UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: December 31, 2009
Commission File Number: 0-53436
Forex365, Inc.
--------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 85-0290243
------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
190 Lakeview Way
Vero Beach, FL 32963
--------------------
(Address of Principal Executive Offices and Zip Code)
(772) 231-7544
--------------
(Registrant's Telephone Number, including Area Code)
N/A
---
(Former Name or Former Address, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_| .
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
(do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |X| No |_| .
As of January 8, 2010, there were 24,857,647 shares of common stock, par value
$0.001 per share, outstanding.
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements: 1
Balance Sheets as of December 31, 2009 (unaudited) and June 30, 2009 2
Unaudited Statements of Operations for the Three and Six Months Ended December 31, 2009 and 2008 3
Unaudited Statements of Cash Flows for the Six Months Ended December 31, 2009 and 2008 4
Notes to Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
Item 4T. Controls and Procedures 22
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings 22
Item 1A. Risk Factors 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits 23
Signatures 25
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
Statements made in this Form 10-Q (the "Quarterly Report") that are not
historical or current facts are "forward-looking statements" made pursuant to
the safe harbor provisions of Section 27A of the Securities Act of 1933, as
amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements often can be identified by the
use of terms such as "may", "will", "expect", "believe", "anticipate",
"estimate", "approximate", or "continue", or the negative thereof. Forex365,
Inc. (the "Company") intends that such forward-looking statements be subject to
the safe harbors for such statements. The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made. Any forward-looking statements represent management's best
judgment as to what may occur in the future. However, forward-looking statements
are subject to risks, uncertainties and important factors beyond the control of
the Company that could cause actual results and events to differ materially from
historical results of operations and events and those presently anticipated or
projected. These factors include adverse economic conditions, entry of new and
stronger competitors, inadequate capital and unexpected costs. The Company
disclaims any obligation subsequently to revise any forward-looking statements
to reflect events or circumstances after the date of such statement or to
reflect the occurrence of anticipated or unanticipated events.
1
FOREX365, INC.
(formerly known as Solar Group, Inc.)
BALANCE SHEETS
December 31, June 30,
2009 2009
(Unaudited)
----------- -----------
ASSETS
------
Current Assets:
Cash $ 682 $ 2,912
----------- -----------
Total current assets 682 2,912
----------- -----------
Total assets $ 682 $ 2,912
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Accrued liabilities and payables - related parties $ 42,393 $ 36,000
Revolving loans payable - related parties 14,000 10,000
----------- -----------
Total current liabilities 56,393 46,000
----------- -----------
Total liabilities 56,393 46,000
----------- -----------
Commitments and contingencies -- --
Stockholders' equity (deficit):
Preferred stock - $.001 par value; authorized
10,000,000 shares, none issued -- --
Common stock - $.001 par value; authorized
200,000,000 shares, 24,857,647 issued and
outstanding 24,858 24,858
Additional paid-in capital 1,891,315 1,891,315
Accumulated (deficit) (1,971,884) (1,959,261)
----------- -----------
Total stockholders' equity (deficit) (55,711) (43,088)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 682 $ 2,912
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
FOREX365, INC.
(formerly known as Solar Group, Inc.)
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
December 31, December 31,
---------------------------- ----------------------------
2009 2008 2009 2008
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
Revenues $ -- $ -- $ -- $ --
General and administrative expenses 4,694 14,556 12,230 30,419
------------ ------------ ------------ ------------
(Loss) from operations (4,694) (14,556) (12,230) (30,419)
Other income (expense):
Interest expense (212) -- (393) --
------------ ------------ ------------ ------------
(Loss) before provision for income taxes (4,906) (14,556) (12,623) (30,419)
Income tax expense -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ (4,906) $ (14,556) $ (12,623) $ (30,419)
============ ============ ============ ============
Net income (loss) per common share:
Basic * * * *
============ ============ ============ ============
Diluted * * * *
============ ============ ============ ============
Weighted average number of shares outstanding:
Basic 24,857,647 24,857,647 24,857,647 24,857,647
============ ============ ============ ============
Diluted 24,857,647 24,857,647 24,857,647 24,857,647
============ ============ ============ ============
* less than $0.01
The accompanying notes are an integral part of these financial statements.
3
FOREX365, INC.
(formerly known as Solar Group, Inc.)
STATEMENTS OF CASH FLOWS
For the Six Months Ended
December 31,
------------------------
2009 2008
(Unaudited) (Unaudited)
----------- -----------
Cash Flows from Operating Activities:
Net income (loss) $(12,623) $(30,419)
Change in operating assets and liabilities:
Accrued liabilities and payables -- 4,602
Accrued liabilities and payables - related parties 6,393 5,500
-------- --------
Net cash used in operating activities (6,230) (20,317)
-------- --------
Cash Flows from Investing Activities:
-------- --------
Net cash provided by (used in) investing activities -- --
-------- --------
Cash Flows from Financing Activities:
Net proceeds from revolving loans 4,000 --
-------- --------
Net cash provided by (used in) financing activities 4,000 --
-------- --------
Net Change in Cash (2,230) (20,317)
Cash, at beginning of period 2,912 21,429
-------- --------
Cash, at end of period $ 682 $ 1,112
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ -- $ --
======== ========
Cash paid during the period for taxes $ -- $ --
======== ========
The accompanying notes are an integral part of these financial statements.
