,950 |
Warrants (issued with preferred stock and debt) |
| 1,567,255 |
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| 1,546,372 |
Deferred equity offering costs |
| (7,508,010) |
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| (7,508,010) |
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Additional paid in capital |
| 51,086,807 |
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| 49,879,489 |
Retained (deficit) |
| (23,134,335) |
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| (9,380,409) |
TOTAL STOCKHOLDERS' (DEFICIT) | $ | (6,266,229) |
| $ | (2,740,659) |
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) | $ | 99,509 |
| $ | 138,823 |
The accompanying notes are an integral part of these unaudited consolidated financial statements
4
OMEGA COMMERCIAL FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
| For the 3 months |
| For the 6 months | ||||||||
| Ended June 30, |
| Ended June 30, | ||||||||
| 2014 |
| 2013 |
| 2014 |
| 2013 | ||||
REVENUES: |
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Sales | $ | 20,000 |
| $ | 260,410 |
| $ | 59,978 |
| $ | 325,340 |
Cost of sales |
| (91,350) |
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| (36,550) |
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| (135,709) |
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| (80,460) |
Gross profit |
| (71,350) |
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| 223,860 |
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| (75,731) |
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| 244,880 |
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EXPENSES: |
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Depreciation |
| 3,045 |
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| 85 |
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| 3,070 |
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| 170 |
Auto |
| 2,805 |
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| 2,273 |
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| 5,009 |
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| 3,342 |
Compensation |
| 19,613 |
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| 26,290 |
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| 43,403 |
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| 53,307 |
Commissions |
| 3,750 |
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| 13,750 |
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Contractor fees |
| 86,390 |
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| 86,390 |
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Professional fees |
| 34,280 |
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| 41,019 |
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| 56,042 |
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| 69,322 |
Dues and subscriptions |
| 2,209 |
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| 1,811 |
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| 3,849 |
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| 5,307 |
Stock issued for services provided |
| 8,188,879 |
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| 313,200 |
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| 9,067,705 |
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| 775,000 |
Stock issued to officers |
| 250,000 |
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| 250,000 |
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Marketing |
| 1,383 |
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| 1,329 |
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| 8,107 |
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| 5,581 |
PR/IR Expense |
| 1,890 |
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| 3,750 |
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| 3,390 |
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| 13,950 |
Rent |
| 46,225 |
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| 2,024 |
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| 46,575 |
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| 4,085 |
Other selling, general and administrative expenses |
| 107,019 |
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| 11,923 |
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| 162,188 |
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| 16,607 |
Total expenses |
| 8,747,488 |
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| 403,704 |
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| 9,746,478 |
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| 946,671 |
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Income (loss) from operations | $ | (8,818,838) |
| $ | (179,844) |
| $ | (9,822,209) |
| $ | (701,791) |
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Other income (expense) |
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Interest income |
| - |
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| - |
| $ | 3,765 |
Loss on sale of trading securities |
| - |
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| - |
| $ | (24,352) |
Unrealized gain/(loss) on trading securities |
| (30,000) |
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| 6,000 |
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Gain (loss) on valuation of asset |
| (2,000,000) |
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| (2,412,500) |
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Beneficial conversion feature |
| (906,753) |
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| (906,753) |
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Fair value adjustment of derivative liabilities |
| (347,481) |
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| (441,722) |
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Interest expense |
| (101,812) |
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| (170,920) |
| $ | (2,256) |
Interest expense (other) |
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| (5,822) |
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Total other income (expense) | $ | (3,386,046) |
| $ | - |
| $ | (3,931,717) |
| $ | (22,843) |
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NET (LOSS) | $ | (12,204,884) |
| $ | (179,844) |
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| (13,753,926) |
| $ | (724,634) |
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Basic and fully diluted net (loss) per common share | $ | (932.52) |
| $ | (43.54) |
| $ | (1,269.98) |
| $ | (198.91) |
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Weighted average common shares outstanding adjusted for stock split |
| 13,088 |
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| 4,131 |
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| 10,830 |
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| 3,643 |
The accompanying notes are an integral part of these unaudited consolidated financial statements
5
OMEGA COMMERICAL FINANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
| 2014 |
| 2013 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net (loss) | $ | (13,753,926) |
| $ | (724,634) |
Adjustments to reconcile net (loss) to net cash provided by operations: |
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Loss on non-cash deposits |
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| 30,000 |
Stock issued for services and to officers |
| 9,317,705 |
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| 775,000 |
Depreciation |
| 3,070 |
|
| 170 |
Unrealized gain on stock purchase |
| (6,000) |
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Amortization of debt discount |
| 160,388 |
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Loss on valuation of assets |
| 2,412,500 |
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Warrant expense |
| 20,883 |
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Beneficial conversion feature |
| 906,753 |
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Fair value adjustment |
| 441,722 |
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Increase in capitalized debt issuance costs |
| 134,148 |
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Decrease in other receivables |
| 110,000 |
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Increase in deposits |
| (919) |
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Increase (decrease) in customer deposits |
| (6,000) |
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| (169,460) |
Increase (decrease) in accounts payable and accrued expenses |
| (41,077) |
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| (23,189) |
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| (300,753) |
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| (112,113) |
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INVESTING ACTIVITIES: |
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Purchase of trading securities |
| (1,500) |
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Furniture, Fixtures & Computers |
| (43,633) |
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VFG funds on deposit 2013 |
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| (130,000) |
TOTAL INVESTING ACTIVITIES |
| (45,133) |
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| (130,000) |
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FINANCING ACTIVITIES |
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Cash received from convertible debentures |
| 302,674 |
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Cash received from sale of common stocks |
| 55,000 |
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Cash contribution |
| 9.975 |
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Cash received from sale of trading securities |
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| 140,213 |
TOTAL FINANCING ACTIVITIES |
| 367,649 |
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| 140,213 |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| 21,763 |
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| (101,902) |
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CASH AND CASH EQUIVALENTS, |
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BEGINNING OF THE QUARTER |
| 28,401 |
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| 111,834 |
END OF THE QUARTER | $ | 50,164 |
| $ | 9,932 |
The accompanying notes are an integral part of these unaudited consolidated financial statements
6
OMEGA COMMERCIAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2014
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements are unaudited, but in the opinion of management of Omega Commercial Finance Corp. (the Company), contain all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position at June 30, 2014, the results of operations and cash flows for the six months ended June 30, 2014 and 2013. The balance sheet as of December 31, 2013 is derived from the Company’s audited financial statements.
Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expense during the reporting period. All intercompany transactions are eliminated in the consolidation process. Actual results could differ from those estimates.
The results of operations for the six months ended June 30, 2014 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2014.
Business organization
Omega Commercial Finance Corporation (formerly known as DOL Resources, Inc.) (the “Company”) is a commercial real estate financing company that also provides asset backed lending services located in the Miami, Florida area. The Company was incorporated in the State of Wyoming on November 6, 1973. Since the Reorganization in September 2007, the Company’s business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. The Company provides financial consulting services for short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. The Company focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. The Company’s operations are based primarily in Miami Beach, Florida.
The Company’s wholly owned subsidiaries include the following:
CCRE LLC (CCRE) - a Florida limited liability company providing second- and third-tier real estate funding as well as partnering in development ventures.
Ωmega Capital Street LLC- a Nevada limited liability company which focuses on commercial mortgage-backed securities and by originating CMBS-style loans with proven and standard securitization underwriting criteria.
Ωmega CRE Group LLC – a Nevada limited liability company which focuses primarily on originating, investing in, acquiring and managing senior or mezzanine performing commercial real estate mortgage loans.
Ωmega Factoring LLC- an Ohio limited liability company focused on products to assist small to medium sized business owners with resolving their short-term working capital needs.
Ωmega Venture Capital. LLC- a Wyoming limited liability company focused on sourcing exciting projects to fund and providing angel funding for their working capital needs.
Capital MatchPoint LLC- a Wyoming limited liability company focused on developing a crowdfunding platform, to provide a showcase for businesses seeking investments from accredited and smaller independent investors
The Company also owns 51% of AmericaVest, a real estate investment trust.
7
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“USGAAP”). The consolidated financial statements of the Company include the Company and its subsidiaries. Certain reclassifications to amounts reported in the December 30, 2013 consolidated financial statements have been made to conform to the June 30, 2014 presentation. All material inter-company balances and transactions have been eliminated.