4
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
---------------------------------------
Organization and Business
Forex365, Inc. (the "Company") was incorporated under the laws of the State
of Nevada on February 8, 1984 under the name Solar Age Industries, Inc. The
Company's principal business activity was the manufacture and sale of solar
air and water heating devices. As of January 1986, the federal energy
credits and most state energy credits expired which severely impacted on
the Company's ability to market its products, resulting in a substantial
loss to the Company for the first two calendar quarters of 1986. The
Company attempted to diversify its operation, but because of the continuing
substantial financial loses sustained by the Company, it was forced to file
a Chapter 11 petition under the Bankruptcy Code District of New Mexico. In
late 1987, the Company filed its plan of reorganization, which was approved
by the Bankruptcy Court. Following distribution to its creditors under the
terms of the plan and consummation of the plan, the bankruptcy case was
subsequently closed. Although the Company continued to market its products,
the Company did not attain the commercial success for its products and,
subsequently, ceased operations.
In July 1998, pursuant to an Agreement and Plan of Reorganization and, as a
result of a reverse merger, the Company acquired through its wholly owned
subsidiary, SGI Capital, Inc., an Illinois corporation, a ninety percent
interest in JSC NBM Stroyservice ("NBM"), Russian limited liability
company, which was a real estate development and construction company based
in Moscow, Russia. Shortly after the merger, the Company was unable to
develop its operations, due to deteriorating economic conditions in Russia
and the inability of NBM to provide audited financial statements for the
fiscal year ended as of June 30, 1999 in accordance with the U.S. General
Accepted Accounting Principles, and the Company was forced to rescind the
Agreement and Plan of Reorganization.
Effective November 15, 2007, the then existing officers and directors of
the Company resigned, and Kevin R. Keating became the sole director. Kevin
R. Keating appointed two additional directors to fill the vacancies on the
Company's board of directors ("Board"). The Board then appointed Kevin R.
Keating as the Chief Executive Officer, Chief Financial Officer, President,
Secretary and Treasurer of the Company.
On June 25, 2008, the Company issued an aggregate of 21,000,000 shares of
common stock (the "Shares") to Kevin R. Keating and to Lionsridge Capital,
LLC, a firm controlled by Fredric M. Schweiger ("Lionsridge"). The Shares
were sold by the Company for an aggregate purchase price of $210,000, or
$0.01 per share. The Shares have certain registration rights. Immediately
following the issuance of the Shares, Kevin R. Keating and Lionsridge owned
approximately 95.3% of the Company's outstanding common stock. The proceeds
from the sale of the Shares were used by the Company to pay certain
liabilities and obligations of the Company.
The Company currently has no operations but is seeking to acquire an
ongoing business. The Company's principal business objective for the next
12 months and beyond such time will be to achieve long-term growth
potential through a combination with an operating business rather than
immediate, short-term earnings. The Company will not restrict its potential
candidate target companies to any specific business, industry or
geographical location and, thus, may acquire any type of business. No
assurance can be given that the Company will ever complete a business
combination with an operating company.
5
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
The accompanying unaudited financial statements of the Company are
presented in accordance with the requirements for Form 10-Q and Regulation
S-X. Accordingly, they do not include all of the disclosures required by
generally accepted accounting principles. In the opinion of management, all
adjustments (all of which were of a normal recurring nature) considered
necessary to fairly present the financial position, results of operations,
and cash flows of the Company on a consistent basis, have been made.
These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used in
the preparation of the Company's financial statements for the fiscal year
ended June 30, 2009. Operating results for the six months ended December
31, 2009 are not necessarily indicative of the results that may be expected
for the fiscal year ending June 30, 2010.
The Company recommends that the accompanying financial statements for the
interim period be read in conjunction with the Company's financial
statements for the year ended June 30, 2009 included in the Company's
annual report on Form 10-K.
The accompanying financial statements include the accounts of the Company.
The Company has no subsidiaries.
Going Concern
Since inception, the Company had a cumulative net loss of $1,971,884 as of
December 31, 2009. Since inception, the Company has been dependent upon the
receipt of capital investment or other financing to fund its operations.
The Company currently has no source of operating revenue, and has only
limited working capital with which to pursue its business plan, which
contemplates the completion of a business combination with an operating
company. The amount of capital required to sustain operations until the
successful completion of a business combination is subject to future events
and uncertainties. It may be necessary for the Company to secure additional
working capital through loans or sales of common stock, and there can be no
assurance that such funding will be available in the future. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern.
The accompanying financial statements have been presented on the basis of
the continuation of the Company as a going concern and do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classifications of liabilities that might
be necessary should the Company be unable to continue as a going concern.
2. SUMMARY OF ACCOUNTING POLICIES:
-------------------------------
Income Taxes
The Company accounts for income taxes in accordance with Accounting
Standards Codification Topic 740, Income Taxes ("Topic 740"), which
requires the recognition of deferred tax liabilities and assets at
currently enacted tax rates for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
A valuation allowance is recognized to reduce the net deferred tax asset to
an amount that is more likely than not to be realized.
Topic 740 provides guidance on the accounting for uncertainty in income
taxes recognized in a company's financial statements. Topic 740 requires a
company to determine whether it is more likely than not that a tax position
will be sustained upon examination based upon the technical merits of the
position. If the more-likely-than-not threshold is met, a company must
measure the tax position to determine the amount to recognize in the
financial statements.
6
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The Company performed a review of its material tax positions. At the
adoption date of July 1, 2007, the Company had no unrecognized tax benefits
as a result of tax positions taken in a prior period. During the quarter
ended December 31, 2009, there were no increases or decreases in
unrecognized tax benefits as a result of tax positions taken during the
quarter, there were no decreases in unrecognized tax benefits relating to
settlements with taxing authorities, and there were no reductions to
unrecognized tax benefits as a result of a lapse of the applicable statute
of limitations. As of December 31, 2009, the Company had no unrecognized
tax benefits that, if recognized, would affect the effective tax rate. As
of December 31, 2009, the Company has no tax positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits
will significantly increase or decrease within 12 months of the reporting
date. Generally, the Company's tax years ended June 30, 1999 and after
remain subject to examination by major taxing jurisdictions.
The Company has elected to classify any interest or penalties recognized
with respect to any unrecognized tax benefits as income taxes. During the
quarter ended December 31, 2009, the Company did not recognize any amounts
for interest or penalties with respect to any unrecognized tax benefits. As
of December 31, 2009, no amounts for interest or penalties with respect to
any unrecognized tax benefits have been accrued.
Use of Estimates
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents. There were no cash equivalents
at December 31, 2009.
Fair Value of Financial Instruments
On July 1, 2008, the Company adopted Accounting Standards Codification
Topic 820, Fair Value Measurements and Disclosures ("Topic 820"). Topic 820
defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosure requirements
for fair value measures. The three levels are defined as follows:
o Level 1 inputs to the valuation methodology are quoted prices
(unadjusted) for identical assets or liabilities in active
markets.
o Level 2 inputs to the valuation methodology include quoted prices
for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the financial
instrument.
o Level 3 inputs to valuation methodology are unobservable and
significant to the fair measurement.
7
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The fair value of the Company's cash and cash equivalents, accrued
liabilities and payables and revolving loans payable approximate carrying
value because of the short-term nature of these items.
Stock Compensation for Services Rendered
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of Accounting Standards Codification Topic
718, Compensation - Stock Compensation ("Topic 718") and Accounting
Standards Codification Section 505-50, Equity, Equity-Based Payments to
Non-employees ("Section 505-50"). All transactions in which goods or
services are the consideration received for the issuance of equity
instruments are accounted for based on the fair value of the consideration
received or the fair value of the equity instrument issued, whichever is
more reliably measurable. The measurement date of the fair value of the
equity instrument issued is the earlier of the date on which the
counterparty's performance is complete or the date on which it is probable
that performance will occur. The Company had no common stock options or
warrants outstanding at December 31, 2009.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards
Codification Section 605-10-S99, Revenue Recognition, Overall, SEC
Materials ("Section 605-10-S99"). Section 605-10-S99 requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services
rendered; (3) the fee is fixed and determinable; and (4) collectibility is
reasonably assured. The Company had no operations and no revenue for the
quarter ended December 31, 2009.
Earnings (Loss) per Share
Basic earnings per (loss) share (EPS) is calculated by dividing the income
or loss available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Since
there are no potentially dilutive securities for the quarters ended
December 31, 2009 and 2008, dilutive EPS calculations are not included.
Recent Pronouncements
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Codification Topic 805, Business Combinations ("Topic
805"). Topic 805 establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree and recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain
purchase. Topic 805 also sets forth the disclosures required to be made in
the financial statements to evaluate the nature and financial effects of
the business combination. Topic 805 applies prospectively to business
combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008.
The provisions of Topic 805 became effective as of the beginning of the
Company's fiscal year beginning July 1, 2009.
In December 2007, the FASB issued Accounting Standards Codification Topic
810, Consolidation ("Topic 810"). Topic 810 establishes the accounting and
reporting for minority interests, which will be recharacterized as
non-controlling interests and classified as a component of equity. This
consolidation method will significantly change the accounting for
transactions with minority interest holders. Topic 810 requires retroactive
adoption of the presentation and disclosure requirements for existing
minority interests. All other requirements of Topic 810 shall be applied
prospectively. This consolidation method is effective for the Company's
fiscal year beginning July 1, 2009.