Management’s Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.
Furniture, Fixtures and Equipment
Property and equipment is stated at cost. Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets.
Furniture and Fixtures
7 years
Equipment
3 years
Expenditures for major renewals and betterments that extend the useful lives of the assets are capitalized and amortized over 3-5 years. Expenditures for maintenance and repairs of the assets are charged to expense as incurred.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. During the quarters ended June 30, 2014 and 2013, the Company recorded no compensation expense based on the fair value of services rendered in exchange for common shares issued to the Company’s officer.
The Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in which services are provided.
As of June 30, 2014 and 2013, the Company recorded $9,067,705 and $775,000 for outside services based on the fair value of services rendered in exchange for common shares, respectively. These approximated the fair value of the shares at the dates of issuances in the opinion of management.
As of June 30, 2014 and 2013, the Company issued to A.S. Austin Company, under their consulting agreements, warrants to purchase 83,333 and -0- shares of common stock at $.40 per share, respectively. As of June 30, 2014, the agreement was cancelled.
As of June 30, 2014, the company issued warrants in conjunction with receipt of a convertible debenture. As of June 30, 2014, these warrants would convert to 5,265 shares of the Company’s common stock.
As of June 30, 2014, 2014, there are options to purchase 1,283 shares and warrants to purchase 11,398 shares outstanding.
8
Deferred Taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases 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. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:
(i)
persuasive evidence of an arrangement exists,
(ii)
the services have been rendered and all required milestones achieved,
(iii)
the sales price is fixed or determinable, and
(iv)
collectability is reasonably assured.
Comprehensive Income (Loss)
The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Comprehensive income (loss) items relate directly to investment securities (see Note 10).
Income (Loss) Per Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Convertible debentures and preferred stock conversions are not considered in the calculations, as the impact of the potential common shares would be to decrease the loss per share. In addition, stock options 1,283 shares and warrants associated with performance contracts totaling 11,398 shares are excluded as well, as the impact of the potential common shares would be to decrease loss per share. Therefore no diluted loss per share figures are presented.
Trading Securities
Trading securities was comprised of publicly traded stock shares which were purchased. The carrying value of the investment is the market price of the shares at June 30, 2014. The Company held no trading securities at December 31, 2013. Any unrealized gain or loss are recorded under other income/(expense) in the accompanying consolidated statements of operations.
Risk and Uncertainties
The Company is subject to risks common to companies in the service industry, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
9
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Related Party Transactions
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the Related parties include:
a. affiliates of the Company;
b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10-15, to be accounted for by the equity method by the investing entity;
c. trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management;
d. principal owners of the Company;
e. management of the Company;
f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements. The disclosures shall include:
a. the nature of the relationship(s) involved;
b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements;
c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and
d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Fair Value for Financial Assets and Financial Liabilities
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level 1
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
10
Level 3
Pricing inputs that are generally observable inputs and not corroborated by market data.
The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.
The Company had fair value adjustments for assets measured at fair value at June 30, 2014. The subsidiary companies acquired during the first 2 quarters of 2014 were adjusted for their fair value. The Company had no fair value adjustments for liabilities measured at fair value at June 30, 2014. The Company did have losses reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date as of June 30, 2014 (see Note 11).
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the quarters ended June 30, 2014 and 2013 or for the year ended December 31, 2013.
Restatement and reclassification
The Company has retroactively restated and/or reclassified items
Subsequent Events
The Company evaluated for subsequent events through the issuance date of the Company’s consolidated financial statements.
Recently issued accounting pronouncements:
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
In February 2013 the FASB issued ASC Update No. 2013-02 “Comprehensive Income Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (Topic 220)”, which amends ASC Topic 220. The amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component. In addition an entity is required to present either on the face of the Statement of Income on in the Notes to the Consolidated Financial Statements significant amounts reclassified out of AOCI and should be provided by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified in its entirety to net income in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross reference to other disclosures required under GAAP that provide additional detail about these amounts. The changes to the ASC as a result of this updated guidance are effective for annual and interim reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 will not have a material effect on the Company’s Consolidated Financial Statements.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE 2: PREPAID ASSETS
During the three months ended June 30, 2014, Omega Capital Street, a wholly owned subsidiary of the Company, signed an operating lease for a photocopy machine. The three year lease required a deposit of $919 and includes an option for a $500 buyout.
11
NOTE 3. CONVERTIBLE DEBENTURES
Current Year Convertible Notes
During the six months ended June 30, 2014, the Company entered into note agreements with unaffiliated investors for the issuance of convertible promissory notes of $302,673, in the aggregate as follows:
ICONIC,
January-June 2014
$124,117
Tonaquint
March 2014
58,000
JMJ
June 2014
55,556
Auctus
April 2014
35,000
Adar Bays
May 2014
30,000
We received net proceeds from these convertible Notes of $255,055 after debt issuance costs of $47,619 paid for lender legal and other fees. In addition, we issued stock valued at $151,394 in consideration of the note issuances. These debt issuance costs will be amortized over the term of the convertible Note or such shorter period as the convertible Notes may be outstanding. Accordingly, as the convertible Notes are converted to common stock prior to their expiration date, that amount of debt issuance costs attributable to the amounts converted will be accelerated and expensed as of the applicable conversion dates.
We have determined that the conversion feature of the convertible Notes represents an embedded derivative since the convertible Note is convertible into a variable number of shares upon conversion. Accordingly, the convertible Notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Company believes that the aforementioned embedded derivatives meet the criteria of ASC 815 (formerly SFAS 133 and EITF 00-19), and should be accounted separately as derivatives with a corresponding value recorded as a liability. Accordingly, the fair value of these derivative instruments have been recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the convertible Notes. Such discount will be accreted from the date of issuance to the maturity dates of the convertible Notes. The change in the fair value of the liability for derivative contracts will be credited to other income (expense) in the consolidated statements of operations at the end of each quarter. The face amount of the convertible Notes were stripped of its conversion feature due to the accounting for the conversion feature as a derivative, which was recorded using the residual proceeds to the conversion option attributed to the debt. The beneficial conversion feature (an embedded derivative) included in the convertible Notes resulted in an initial debt discount of $302,673 and an initial loss on the valuation of derivative liabilities of $829,706 for a derivative liability balance of $1,041,076 at issuance.
During the six months ended June 30, 2014, the 6/28/13, 8/14/13 and 8/23/13 debentures and all accrued interest totaling $93,448 were converted at the option of the note holder into 1,046shares of common stock (20,928,222 pre-reverse split) at the due date resulting in $118,701 equity contra account derivative liability adjustment for conversion.
The fair values of all the convertible notes includes notes issued in the prior year and were calculated at issue date utilizing the following assumptions:
Issuance Date | Fair Value | Term | Assumed Conversion Price | Market Price on Issue Date | Volatility Percentage | Interest Rate |
9/25/13 | 111,000 | 9 months | .0014 | 0.0075 | 589% | .45% |
10/23/13 | 269,571 | 9 months | .0014 | .0052 | 589% | .45% |
12/11/2013 | 166,284 | 24 months | .007 | .0214 | 576% | .45% |
1/6/14 | 106,667 | 12 months | .005625 | .0199 | 703% | .45% |
3/11/14 | 550,062 | 12 months | 61.60 | 172 | 827.32 | .13% |
4/4/14 | 72,580 | 12 months | 64.80 | 160 | 663% | .43% |
4/22/14 | 56,606 | 12 months | 54 | 130 | 654% | .45% |
4/29/14 | 63,636 | 9 months | 64.90 | 118 | 1,281% | .45% |
5/5/14 | 43,230 | 12 months | 83.20 | 120 | 653% | .43% |
5/21/14 | 47,896 | 12 months | 40.50 | 110 | 648% | .37% |
6/20/14 | 91.396 | 12 months | 18 | 70 | 608% | .49% |
6/23/14 | 100,308 | 24 months | 28.8 | 52 | 609% | .48% |
At June 30, 2014, the Company revalued the derivative liability balance of the convertible Notes; the change in the derivative liability increased by $441,772.