8
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
In March 2008, the FASB issued amendments to Accounting Standards
Codification Sections 815-10-15 and 815-10-65, Derivatives and Hedging,
Overall. These amendments expand the disclosure requirements by requiring
qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of, and
gains and losses on, derivative instruments, and disclosures about credit
risk-related contingent features in derivative agreements. These amendments
are effective for the quarter ending March 31, 2009.
In June 2008, the FASB amended Accounting Standards Codification Section
260-10, Earnings per Share, Overall. These amendments address whether
instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in
computing earnings per share under the two-class method. These amendments
require companies to treat unvested share-based payment awards that have
non-forfeitable rights to dividend or dividend equivalents as a separate
class of securities in calculating earnings per share. These amendments are
effective for the fiscal year beginning July 1, 2009.
In June 2008, the FASB adopted Accounting Standards Codification Section
815-40, Derivatives and Hedging, Contracts in Entity's Own Equity. This
section provides that an entity should use a two step approach to evaluate
whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. It also clarifies on the impact of
foreign currency denominated strike prices and market-based employee stock
option valuation instruments on the evaluation. This section is effective
for the fiscal year beginning July 1, 2009.
In June 2008, the FASB amended Accounting Standards Codification Section
840-10, Leases, Overall. These amendments provide guidance for accounting
for nonrefundable maintenance deposits. It also provides revenue
recognition accounting guidance for the lessor. These amendments are
effective for the fiscal year beginning July 1, 2009.
In May 2009, the FASB amended Accounting Standards Codification Section
855-10, Subsequent Events, Overall. These amendments establish the general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or available
to be issued. These amendments are effective for the quarter and fiscal
year ended June 30, 2009.
In June 2009, the FASB issued Accounting Standards Update No. 2009-01,
Generally Accepted Accounting Principles--amendments based on--Statement of
Financial Accounting Standards No. 168--The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles,
amending Accounting Standards Codification Section 105, Generally Accepted
Accounting Principles ("Update No. 2009-01") which identifies the sources
of accounting principles and the framework for selecting the principles
used in the preparation of financial statements. Update No. 2009-01 is
effective for interim and fiscal periods ending after September 15, 2009.
In August 2009, the FASB issued Accounting Standards Update No. 2009-04,
Accounting for Redeemable Equity Instruments--Amendment to Section
480-10-S99 (SEC Update), amending Accounting Standards Codification Section
480-10-S99, Distinguishing Liabilities from Equity, Overall ("Update No.
2009-04"), which requires certain securities that are redeemable for cash
or other assets to be classified outside of permanent equity if they are
redeemable (1) at a fixed or determinable price on a fixed or determinable
date, (2) at the option of the holder, or (3) upon the occurrence of an
event that is not solely within the control of the issuer. Update No.
2009-04 is effective for interim and fiscal periods ending after August 26,
2009.
9
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
In August 2009, the FASB issued Accounting Standards Update No. 2009-05,
Fair Value Measurements and Disclosures (Topic 820)--Measuring Liabilities
at Fair Value, amending Accounting Standards Codification Section 820-10,
Fair Value Measurements and Disclosures, Overall ("Update No. 2009-05"),
which provides clarification of the fair value measurement of liabilities
in circumstances in which a quoted price in an active market for the
identical liability is not available. Update No. 2009-05 is effective for
interim and fiscal periods ending after August 26, 2009.
In September 2009, the FASB issued Accounting Standards Update No. 2009-06,
Income Taxes (Topic 740)--Implementation Guidance on Accounting for
Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic
Entities, amending Accounting Standards Codification Section 740, Income
Taxes ("Update No. 2009-06"), which provides implementation guidance on
accounting for uncertainty in income taxes. The implementation guidance
applies to all non-government entities, and the disclosure amendments apply
only to non-public entities. Update No. 2009-06 is generally effective for
interim and fiscal periods ending after September 15, 2009.
In January 2010, the FASB issued Accounting Standards Update No. 2010-01,
Equity (Topic 505)--Accounting for Distributions to Shareholders with
Components of Stock and Cash, a consensus of the FASB Emerging Issues Task
Force ("Update No. 2010-01"). The amendments in this Update clarify that
the stock portion of a distribution to shareholders that allows them to
elect to receive cash or stock with a potential limitation on the total
amount of cash that all shareholders can elect to receive in the aggregate
is considered a share issuance that is reflected in earnings per share
prospectively and is not a stock dividend for purposes of applying Topics
505 and 260 (Equity and Earnings per Share). Update No. 2010-01 is
generally effective for interim and fiscal periods ending on or after
December 15, 2009, and should be applied on a retrospective basis.
The implementation and adoption of these Standards is not expected to have
a material effect on the Company's financial position, results of
operations, or cash flows.
3. STOCKHOLDERS' EQUITY:
---------------------
As of June 30, 2007, the Company had 1,027,647 shares of common stock,
$0.01 par value per share, outstanding.