12
The fair value of the convertible Notes was calculated at June 30, 2014 utilizing the following assumptions:
Fair Value | Term | Assumed Conversion Price | Volatility Percentage | Interest Rate |
$1,997,440 | 9 months to 2 years | various | 579.23%-744.17% | .01% - 1.62% |
NOTE 4. ACCOUNTS PAYABLE and ACCRUED LIABILITIES
As of June 30, 2014 and December 31, 2013, the Company has outstanding $49,956 and $39,293 in Accounts payable and accrued liabilities relating to operational expenses and legal fees, respectively.
NOTE 5. CUSTOMER DEPOSITS
As of June 30, 2014 and December 31, 2013, the Company had outstanding Customer deposit balances of $3,540 and $9,540, respectively. This remaining balance of $3,540 as of June 30, 2014 is being refunded to the customer at $1,000 per month, as agreed between the parties.
NOTE 6 STOCKHOLDERS’ EQUITY (DEFICIT)
Capital Stock
The Company is currently authorized to issue unlimited common shares at $.01 par value per share and the following preferred shares:
On July 2, 2014, the Company effected a 1:20,000 split of its Common stock. All common stock and per share data for all periods presented in these financial statements have been restated to give effect to the reverse split. The December 31, 2013 financial statement have been retroactively restated herein in accordance with SAB Topic 4C. As of June 30, 2014 and December 31, 2013, the Company had 29,843 and 14,293 shares of common stock issued and outstanding, respectively.
During the six months ended June 30, 2014, the Company issued 1,046 shares of common stock for conversion of debt including interest, 25,350 shares of common stock for consulting and contracting services, 250 shares to investors under Share Purchase Agreements, 684 shares of common stock for costs associated with securing convertible debenture financing, 2,500 shares of common stock to its wholly owned subsidiary for mergers and acquisitions and 13 shares of restricted common stock to its officer for services.
In July, 2014 the company issued 51,750,000 shares of common stock including 40,000,000 shares to its officer and 10,000,000 shares to a subsidiary, Omega Capital Street, in anticipation of share exchange business combinations and mergers, 200,000 shares as compensation to a contractor at its primary operating subsidiary, 1,550,000 shares of common stock for consulting services related, 1,100,000 of those shares to vendors associated with the business’ primary function, and 97,002 shares of Series A Preferred Convertible stock to 9 investors in consideration of term modifications in the initial Unit Subscription Agreement (see PREFERRED STOCK below). These preferred shares will be recorded as Deferred equity costs and expensed as the Agreement takes effect.
PREFERRED STOCK
On September 4, 2013, the Company entered a Unit Subscription Agreement and an Account Management Agreement with nine oversea investors.Under the Account Management Agreement, investors under the Unit Subscription Agreement and Company appointed an intermediary to monitor and enforce the Use of Proceeds to ensure that it meets the projected Use of Proceeds as detailed in our December 31, 2013 10-K filing with the SEC. In accordance with the terms of the agreement, we have reserved the appropriate number of shares of common stock for the preferred stock conversion.
In April 2014 the Company issued 80,000 shares of Series F Preferred Stock, $100 par value, to a consultant in exchange for his services and recorded $8,000,000 expense to Preferred stock for services.
In July 2014, in consideration for term modifications made to the above mentioned agreements, the Company issued to the same 9 shareholders 97,002 shares of Series A Preferred stock with the same rights and restrictions.
As of July 30, 2014, the Company currently has the following preferred stock classes and issuances:
Series A Preferred stock: 1,000,000 shares authorized, 368,000 issued and outstanding
Series B preferred stock: 1,000,000 shares authorized, -0- shares issued and outstanding
Series C preferred stock: 500,000 shares authorized, 500,000 issued and outstanding
Series D preferred stock: 100,000 shares authorized, 100,000 issued and outstanding
Series E Redeemable Cumulative Preferred Stock: 25,000 shares authorized, -0- shares issued and outstanding.
Series F Cumulative Redeemable preferred stock – 500,000 shares authorized, 80,000 shares issued and outstanding
Series G Convertible Preferred Stock: 1,000,000 shares authorized, 1,000,000 issued and outstanding
13
OPTIONS
As part of the Standby Purchase Agreement with Lambert (See Note 14), the Company granted to Lambert a 5-year Option to Purchase Shares for 25,641,000 shares (pre-stock split) of our common stock at an exercise price of the lesser of (i) $0.40 per share or (ii) 110% of the lowest daily VWAP for our common stock as reported by Bloomberg during the thirty trading days prior to the date the option is exercised. The options expire March 7, 2018. The Company did not grant any registration rights with respect to any share of common stock issuable upon exercise of the options. The fair values of the options expense was calculated using the Black-Scholes options pricing model at issue date using the following assumptions:
Issuance Date | Dividend Yield | Fair Value | Term | Assumed Conversion Price | Market Price on Issue Date | Volatility Percentage | Federal 5 year Risk-free Interest Rate |
3/8/2013 | 0% | 4,500,950 | 5 years | $0.1210 | $0.1759 | 729% | .75% |
No additional stock options were issued during the six month ended June 30, 2014.
WARRANTS
As part of the consulting agreement with A.S. Austin Company, Inc., the Company granted warrants to purchase up to 1,000,000 shares of common stock, to be granted ratably over the term of the agreement on the first day of each calendar month. The Warrants are exercisable at any time or from time to time commencing on the grant date at an exercise price of $.40 per share. The Warrants will expire two years from the date of issuance and will be subject to customary stock splits and payable in legal tender.
During the six months ended June 30, 2014, the Company issued to A.S.Austin Company 83,333 warrants to purchase shares of common stock at $.40 per share. Subsequently, the contract was cancelled. As of June 30, 2014, the Company issued to A.S. Austin Company 333,328 warrants.
On September 4, 2013, as part of the Unit exchange agreement of convertible preferred stock, 101,258,100 warrants were issued to 9 investors. These warrants expire in 3 years (36 months) and are exercisable at variable amounts, as per the agreements and accompanying warrant certificates.
Stock Warrants and Options
Stock warrants/options outstanding and exercisable on June 30, 2014 are as follows:
Exercise Price per Share |
| Shares Under Option/warrant |
| Remaining Life in Years |
|
|
|
|
|
Outstanding |
|
|
|
|
$0.40 or 110% lowest daily VWAP 30 (Bloomberg) 30 trading days preceding the sale |
| 1,283 |
| 5.00 |
$0.40 |
| 17 |
| 2.00 |
$0.5000 - $7,3927 |
| 5,063 |
|
|
Exercisable |
|
|
|
|
$0.40 or 110% lowest daily VWAP 30 (Bloomberg) 30 trading days preceding the sale |
| 0 |
| 5.00 |
$.40 |
| 17 |
| 2.00 |
As of July 2014, these options have been adjusted for the 1:20,000 stock split and are presented here. As of June 30, 2014, the Company has outstanding 1,283 options and 5,080 warrants to purchase our common stock. No warrants have been exercised.
DEFERRED EQUITY OFFERING COSTS
In connection with the Standby Purchase Agreement with Lambert in 2013, the Company issued 23,400,000 shares to Lambert in 2013. In the event it is determined no additional shares will be sold under the Standby Purchase Agreement, any deferred equity offering costs will be expensed at such time. As of June 30, 2014, no additional shares of common stock have been issued to Lambert under the Standby Purchase Agreement.
In July, 2014, In connection with adjustments to the Preferred Stock agreement, the Company issued 97,002 shares of Series A Preferred stock and recorded the cost to Deferred equity offering costs. At such time as the tranches of funding begin, deferred equity offering costs will be expensed.
14
ADJUSTMENTS TO DERIVATIVE LIABILITY FOR CONVERSION
On January 6, 2014, the Company issued 214 shares of common stock (4,271,166 shares split 1:20,000) to retire a debenture, including interest. On April 25, 2014, the Company issued 244 shares of common stock (4,879,279 shares split 1:20,000) to retire a debenture, including interest. On May 28, 2014, the Company issued 589 shares of common stock (11,777,777 shares split 1:20,000) to retire a debenture, including interest. These resulted in an equity adjustment of $118,701 to retire their debentures.
As of the date of this filing, no other debentures have been called or converted.
NOTE 7: INCOME (LOSS) PER SHARE
Income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. Basic and diluted income (loss) per share was the same for the periods ended June 30, 2014 and 2013. Stock options and warrants associated with performance contracts totaling 6,363 shares are not considered in the calculation as the impact of the potential common shares would be to decrease loss per share. Therefore no diluted loss per share figures are presented. The Company posted losses of ($1,270) and ($199) per basic and diluted share for the periods ended June 30, 2014 and 2013, respectively.
NOTE 8. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information for the periods ending June 30, 2014 and 2013 are summarized as follows:
Cash paid during the periods ending June 30, 2014 and 2013 for interest and income taxes:
| 2014 |
| 2013 | ||
Income Taxes | $ | -- |
| $ | -- |
Interest Paid | $ | 934 |
| $ | 2,256 |
NOTE 9.SEGMENT REPORTING
The Company follows paragraph 280 of the FASB Accounting Standards Codification for disclosures about segment reporting. This Statement requires companies to report information about operating segments in interim and annual financial statements. It also requires segment disclosures about products and services, geographic areas, and major customers.
2014 | Commercial |
| Commercial |
| Web Portal |
| Total | ||||
| Financing (CRE) |
| M & A (STREET) |
| (CMP) |
|
| ||||
Revenue |
| 39,978 |
|
| 20,000 |
|
| 0 |
|
| 59,978 |
Cost of Sales |
| (132,309) |
|
| (3,400) |
|
| 0 |
|
| (135,709) |
Gross Profit | $ | (92,331) |
| $ | 16,600 |
| $ | 0 |
|
| (75,731) |
Expenses |
| (13,390,524) |
|
| (232,671) |
|
| (55,000) |
|
| (13,678,195) |
Net (loss) | $ | (13,482,855) |
| $ | (216,071) |
| $ | (55,000) |
|
| (13,753,926) |
|
|
|
|
|
|
|
|
|
|
|
|
2013 | Commercial |
| Commercial |
| Web Portal |
| Total | ||||
| Financing (CRE) |
| M & A (STREET) |
| (CMP) |
|
|
| |||
Revenue |
| 323,340 |
|
| 0 |
|
| 0 |
|
| 325,340 |
Cost of Sales |
| (80,460) |
|
| 0 |
|
| 0 |
|
| (80,460) |
Gross Profit | $ | 244,880 |
| $ | 0 |
| $ | 0 |
| $ | 244,880 |
Expenses |
| (969,514) |
|
| 0 |
|
| 0 |
|
| (969,514) |
Net Loss | $ | (724,634) |
| $ | 0 |
| $ | 0 |
| $ | (724,634) |
NOTE 10. GOING CONCERN
The accompanying consolidated financial statements for the periods ended June 30, 2014 and 2013 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As of June 30, 2014, the Company has negative working capital of ($6,266,229) and a retained deficit of ($23,134,335). There can be no assurance that the Company will be able to obtain the substantial additional capital resources necessary to implement its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company is pursuing sources of additional financing and there can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all. Any inability to obtain additional financing will have a material adverse effect on the Company, including possibly requiring the Company to cease operations.
15
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 11. TRADING SECURITIES
As of June 30, 2014, the Company held $7,500 in securities in its margin account and $808 in its money market account, which is included in the cash balance of $50,164.
The Company held no investments or securities and $7,681 in its money market account as of June 30, 2013.
NOTE 12. JUDGMENTS PAYABLE
The Company currently has three judgments against it. Included in the accompanying balance sheets at June 30, 2014 and December 31, 2012 is $2,300,948 stemming from the following lawsuits.
Sebaco Siete, S.A. v. Omega Realty Partners, LLC, et. al. 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 06-11204 CA 13 FJ. A default judgment against impleader defendants in the amount of $1,564,832 was filed in 2009.
Jorge Ramos v. Omega Capital Funding, LLC, et. al. in the circuit court of the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 07-38288 CA 09. A final summary judgment was filed in 2009 in the amount of $85,000.
Luxury Home LLC v. Omega et. al. Case No.: CV2011-004554. A default judgment in the amount of $651,116 was filed in 2012 for a previous year’s claim.
On April 26, 2013, Madison Boardwalk, LLC (“Madison Boardwalk”) filed a complaint in the U.S. District Court for the Western District of Wisconsin (Case No. l 13-cv-288) against Omega Commercial finance Corp. (“the company”), Jon S. Cummings IV and Von C. Cummings. The complaint alleges that the company breached its agreements with Madison Boardwalk to provide it with funding for a hotel it was seeking to finance and develop (the “Project”).
The complaint also alleges that the defendants engaged in deceptive practices in violation of Wisconsin Statues Section 100.18(1) and that Jon S. Cummings IV and made intentional misrepresentations related to the Company’s ability to arrange financing for the Project. The plaintiff is seeking damages against the Company in the amount of $9,240,874, which the plaintiff claims is the difference between the financing cost proposed by the Company and what the plaintiff alleged they could receive from an alleged alternative funding source; plus, Jon S. Cummings IV and Von C. Cummings jointly and severally in the amount of $1,071,000, and certain other amounts as determined at trial. The plaintiff did provide to the Company a payment of a non-refundable due diligence and processing fee in the amount of $20,000, which is not in dispute.
In response to this complaint, the Company and Jon S. Cummings IV filed a motion to dismiss the complaint due to Jurisdiction and Venue. On November 7, 2013, the Court issued an order denying the motion to dismiss, granting Madison Boardwalk’s motion for leave to file a surreply and allowing Madison Boardwalk leave until November 21, 2013 to show that the individual defendants in this case are citizens of Florida.
The Company believes that this claim is totally without merit, and the Company intends to file its Answer and Affirmative Defenses followed by a Motion for Summary Judgment and to vigorously defend the company, The Company cannot predict th3e ultimate outcome of the complaint. And, in the event, that the court ultimately awards Madison Boardwalk the full claimed amount, it may have an adverse effect on our financial and liquidity positions in future periods. However, the company holds the right to file a Rule 11 Motion for sanctions any time prior to trial for any damages this may cause to the company and its shareholders of record. Furthermore, the Company assumes Von C. Cummings will retain his own counsel at his cost because he is employed as the CEO of Bentley Addison Capital finance and not the Company.
As of June 30, 2014 and December 31, 2013, the Company has payment obligations of $2,300,948 on the judgments against it.
NOTE 13 RELATED PARTY TRANSACTIONS
During the periods ended June 30, 2014 and 2013, the Company compensated its officer $43,403 and $53,307 in cash and equivalents, respectively. Also during the period ended June 30, 2014, the Company issued its officer 250,000 shares of restricted common stock.
On July 9, 2014, the Company issued its officer 40,000,000 shares of restricted common stock, valued at the current close price on the date of issuance, the expense approximating the fair value of the services.
16
NOTE 14. MATERIAL TRANSACTIONS
TERMINATION OF DUTCHESS INVESTMENT AGREEMENT
On March 12, 2012, the Company entered into the Investment Agreement with Dutchess Opportunity Fund, II, LP (“Duchess”). Pursuant to the Investment Agreement, Dutchess committed to purchase up to $25 million of common stock over the course of 36 months. No sales of our common stock were made under this agreement, and the Company terminated this agreement on February 7, 2013.
JOINT VENTURE – GARDENS VE
On February 20, 2012, CCRE, a wholly owned subsidiary of Omega Commercial Finance Corp., entered into the Strategic Alliance Agreement (the “Strategic Alliance”) with Gardens VE Limited (Company No. 07071936), a British Company (“Gardens”), and its management, whereby the parties agreed to form a strategic alliance for the acquisition and refurbishment of the La Posta Golf Club & Luxury Hotel. Under the Agreement, Gardens has free and clear, unencumbered title to the fixed assets and issues equal to forty-nine (49%) percent of their ownership interests in Gardens to CCRE in exchange for future fundraising for operating capital and related expenses. CCRE is responsible for the arrangement and contribution of up to but no more than fifty-eight million dollars ($58,000,000 US) over the course of the operation as needed per the budgeted projected cost for the Strategic Alliance but not to exceed 10 years. The principal is responsible for the day-to-day operation for the entire duration of the project as it pertains to the future refurbishment phase and he has currently placed the property under contract with a hard deposit. In addition he is responsible for transferring free and clear with an unencumbered title of fixed assets in order to support future financing for all phases covering the acquisition on through the refurbishment of the property. The termination of the strategic alliance is at the discretion of both parties or upon the completion of the refurbishment and or disposition of the stabilized income-producing asset. Gardens has not completed the acquisition of La Posta and we will continue to work with the principal and general manager to continue our efforts under the Strategic Alliance to raise additional capital to meet our funding obligations to complete this transaction.