On June 25, 2008, the Company issued 16,000,000 shares of common stock to
Kevin R. Keating, a director of the Company and the Company's sole officer,
for a purchase price of $160,000, or $0.01 per share.
On June 25, 2008, the Company issued 5,000,000 shares of common stock to
Lionsridge for a purchase price of $50,000, or $0.01 per share.
On June 26, 2008, the Company issued 630,000 shares of common stock to
Kevin R. Keating for services rendered as a director of the Company, which
services were valued at $6,300, or $0.01 per share.
10
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
On June 26, 2008, the Company issued 2,200,000 shares of common stock to a
consulting firm controlled Frederic M. Schweiger ("Consultant"), which
consulting services were valued at $22,000, or $0.01 per share.
Effective August 14, 2008, the Company filed amended and restated articles
of incorporation ("Restated Articles of Incorporation") with the Nevada
Scretary of State. The Restated Articles of Incorporation amended the
Company's then current articles of incorporation to, among other things,
increase the number of authorized shares of common stock from 50,000,000 to
200,000,000, increase the number of authorized shares of preferred stock
from 1,000,000 to 10,000,000, and reduce the par value per share of the
common and preferred stock from $0.01 to $0.001. The financial statements
have been adjusted to give retroactive effect to the reduction in the par
value per share of the common stock.
As of December 31, 2009, the Company had 24,857,647 shares of common stock,
$0.001 par value per share, outstanding. As of December 31, 2009, there
were no outstanding options or warrants to purchase shares of the Company's
common stock.
4. RELATED PARTY TRANSACTIONS:
---------------------------
Commencing July 1, 2004, the Company's Board of Directors approved a
consulting fee of $3,500 per month payable to its former director and Chief
Executive Officer, Leon Leibovich, for consulting services rendered to the
Company for financial and administrative matters and for assisting the
Company in identifying an operating company for a potential business
combination. The Company recorded expenses for these consulting services of
$13,500 and $42,000 during the fiscal years ended June 30, 2008 and 2007,
respectively. On November 14, 2007, the Company entered into a Settlement
and Release Agreement with Leon Leibovich, which provided that for the
partial payment, at the closing of the sale of the Shares by the Company,
of certain consulting fees earned by Leon Leibovich for consulting services
rendered to the Company from July 2004 to October 2007. As part of the
settlement of such consulting fees, Leon Leibovich agreed to accept $68,542
("Settlement Amount") in full and complete payment of $140,000 of unpaid
consulting fees. As part of the Settlement Agreement, Leon Leibovich also
agreed to release the Company from all claims and to indemnify the Company
from any loss, cost or expense incurred by the Company up to a maximum of
$12,500 for a period of 4 months following the closing of the sale of the
Shares. In accordance with the Settlement Agreement, the Company paid
$56,042 to Leon Leibovich at the closing of the sale of the Shares and
withheld $12,500 from the Settlement Amount payable to Leon Leibovich,
which withheld amount will be paid to Leon Leibovich at the end of the
4-month period, subject to any claims for indemnity. On October 22, 2008,
in accordance with the terms of the Settlement Agreement, the Company paid
$12,500 to Leon Leibovich in full payment of the amount that had been
withheld from the initial payment of the Settlement Amount to satisfy
potential claims for indemnity.
On May 5, 2008, the Company entered into a revolving loan agreement with
Vero Management, L.L.C. ("Vero"). Pursuant to this agreement, the Company
borrowed $10,500 from Vero on May 5, 2008. The Company is required to repay
the outstanding advances in full on or before June 30, 2008. The loan bears
interest at a rate of 6% per annum. The loan was used by the Company to pay
professional fees. Kevin R. Keating, the Company's Chief Executive Officer,
Chief Financial Officer, President, Secretary and Treasurer and a director
is the sole member and manager of Vero. The Company paid the Vero loan on
June 27, 2008 from the proceeds of the sale of Shares. Vero waived any
payment of accrued interest on the loan.
11
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
On June 25, 2008, the Company issued 16,000,000 shares of common stock to
Kevin R. Keating, a director of the Company and the Company's sole officer,
for a purchase price of $160,000, or $0.01 per share. On June 26, 2008, the
Company issued 630,000 shares of common stock to Kevin R. Keating for
services rendered as a director of the Company, which services were valued
at $6,300, or $0.01 per share.
Effective July 1, 2008, the Company entered into a management agreement
("Management Agreement") with Vero Management, LLC ("Vero") under which
Vero has agreed to provide a broad range of managerial and administrative
services to the Company including, but not limited to, assistance in the
preparation and maintenance of the Company's financial books and records,
the filing of various reports with the appropriate regulatory agencies as
are required by State and Federal rules and regulations, the administration
of matters relating to the Company's shareholders including responding to
various information requests from shareholders as well as the preparation
and distribution to shareholders of relevant Company materials, and to
provide office space, corporate identity, telephone and fax services,
mailing, postage and courier services for a fixed fee of $3,000 per month,
for an initial period of twelve months. The agreement may be terminated by
either party in writing during the initial twelve months. At the end of the
initial twelve month term, the agreement will continue to remain in effect
until terminated in writing by either party. Kevin R. Keating, the
Company's Chief Executive Officer, Chief Financial Officer, President,
Secretary and Treasurer and sole director is the sole member and manager of
Vero. Effective July 1, 2009, the Company and Vero reduced the monthly fee
under the Management Agreement from $3,000 to $1,000. The Company recorded
expenses for these services of $3,000 during the quarter ended December 31,
2009. As of December 31, 2009, the Company had unpaid fees owed to Vero of
$42,000, which have been recorded as accrued liabilities and payables -
related parties.