As of March 27, 2013, an operating agreement addendum (the “Addendum”) was issued by the Company and Gardens whereby CCRE will now own 95% of Gardens in exchange 1,000,000 shares of our unregistered common stock. The principal will retain a 75% profit participating interest pro rata for all mortgages, liens, operating expenses and or encumbrances on Garden’s development/projects. As of the date of this filing, the agreements are being finalized.
JOINT VENTURE – TOWERS
On June 27, 2012, CCRE, a wholly owned subsidiary of Omega Commercial Finance Corp., entered into the Strategic Alliance Agreement (the “Strategic Alliance II”) with Towers Real Estate Limited, a British Company (“Towers”), and its management, whereby the parties agreed to form a strategic alliance for the acquisition and construction of the Le Principesse real estate located in Mestre-Venice, Italy. Under the Agreement, Towers has free and clear, unencumbered title to the fixed assets and issues equal to forty-nine (49%) percent of their ownership interests in Towers to CCRE in exchange for future fundraising for operating capital and related expenses. CCRE is responsible for the arrangement and contribution of up to but no more than three hundred seventy five million dollars ($375,000,000 US) over the course of the operation as needed per the budgeted projected cost for the Strategic Alliance.
On March 27, 2013, an operating agreement addendum (the “Addendum”) was issued by the Company and Towers whereby the principal in the development agreed to transfer an additional 46% interest in Towers to CCRE, giving CCRE a 95% ownership interest in the capital of Towers in exchange for 1,000,000 shares of the Company’s unregistered common stock. The principal of Towers will retain a 75% profit participating interest pro rata for all mortgages, liens, operating expenses and or encumbrances on Tower’s development/projects. As of the date of this filing, the agreement is being finalized.
ACQUISITION / CANCELLATION OF VFG SECURITIES INC. PURCHASE
On January 23, 2013, the Company entered into a Purchase & Option to Purchase Agreement with VFG Securities Incorporated, a California corporation (“VFG Securities”) to acquire 100% of VFG Securities for $750,000 in cash and common stock. Under the terms of this agreement, the Company agreed to pay the shareholders of VFG Securities (1) $125,000 upon the first closing to acquire 17% of the issued and outstanding common stock of VFG (the “First Closing”) and (2) $525,000 in cash (the “Deferred Cash Payment”) plus 1,000,000 shares of the Company’s common stock to acquire the remaining 83% of VFG common stock (the “Second Closing:”). The First Closing and initial $125,000 was paid upon VFG’s filing of a Form BD with the Financial Industries Regulatory Authority (“FINRA”) and at such time the Company received a 17% non-controlling minority ownership stake in VFG Securities and VFG Advisors LLC, a subsidiary of VFG Securities. The Second Closing is contingent on obtaining FINRA approval within 90 days of First Closing. In addition, the Purchase Price is subject to VFG Securities achieving gross revenue of at least $3,300,000 during the 12 month period ending on December 31, 2013 (the “Revenue Target”). In the event VFG does not meet its Revenue Target, then the Purchase Price will be reduced pro rata based on a gross revenue target on $3,500,000. In addition, the Second Closing is subject to the Company obtaining errors and omissions insurance for VFG Securities’ operations and other customary conditions of closing. As of March 31, 2014, VFG has withdrawn from the acquisition and refunded the Company $110,000 in February 2014. The balance of this contract has been terminated.
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EQUITY PURCHASE AGREEMENT - LAMBERT PRIVATE EQUITY LLC
On February 8, 2013, the Company entered into a Standby Equity Purchase Agreement (the “Agreement”) with Lambert Private Equity LLC (“Lambert”). The Agreement provides us with an equity line whereby the Company can sell to Lambert, from time to time, our shares of common stock up to an aggregate value of $100 million over a thirty-six month period. On March 8, 2013, the Company issued to Lambert 13,400,000 shares of restricted common stock, valued at $2,357,060 or $.1759 per share, the value of the stock which approximated the value of services. On June 3, 2013, the Company issued to Lambert 10,000,000 shares of restricted stock under this agreement. The Company recorded the value of the stock at the valuation specified in the Standby Purchase Agreement or $650,000 to APIC. As of June 30, 2014, there have been no additional transactions with Lambert.
DEFINITIVE AGREEMENT FOR SHARE EXCHANGE– TRACKIMO / CANCELLATION
On March 31, 2014, the Company by and through its wholly owned subsidiary Omega Venture Capital LLC (“OVC”) entered into a Definitive Agreement for a Share Exchange (“Agreement”) pursuant to which OVC was to acquire 20% of the membership units of Trackimo LLC, a Delaware limited liability company (“TRACK”). In exchange, the Company agreed to issue fifty thousand (50,000) shares of Series B Redeemable Preferred shares, par value $100.00. The closing of the exchange was to have occurred on March 31, 2014. The Company never issued the shares, and the deal was nullified in May 2014.
PURCHASE & OPTION TO PURCHASE - GENEVE INTERNATIONAL/ CANCELLATION
On March 24, 2014, the Company entered into a Purchase & Option to Purchase Agreement with Geneve International Corporation, a Texas corporation, to acquire ownership interest in Geneve. In accordance with the terms of the agreement, the Company paid Geneve $16,800 upon first closing to acquire 24% of the issued and outstanding common stock. The second closing never occurred, and the Company unwound the deal, receiving their funds minus fees and expenses on June 9, 2014. As of June 30, 2014, this agreement has been dissolved.
ACQUISITION OF CAPITAL MATCHPOINT
On February 7, 2014, the Company issued 1,000,000 shares of Series G Preferred stock, $1 par value, convertible at 1 share of Series G Preferred stock for 25 shares of common stock in exchange for Capital Match Point, a web portal. The transaction was valued at the price of the common stock shares at the close of or trading or $412,500. The asset was subsequently adjusted for fair value and written off as of June 30, 2014. During June, 2014, the current contractors operating the website resigned and the Company is in the process of restaffing and implementing a new business plan.
PURCHASE 51% OF AMERICAVEST
On June 3, 2014, the Company entered into a Definitive Share Purchase agreement (the Agreement) with AmericaVest CRE Mortgage Funding Trust Incorporated (the “Shareholder”) a Maryland corporation, pursuant to which the Registrant acquired from Shareholder fifty-one percent (51%) or 1,564,079 shares of Shareholders common stock. The Company issued a promissory note in favor of the shareholder for $2,000,000 (“Purchase Price”) The Note was of non interest and to be due and payable in forty-five (45) days after the Closing Date (the “Maturity Date”).
On July 22, 2014, the Company and AmericaVest amended their agreement to accept 285,000 shares of common stock in exchange for 51% of the Company. As of the date of this filing, the stock has not yet been issued.
STOCK ISSUANCES
COMMON STOCK
STOCK SPLIT
On July 2, 2014, the Company effected a 1:20,000 share reverse stock split, notification of which per our 8-K filing with the SEC on July 7, 2014. Our trading symbol reverted to OCFN on July 31, 2014.
After the Company received its approval for the 1:20,000 share stock split in July, the Company issued 51,750,000 shares of common stock for services received including 40,000,000 shares to its officer and 10,000,000 to its wholly owned subsidiary Omega Capital Street. The transactions were valued at the value of shares on the date of transaction, which approximated the value of services. The shares issued to the subsidiary were recorded at par value.
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PREFERRED STOCK
On September 4, 2013, the Company entered a Unit Subscription Agreement and an Account Management Agreement with nine oversea investors.Under the Account Management Agreement, investors under the Unit Subscription Agreement and Company appointed an intermediary to monitor and enforce the Use of Proceeds to ensure that it meets the projected Use of Proceeds as detailed in our December 31, 2013 10-K filing with the SEC. In accordance with the terms of the agreement, we have reserved the appropriate number of shares of common stock for the preferred stock conversion.
In July 2014, in consideration for timing changes made to the above mentioned agreements, the Company issued to the same 9 shareholders 97,002 shares of Series A Preferred stock with the same rights and restrictions.
NOTE 15. INCOME TAXES
At June 30, 2014, the Company had federal and state net operating loss carry forwards of approximately $23,135,000 that expire in various years through the year 2024.
Due to cumulative operating losses, there is no provision for current federal or state income taxes for the periods ended June 30, 2014 or December 31, 2013.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.
The Company’s deferred tax asset at June 30, 2014 and December 31, 2013 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $7,865,900 less a valuation allowance in the amount of ($7,865,900). Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance.
The Company’s total deferred tax asset as of June 30, 2014 and December 31, 2013 is as follows:
| 2014 |
| 2013 | ||
Net operating loss carry forwards | $ | 7,865,900 |
| $ | 3,189,339 |
Valuation Allowance |
| (7,865,900) |
|
| (3,189,339) |
Net deferred tax asset | $ | 0 |
| $ | 0 |
The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes as of June 30, 2014 and December 31, 2013, is as follows:
|
| 2014 |
| 2013 |
Income tax computed at the federal statutory rate |
| 34% |
| 34% |
Valuation Allowance |
| (34%) |
| (34%) |
Net deferred tax asset |
| 0% |
| 0% |
NOTE 16. LEASE COMMITMENTS
Omega Capital Street has an 11 month sublet of office space in downtown Miami, FL with an unrelated landlord. The sublease may be renegotiated upon expiration December 1, 2014. The Company also has a month to month lease for an executive office at $95 per month with an unrelated landlord. Therefore, no future minimum lease commitment exists beyond one year.
NOTE 17. SUBSEQUENT EVENTS
DISSOLUTION OF GENEVE AGREEMENT
On March 24, 2014, the Company entered into a Purchase & Option to Purchase Agreement with Geneve International Corporation, a Texas corporation, to acquire ownership interest in Geneve. In accordance with the terms of the agreement, the Company paid Geneve $16,800 upon first closing to acquire 24% of the issued and outstanding common stock. The second closing never occurred, and the Company unwound the deal, receiving their funds minus fees and expenses on June 9, 2014.
PURCHASE 51% OF AMERICAVEST
On June 3, 2014, the Company entered into a Definitive Share Purchase agreement (the Agreement) with AmericaVest CRE Mortgage Funding Trust Incorporated (the “Shareholder”) a Maryland corporation, pursuant to which the Registrant acquired from Shareholder fifty-one percent (51%) or 1,564,079 shares of Shareholders common stock. The Company issued a promissory note in favor of the shareholder for $2,000,000 (“Purchase Price”) The Note was of non interest and shall be due and payable in forty-five (45) days after the Closing Date (the “Maturity Date”).
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On July 22, 2014, the Company and AmericaVest amended their agreement to accept 285,000 shares of common stock in exchange for 51% of the Company. The stock has not yet been issued.
STOCK SPLIT AND SUBSEQUENT STOCK ISSUANCES
On July 2, 2014, the Company effected a 1:20,000 split of its common stock, leaving 29,843 shares of common stock outstanding.
On July 9, 2014, the Company issued 40,000,000 shares of common stock to its officer and 10,000,000 shares to its wholly owned subsidiary for mergers and acquisitions, the value of the stock approximating the value of services. The shares issued to the subsidiary are recorded at par value.
On July 30, 2014, the Company issued 200,000 shares of common stock to a contractor at its primary subsidiary for services rendered, 1,300,000 shares of common stock to vendors for services received in producing revenue (COGS), and 250,000 shares of common stock to independent contractors for services, the value of the stock approximating the value of services. Also on July 30, 2014, the Company issued 97,002 shares of Series A Preferred Convertible stock to 9 investors in consideration for term modifications in the Unit Share Purchase Agreement (see PREFERRED STOCK, Note 6).
Management has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis should be read in conjunction with our historical combined financial statements and the related notes. The management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “project,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc)., or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Current Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We disclaim any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Current Report. Please see “Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
Overview
We were incorporated in the state of Wyoming on November 6, 1973 under the name DOL Resources, Inc. From inception until October 2002, our primary business activity was the acquisition, disposition, commercialization and/or exploration of interests in oil, gas and/or coal properties. In October 2002, we sold all of our oil and gas properties to Glauber Management Company whereupon we ceased any business operations and became a development stage company, whose activities were limited to that of a shell company seeking to merge with or acquire an operating business.
On September 14, 2007, we entered into a Stock Purchase Agreement and Share Exchange with Omega Capital Funding LLC, a Florida limited liability company (“ Omega Capital ”) pursuant to which we acquired 100% ownership of Omega Capital (the “ Reorganization ”). After the Reorganization, our business operations consisted of those of Omega Capital. Prior thereto since 2002, we were a non-operating shell company with no revenue and minimal assets. As a result of the Reorganization, we were no longer considered a shell company.
Since the Reorganization in September 2007, our business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. We provide short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. We focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. Our operations are based primarily in Miami Beach, Florida.
Going Concern
As of June 30, 2014, we have not yet achieved profitable operations. We have accumulated losses since inception, a working capital deficiency and we expect to incur further losses in the development of our business, all of which, according to our accountants, casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. We intend to seek additional funds by equity financing through an offering of our securities and/or related party advances, however there is no assurance of additional funding being available.
Results of Operations – three months ended June 30, 2014 and 2013
Revenues
For the three months ended June 30, 2014 our sales decreased $240,410 compared to the same period in 2013 primarily as a result of delayed contract signing and new business startups.
Cost of Sales
Cost of sales for the three months ended June 30, 2014 increased by $54,800 compared to the same period in 2013 even though our sales decreased, primarily because of ongoing business not yet closed. Cost of sales as a percentage of revenues for the three months ended June 30, 2014 was 456.75% compared to 14.0% for the three months ended June 30, 2013. These increases were primarily as a result of the new business startup, Omega Capital Street, and more due diligence for prospective deals being brought into the company.
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Operating Expenses
Total expenses for the three months ended June 30, 2014 increased by $8,343,784 compared to the same period in 2013. The increase was primarily due to stock and warrants issued for fundraising, convertible debentures issued for operating capital including warrant expenses and derivative expenses, calculated using the Black-Scholes model as well as increased contractor costs, rent and professional fees for operational subsidiaries.
Other Income (Expense)
Total other income (expense) for the three months ended June 30, 2014 was ($3,386,046), due to fair valuation of assets and fair value adjustment of derivative liabilities, compared to ($0) for the three months ended June 30, 2013.
Loss From Operations
Our net loss for the three months ended June 30, 2014 increased by $12,025,040 compared to the same period in 2013 due to the circumstances set forth above.
Results of Operations – six months ended June 30, 2014 and 2013
Revenues
For the six months ended June 30, 2014 our sales decreased $265,362 compared to the same period in 2013 primarily as a result of delayed contract signing and new business startups.
Cost of Sales
Cost of sales for the six months ended June 30, 2014 increased by $55,249 compared to the same period in 2013 even though our sales decreased, primarily because of ongoing business not yet closed. Cost of sales as a percentage of revenues for the six months ended June 30, 2014 was 226.3% compared to 27.3% for the six months ended June 30, 2013. These increases were primarily as a result of the decrease in sales discussed above and partially increased by consulting services related to ongoing projects.
Operating Expenses
Total expenses for the six months ended June 30, 2014 increased by $8,799,807 compared to the same period in 2013. The increase was primarily due to stock and warrants issued for fundraising including warrant expenses and derivative expenses, calculated using the Black-Scholes model as well as increased contractor costs, rent and professional fees for operational subsidiaries.
Other Income (Expense)
Total other income (expense) for the six months ended June 30, 2014 was ($3,931,717), due to fair valuation of assets and fair value adjustment of derivative liabilities, compared to ($22,843) for the six months ended June 30, 2013, which was due to loss on sales of trading securities and interest charges incurred through our margin account, partially offset by $3,765 in interest received on money market funds..
Loss From Operations
Our net loss for the six months ended June 30, 2014 increased by $13,029,292 compared to the same period in 2013 due to the circumstances set forth above.
Capital Resources and Liquidity
Liquidity is a measure of a company’s ability to meet potential cash requirements. On June 30, 2014, we had total assets of $99,509 compared to $138,823 on December 31, 2013, a decrease of $39,314 (28.3%). We had total stockholders’ deficit of $6,266,229 on June 30, 2013 compared to the deficit of stockholders’ equity of $2,740,659 on December 31, 2013, an increase in the deficit of $3,525,570.