On January 9, 2009, Vero entered into a revolving loan agreement with the
Company under which Vero has agreed to advance the Company up to $14,000
from time to time to provide the Company with working capital. On January
9, 2009, the Company received an initial advance from Vero totaling $7,000.
On August 13, 2009, the Company received an additional advance from Vero
totaling $2,500. Vero is owned and controlled by Kevin R. Keating, the
Company's sole officer and director and a principal stockholder of the
Company. See note 9.
On January 9, 2009, Lionsridge entered into a revolving loan agreement with
the Company under which Lionsridge has agreed to advance the Company up to
$6,000 from time to time to provide the Company with working capital. On
January 9, 2009, the Company received an initial advance from Lionsridge
totaling $3,000. On August 19, 2009, the Company received an additional
advance from Lionsridge totaling $1,500. Lionsridge is a principal
stockholder of the Company. Lionsridge is owned and controlled by Frederic
M. Schweiger. See note 9.
As of December 31, 2009, the Company has received aggregate advances of
$9,500 from Vero and $4,500 from Lionsridge under the revolving loan
agreements. The revolving loan agreements provide that: (i) all advances
are due and payable in full on the occurrence of a change of control of the
Company, and (ii) interest will accrue on outstanding advances at a rate of
6% per annum commencing July 1, 2009. The Company has recorded these
advances as revolving loans payable - related parties.
12
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
5. REVOLVING LOAN
--------------
On November 17, 2007, the Company entered into a revolving loan agreement
with Keating Investments, LLC ("Lender"). Pursuant to this agreement, the
Company borrowed $5,000 from the Lender on November 17, 2005. The Company
is required to repay the outstanding advances in full on or before June 30,
2008. The loan bears interest at a rate of 6% per annum. The loan was used
by the Company to pay attorneys in connection with certain litigation. See
note 6. The Company paid the Keating Investments loan on June 27, 2008 from
the proceeds of the sale of Shares. Keating Investments waived any payment
of accrued interest on the loan. Keating Investments, LLC is the managing
member of KIG Investors II, LLC ("KIG"). KIG assigned its rights to
purchase the Shares to Kevin R. Keating and Lionsridge on June 20, 2008.
See note 4 above for revolving loan agreements between the Company and
certain related parties.
6. LITIGATION
----------
The Company was named in a civil action filed in Nevada District Court,
Clark County on August 7, 2007 captioned Benchmark Capital, LLC vs.
Forex365, Inc., formerly known as Solar Group, Inc., Leon Leibovich and
Does I-XV (the "Benchmark Action"). The lawsuit alleged a number of causes
of action related to Benchmark's attempts to acquire a controlling interest
in the Company from certain stockholders ("Controlling Interest") during
the period from April 2005 to May 2007. During this time period, Benchmark
alleged it advanced monies to the Company to pay certain expenses and costs
of the Company. Benchmark alleged certain other defendants breached a
verbal agreement to sell it the Controlling Interest. Generally, Benchmark
demanded the Company to repay these advances in and/or to issue its common
stock to Benchmark in lieu of cash repayment of the advances. Benchmark was
also seeking specific performance to have the Controlling Interest
transferred to it.
On November 1, 2007, the Company was advised that a default judgment had
been entered against the Company on October 31, 2007. The default judgment
provided that the Company pay Benchmark the sum of $41,670.88 plus interest
at 10.25% per annum from August 7, 2007 until paid, plus costs of $447.98
and attorney fees of $5,420. On January 8, 2008, the Court vacated the
default judgment against the Company. The Company timely filed its answer
to the complaint.
On March 10, 2008, Benchmark agreed to settle the Benchmark Action and to
release the Company and other defendants from all claims (including a
$2,000 advance made in June 2006 by Benchmark to pay the Company's
corporate filing fees to the State of Nevada) in exchange for a cash
payment of $65,000 ("Benchmark Settlement Amount"). The Company recorded a
litigation loss for $63,000 related to the settlement of the Benchmark
Action in fiscal year ended June 30, 2007 since the events that gave raise
to the claim occurred during the fiscal year ended June 30, 2007.
On June 25, 2008, the Company paid the Benchmark Settlement Amount in full
from the proceeds of the sale of the Shares. On June 30, 2008, the
Benchmark Action was dismissed with prejudice.