All assets are booked at historical cost. Management reviews on an annual basis the book value, along with the prospective dismantlement, restoration, and abandonment costs and estimate residual value for the assets, in comparison to the carrying values on the financial statements.
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Financing - The Equity Line of Credit. On February 8, 2013 we entered into a Standby Equity Purchase Agreement (the “Agreement”) with Lambert Private Equity LLC (“Lambert”). The Agreement provides us with an equity line whereby we can sell to Lambert, from time-to-time, our shares of common stock up to an aggregate value of $100 million over a thirty-six month period. Under the terms of the Agreement, once a registration statement becomes effective we will have the right to deliver to Lambert from time-to-time a “Draw Down Notice” stating the dollar amount of common shares we intend to sell to Lambert, up to a maximum of $100 million. Our board of directors will also have the discretion to use the funds for purposes it deems to be in our best interest. There can be no assurance that once we file a registration statement, it will become effective or that we will realize any proceeds from the Agreement. The Agreement will not be effective until the date a registration statement is declared effective by the SEC. On June 3, 2013, the Company issued to Lambert 10,000,000 shares of its common stock under this agreement.
Net cash (used in) operating activities during the six months ended June 30, 2014 was ($300,753) as compared to net cash (used by) operating activities of ($112,115) for the six months ended June 30, 2013. These changes were primarily due to an increase in our net loss partially offset by non-cash expenses in connection with the issuance of common stock for services and debentures issued for operational cash flow.
Net cash used in investing activities during the six months ended June 30, 2014 was $45,133 as compared to net cash used in investing activities of $130,000 for the six months ended June 30, 2014. The decrease was due to non-cash financing of investments offset by cash purchases of trading securities and furniture, fixtures and computers.
Net financing activities for the six months ended June 30, 2014 was $367,649 compared to 140,213 during the six months ended June 30, 2013. The increase was due to sales of convertible debentures, common stock and contribution with no sales of securities.
Cash Requirements
We have not yet achieved profitable operations and expect to incur further losses in the development of our business, cash needs to complete various transactions we have entered into and repay certain indebtedness, the result of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from business operations when they come due. We intend to meet our financial needs for operations by equity and/or debt financing and/or related party advances. In the event we are unable to borrow or raise funds needed for our business, or we are unable to repay our current obligations when due, we will have to seek additional financing, and no assurances can be given that such financing would be available on a timely basis, on terms that are acceptable or at all. Failure to obtain such additional financing could result in delay or indefinite postponement of our planned operations which would materially adversely affect our business, results of operations and financial condition and threaten our financial viability.
Our registration statement on Form S-1 filed with the Securities and Exchange Commission which was declared effective on January 30, 2013, permits us to sell up to 100,000,000 shares of our common stock at $.10 per share for a proposed maximum aggregate offer price of $10,000,000 along with certain selling shareholders who may sell up 31,075,350 shares of our common stock. As of the date of this report, we sold 10,000,000 shares under this registration statement to Lambert as discussed above, 3,000,000 shares to 3 individual investors for cash and reserved 28,000,000 for conversion under the preferred stock issuances.
Any additional funds raised through the issuance of equity or convertible debt securities will reduce the percentage ownership of our stockholders who may experience additional dilution and such securities may have rights, preferences or privileges senior to those of our common stock.
In the next six months, the company's goal is to achieve profitable operations through implementation of our proposed financing products and services.
We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
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Critical Accounting Policies and Estimates
Emerging Growth Company
We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.
Critical Accounting Policies
Our financial statements are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.
Revenue Recognition
We will be primarily engaged in the sourcing of and providing advice in connection with second- and third-tier financing for commercial development and construction. Revenues are generated from fixed non-refundable processing fees associated with the contractual agreement. Revenues are recorded at the time each contract is signed and fees remitted.
The fees are non-refundable and fixed, which is unconditionally earned and is not contingent on success factors. We recognize revenues as amounts become billable in accordance with contract terms. These revenues based on contractual agreement with us are recognized as the contracts are signed and the fees are received, and amounts are earned in accordance with the Securities and Exchange Commission (the “SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104, “Revenue Recognition” (“SAB 104”). We consider amounts to be earned once evidence of an arrangement has been obtained, the contract signed, and the processing fees remitted.
In the past our fees have not been refundable, which resulted in unclear contracts and several lawsuits. Our contracts have been rewritten to clearly state the processing fees as non-refundable, and customers are clearly informed of the fees and policies. If the Company elects to refund any processing fees, determined on a case by case basis, a loss provision will be recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined by the contractual agreement and the amount of processing fees associated with the customer. There were $6,540 and $-0- in refunds or anticipated contract refunds as of June 30, 2014 and 2013, respectively.
Fair Value of Financial Instruments
The carrying amounts of our financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their short maturities.
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Investments in and Advances to Unconsolidated Entities
The trends, uncertainties or other factors that may negatively affected the Company’s business and the finance, construction and new development industries in general may also affect the unconsolidated entities in which the Company may have investments. The Company will review each of its investments in unconsolidated entities on a quarterly basis to determine the recoverability of its investment. The Company evaluates the recoverability of its investment in unconsolidated entities, which entails a detailed cash flow analysis using many estimates including but not limited to expected sales pace, expected sales prices, expected incentives, costs incurred and anticipated, sufficiency of financing and capital, competition, and market conditions. When markets deteriorate and it is no longer probable that the Company can recover its investment in a joint venture, the Company impairs its investment. If a joint venture has its own loans or is principally a joint venture to hold an option, such impairment may result in the majority or all of our investment being impaired.
Income Taxes — Valuation Allowance
Significant judgment is required in estimating valuation allowances for deferred tax assets. In accordance with ASC 740, a valuation allowance is established against a deferred tax asset if, based on the available evidence, it is more likely than not that such asset will not be realized. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carry forward periods under tax law. We periodically assesses the need for valuation allowances for deferred tax assets based on ASC 740’s “more-likely-than-not” realization threshold criterion. In our assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative income and losses, forecasts of future profitability, the duration of statutory carryback or carry forward periods, its experience with operating loss and tax credit carry forwards being used before expiration, and tax planning alternatives.
In accordance with ASC 740, we assesses whether a valuation allowance should be established based on its determination of whether it is more likely than not that some or all of the deferred tax assets will not be realized. Our assessment of the need for a valuation allowance on its deferred tax assets includes assessing the likely future tax consequences of events that have been recognized in its consolidated financial statements or tax returns. We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, on business plans and other expectations about future outcomes. Changes in existing tax laws or rates could affect actual tax results and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our accounting for deferred tax assets represents its best estimate of future events using the guidance provided by ASC 740.
Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in future reporting periods (carry forward period assumptions), it is reasonably possible that actual results could differ from the estimates used in our historical analyses. Our assumptions require significant judgment because the residential homebuilding industry is cyclical and is highly sensitive to changes in economic conditions. If our results of operations are less than projected and there is insufficient objectively verifiable evidence to support the likely realization of its deferred tax assets, a valuation allowance would be required to reduce or eliminate its deferred tax assets
Stock Based Compensation
From time to time, we have compensated our officers and vendors with the issuance of stock. The value of the transaction is determined by the trading price on the day of the transactions. We anticipate that we will continue to compensate our officers with stock and traditional payments in the future. Since the stock price is variable and there is no assurance the stock price will remain at any level, the amount of stock issued for services in kind or bonus awards will vary, and dilution may occur.
Off-Balance Sheet Arrangements
There are no 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, who is also our Chief Financial Officer, CFO, to allow timely decisions regarding required disclosure. Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2013. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of September 30, 2013.
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all 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, within our company have been detected.
Changes in Internal Control
There were no changes identified in connection with our internal control over financial reporting during the six months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 1. Legal Proceedings
Other than as set forth below, there are no material pending legal proceedings to which we are a party or to which any of our property is subject and to the best of our knowledge, no such actions against us are contemplated or threatened.
The following is summary information on the cases against us or our affiliates.
Jorge Ramos v. Omega Capital Funding, LLC, et. al. In the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 07-38288 CA 09. This matter resulted in a summary judgment against the Defendants on September 25, 2009 for $85,000. The judgment accrues interest at 8% annually and has yet to be satisfied.
Sebaco Siete, S.A. v. Omega Realty Partners, L.L.C., et. al. In the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 06-11204 CA 13. This matter resulted in a default final judgment against the Defendants in March 2008 for $1,564,832 plus fees and costs. The judgment accrues interest at 11% annually and has yet to be satisfied.
Luxury Home, LLC v. Omega Commercial Finance Corporation, et. al. In the Superior Court of Arizona, Maricopa County, Arizona. Case No.: CV2011-004554. This breach of contract matter resulted in a default judgment against the Defendants in 2012 for $651,113 plus fees and costs. The judgment accrues interest at 4.25% annually and has yet to be satisfied.
On April 26, 2013, Madison Boardwalk, LLC (“Madison Boardwalk”) filed a complaint in the U.S. District Court for the Western District of Wisconsin (Case No. l 13-cv-288) against Omega Commercial finance Corp. (“the company”), Jon S. Cummings IV and Von C. Cummings. The complaint alleges that the company breached its agreements with Madison Boardwalk to provide it with funding for a hotel it was seeking to finance and develop (the “Project”).
The complaint also alleges that the defendants engaged in deceptive practices in violation of Wisconsin Statues Section 100.18(1) and that Jon S. Cummings IV and made intentional misrepresentations related to the Company’s ability to arrange financing for the Project. The plaintiff is seeking damages against the Company in the amount of $9,240,874, which the plaintiff claims is the difference between the financing cost proposed by the Company and what the plaintiff alleged they could receive from an alleged alternative funding source; plus, Jon S. Cummings IV and Von C. Cummings jointly and severally in the amount of $1,071,000, and certain other amounts as determined at trial. The plaintiff did provide to the Company a payment of a non-refundable due diligence and processing fee in the amount of $20,000, which is not in dispute.
In response to this complaint, the Company and Jon S. Cummings IV filed a motion to dismiss the complaint due to Jurisdiction and Venue. On November 7, 2013, the Court issued an order denying the motion to dismiss, granting Madison Boardwalk’s motion for leave to file a surreply and allowing Madison Boardwalk leave until November 21, 2013 to show that the individual defendants in this case are citizens of Florida.
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The Company believes that this claim is totally without merit, and the Company intends to file its Answer and Affirmative Defenses followed by a Motion for Summary Judgment and to vigorously defend the company, The Company cannot predict th3e ultimate outcome of the complaint. And, in the event, that the court ultimately awards Madison Boardwalk the full claimed amount, it may have an adverse effect on our financial and liquidity positions in future periods. However, the company holds the right to file a Rule 11 Motion for sanctions any time prior to trial for any damages this may cause to the company and its shareholders of record. Furthermore, the Company assumes Von C. Cummings will retain his own counsel at his cost because he is employed as the CEO of Bentley Addison Capital finance and not the Company.
We currently have total payment obligations of $2,300,945 on the judgments against us, which is included in our financial statements for the quarter ended June 30, 2014 and the audited financial statements for the year ended December 31, 2013.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds.
Common Stock
On July 2, 2014, the Company effected a 1:20,000 split of its Common stock. All common stock and per share data for all periods presented in these financial statements have been restated to give effect to the reverse split. The December 31, 2013 financial statement have been retroactively restated herein in accordance with SAB Topic 4C. As of June 30, 2014 and December 31, 2013, the Company had 29,843 and 14,293 shares of common stock issued and outstanding, respectively.
During the 6 months ended June 30, 2014, the Company issued 1,046 shares of common stock for conversion of debt including interest, 25,350 shares of common stock for consulting and contracting services, 250 shares to investors under Share Purchase Agreements, 684 shares of common stock for costs associated with securing convertible debenture financing, 2,500 shares of common stock to its wholly owned subsidiary for mergers and acquisitions and 13 shares of restricted common stock to its officer for services.
In July, 2014 the company issued 51,750,000 shares of common stock including 40,000,000 shares to its officer and 10,000,000 shares to a subsidiary, Omega Capital Street, in anticipation of share exchange business combinations and mergers, 200,000 shares as compensation to a contractor at its primary operating subsidiary, 1,550,000 shares of common stock for consulting services related, 1,100,000 of those shares to vendors associated with the business’ primary function, and 97,002 shares of Series A Preferred Convertible stock to 9 investors in consideration of term modifications in the initial Unit Subscription Agreement (see PREFERRED STOCK below). These preferred shares will be recorded as Deferred equity costs and expensed as the Agreement takes effect.
Preferred Stock.
In accordance with the terms of the preferred stock issuance agreements, we have reserved 28,000,000 shares of common stock for the preferred stock conversion.
In February, 2014, the Company issued 1,000,000 shares of Series G Preferred Convertible stock, $1 par value, convertible at 1 share of Series G Preferred Convertible stock for 25 shares common stock, to purchase Capital Match Point, a web portal. The transaction was initially valued at the par value of the preferred stock, then revalued at the conversion price of the common stock underlying the preferred issuance and subsequently revalued as of June 30, 2014, showing a loss of $412,500 on valuation.
In April, 2014, the Company issued 80,000 shares of Series F Preferred stock, $100 par value, to a consultant for services rendered, the value of the stock approximating the value of services.
There were 271,998 shares of Series A Preferred Cumulative Convertible stock, 500,000 shares of Series C Preferred Cumulative stock, 100,000 shares of Series D Convertible preferred stock, 80,000 shares of Series F Cumulative Redeemable, 1,000,000 shares of Series G Convertible stock issued and outstanding as of June 30, 2013. There were 271,998 shares of Series A Preferred Cumulative Convertible stock, 500,000 shares of Series C Preferred Cumulative stock, 100,000 shares of Series D Convertible preferred stock issued and outstanding as of December 31, 2013.
In July 2014 we issued an additional 97,002 shares of Series A Preferred Cumulative Convertible stock in consideration of contract modifications to a preferred stock issuance agreement. As of the date of this filing, there were 368,000 shares of Series A Preferred Cumulative Convertible stock outstanding.
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These shares of our preferred stock were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 (the “Securities Act”). In addition, the recipients of our shares were sophisticated investors and had access to information normally provided in a prospectus regarding us. In addition, the recipients of the shares had the necessary investment intent as required by Section 4(2) since they agreed to allow us to include a legend on the shares stating that such shares are restricted pursuant to Rule 144 of the Securities Act. These restrictions ensure that these shares 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 the above transactions.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure
Item 5. Other Information
Common Stock Split
On July 2, 2014, the Company effected a 1:20,000 split of its Common stock. All common stock and per share data for all periods presented in these financial statements have been restated to give effect to the reverse split. The December 31, 2013 financial statement have been retroactively restated herein in accordance with SAB Topic 4C. As of June 30, 2014 and December 31, 2013, the Company had 29,843 and 14,293 shares of common stock issued and outstanding, respectively.
During the 6 months ended June 30, 2014, the Company issued 1,046 shares of common stock for conversion of debt including interest, 25,350 shares of common stock for consulting and contracting services, 250 shares to investors under Share Purchase Agreements, 684 shares of common stock for costs associated with securing convertible debenture financing, 2,500 shares of common stock to its wholly owned subsidiary for mergers and acquisitions and 13 shares of restricted common stock to its officer for services.
In July, 2014 the company issued 51,750,000 shares of common stock including 40,000,000 shares to its officer and 10,000,000 shares to a subsidiary, Omega Capital Street, in anticipation of share exchange business combinations and mergers, 200,000 shares as compensation to a contractor at its primary operating subsidiary, 1,550,000 shares of common stock for consulting services, 1,100,000 of those shares to vendors associated with the business’ primary function, and 97,002 shares of Series A Preferred Convertible stock to 9 investors in consideration of term modifications in the initial Unit Subscription Agreement (see PREFERRED STOCK below). These preferred shares will be recorded as Deferred equity costs and expensed as the Agreement takes effect.
Item 6. Exhibits
Exhibit Number |
| Description |
31.1* |
| Section 302 Certification of Chief Executive Officer and Chief Financial Officer. |
32.1* |
| Section 906 Certification of Chief Executive Officer and Chief Financial Officer. |
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 |
*
Filed herewith
**
In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| OMEGA COMMERCIAL FINANCE CORPORATION. | |
|
|
|
Date: August 14, 2014 | By: | /s/Jon S. Cummings, IV |
|
| Jon S. Cummings, IV |
|
| Chief Executive Officer and Chief Financial Officer |
|
| (Principal Executive Officer and Principal Financial and Accounting Officer) |
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