7. INCOME TAXES:
-------------
The Company recognizes the amount of income taxes payable or refundable for
the current year and recognizes deferred tax assets and liabilities for the
future tax consequences attributable to differences between the financial
statement amounts of certain assets and liabilities and their respective
tax bases. Deferred tax assets and deferred liabilities are measured using
enacted tax rates expected to apply to taxable income in the years those
temporary differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance to the extent that uncertainty
exists as to whether the deferred tax assets will ultimately be realized.
13
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
As of June 30, 2009, the Company had net operating loss carryovers of
approximately $980,573 which will expire through the year 2029. A valuation
allowance was established at June 30, 2009 to fully offset the benefit from
the net operating loss carryforward to the extent it is more likely than
not, based upon available evidence, that the recorded value will not be
realized. Realization is dependent on the existence of sufficient taxable
income within the carryforward period. On June 25, 2008, upon the issuance
of common shares to Kevin R. Keating and Lionsridge, the Company underwent
a change of control pursuant to Section 382 of the Internal Revenue Code.
Net operating losses prior to the change of control are limited in post
change periods under Section 382.
The Company has no unrecognized tax benefits as a result of tax positions
taken with respect to the quarter ended December 31, 2009 or prior periods.
See Note 2.
8. BASIC AND FULLY DILUTED INCOME (LOSS) PER SHARE
-----------------------------------------------
The following data show the amounts used in computing basic income (loss)
per share:
For the Six Months Ended
December 31,
----------------------------
2009 2008
------------ ------------
(unaudited) (unaudited)
------------ ------------
Income (loss) from operations available to
common stockholders (numerator) $ (12,623) $ (30,419)
------------ ------------
Weighted average number of common shares
outstanding used in income (loss) per share during
the period (denominator) 24,857,647 24,857,647
------------ ------------
Basic income (loss) per common share * *
* Less than $0.01 per share.
Fully Diluted income (loss) per share were not presented, as the Company
had no common equivalent shares for all periods presented that would effect
the computation of fully diluted income (loss) per share.
9. SUBSEQUENT EVENTS
-----------------
On January 8, 2010, the Company received an additional advance under its
revolving loan from Vero totaling $3,500. On January 8, 2010, the Company
received an additional advance from Lionsridge totaling $1,500. See note 4.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward-Looking Statement Notice
Certain statements made in this Quarterly Report on Form 10-Q are
"forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995) in regard to the plans and objectives of
management for future operations. Such statements involve known and unknown
risks, uncertainties and other factors that may cause actual results,
performance or achievements of Forex365, Inc. ("we", "us", "our" or the
"Company") to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based, in part, on assumptions involving the continued expansion
of business. Assumptions relating to the foregoing involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance the forward-looking
statements included in this Quarterly Report will prove to be accurate. In light
of the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
Business History and Background
We were incorporated under the laws of the State of Nevada on February 8,
1984 under the name Solar Age Industries, Inc. The Company's principal business
activity was the manufacture and sale of solar air and water heating devices. As
of January 1986, the federal energy credits and most state energy credits
expired which severely impacted our ability to market our products, resulting in
a substantial loss for the first two calendar quarters of 1986. We attempted to
diversify our operation, but because of the continuing substantial financial
loses sustained by us, we were forced to file a Chapter 11 petition under the
Bankruptcy Code District of New Mexico. In late 1987, we filed our plan of
reorganization, which was approved by the Bankruptcy Court. Following
distribution to our creditors under the terms of the plan and consummation of
the plan, the bankruptcy case was subsequently closed. Although we continued to
market our products, we did not attain the commercial success for our products
and, subsequently, ceased operations.
In July 1998, pursuant to an Agreement and Plan of Reorganization and, as a
result of a reverse merger, we acquired through our wholly owned subsidiary, SGI
Capital, Inc., an Illinois corporation, a ninety percent interest in JSC NBM
Stroyservice ("NBM"), Russian limited liability company, which was a real estate
development and construction company based in Moscow, Russia. Shortly after the
merger, the Company was unable to develop its operations, due to deteriorating
economic conditions in Russia and the inability of NBM to provide audited
financial statements for the fiscal year ended as of June 30, 1999 in accordance
with the U.S. Generally Accepted Accounting Principles, and we were forced to
rescind the Agreement and Plan of Reorganization.
Reorganization and Change of Control
On November 14, 2007, we entered into a securities purchase agreement
("Purchase Agreement") with KIG Investors II, LLC ("KIG") pursuant to which KIG
agreed to purchase, subject to the satisfaction of certain conditions precedent,
newly issued shares of common stock from the Company for cash consideration.
Effective November 15, 2007, in accordance with the terms of the Purchase
Agreement, our then existing officers and directors resigned, and Kevin R.
Keating became our sole director. Kevin R. Keating appointed two additional
directors, Margie Blackwell and Jeff Andrews, to fill the vacancies on our board
of directors ("Board"). The Board then appointed Kevin R. Keating as our Chief
Executive Officer, Chief Financial Officer, President, Secretary and Treasurer.
15
Effective June 19, 2008, the Purchase Agreement was amended by the parties
and KIG thereafter assigned its rights thereunder to Kevin R. Keating and
Lionsridge Capital, LLC ("Lionsridge"), a limited liability company controlled
by Fredric M. Schweiger. Pursuant to the amended Purchase Agreement, on June 25,
2008, we issued 16,000,000 shares of common stock to Kevin R. Keating and
5,000,000 shares of common stock to Lionsridge. These shares were sold by us for
an aggregate purchase price of $210,000, or $0.01 per share. We also granted
Kevin R. Keating and Lionsridge certain demand and piggyback registration rights
with respect to these shares. The proceeds from the sale of these shares under
the amended Purchase Agreement were used by us to pay certain of our liabilities
and obligations as described below.
On November 14, 2007, the Company entered into a Settlement and Release
Agreement ("Settlement Agreement") with Leon Leibovich, the former CEO and
director of the Company, which provided that for the partial payment, at the
closing of the sale of the shares by the Company under the Purchase Agreement,
of certain consulting fees earned by Leon Leibovich for consulting services
rendered to the Company from July 2004 to October 2007. As part of the
settlement of such consulting fees, Leon Leibovich agreed to accept $68,542
("Settlement Amount") in full and complete payment of $140,000 of unpaid
consulting fees. As part of the Settlement Agreement, Leon Leibovich also agreed
to release the Company from all claims and to indemnify the Company from any
loss, cost or expense incurred by the Company up to a maximum of $12,500 for a
period of 4 months following the closing of the sale of shares under the amended
Purchase Agreement. In accordance with the Settlement Agreement, the Company
paid $56,042 to Leon Leibovich at the closing of the sale of shares under the
amended Purchase Agreement and withheld $12,500 from the Settlement Amount
payable to Leon Leibovich, which withheld amount will be paid to Leon Leibovich
at the end of the 4-month period, subject to any claims for indemnity. On
October 23, 2008, in accordance with the terms of the Settlement Agreement, the
Company paid $12,500 to Leon Leibovich in full payment of the amount that had
been withheld from the initial payment of the Settlement Amount to satisfy
potential claims for indemnity.
On November 17, 2007, the Company entered into a revolving loan agreement
with Keating Investments, LLC ("KI"). Pursuant to this agreement, the Company
borrowed $5,000 from KI on November 17, 2005. The Company was required to repay
the outstanding advances in full on or before June 30, 2008. The loan carried
interest at a rate of 6% per annum. The loan was used by the Company to pay
attorneys in connection with the Benchmark Action, more fully described in the
following paragraph. The Company paid KI $5,000 in full payment of the loan on
June 27, 2008 from the proceeds of the sale of shares under the amended Purchase
Agreement. KI waived any payment of accrued interest on the loan. KI was the
managing member of KIG. KIG assigned its rights to purchase shares under the
Purchase Agreement on June 20, 2008.
On March 10, 2008, Benchmark Capital, LLC ("Benchmark") agreed to settle a
civil action filed in Nevada District Court, Clark County on August 7, 2007
captioned Benchmark Capital, LLC vs. Forex365, Inc., formerly known as Solar
Group, Inc., Leon Leibovich and Does I-XV (the "Benchmark Action"). The lawsuit
alleged a number of causes of action related to Benchmark's attempts to acquire
a controlling interest in the Company from certain stockholders ("Controlling
Interest") during the period from April 2005 to May 2007. During this time
period, Benchmark alleged it advanced monies to the Company to pay certain
expenses and costs of the Company. Benchmark alleged certain other defendants
breached a verbal agreement to sell it the Controlling Interest. Generally,
Benchmark demanded that the Company repay these advances in and/or to issue its
common stock to Benchmark in lieu of cash repayment of the advances. Benchmark
also sought specific performance to have the Controlling Interest transferred to
it. Pursuant to the settlement, Benchmark agreed to release the Company and
other defendants from all claims (including a $2,000 advance made in June 2006
by Benchmark to pay the Company's corporate filing fees to the State of Nevada)
in exchange for a cash payment of $65,000 ("Benchmark Settlement Amount"). On
June 25, 2008, the Company paid the Benchmark Settlement Amount in full from the
proceeds of the sale of shares under the amended Purchase Agreement. On June 30,
2008, the Benchmark Action was dismissed with prejudice.
16
On May 5, 2008, the Company entered into a revolving loan agreement with
Vero Management, L.L.C. ("Vero"). Pursuant to this agreement, the Company
borrowed $10,500 from Vero on May 5, 2008. The Company was required to repay the
outstanding advances in full on or before June 30, 2008. The loan carried
interest at a rate of 6% per annum. The loan was used by the Company to pay
professional fees. Kevin R. Keating, the Company's sole officer and director, is
the sole member and manager of Vero. The Company paid Vero $10,500 in full
payment of the loan on or about June 27, 2008 from the proceeds of the sale of
shares under the amended Purchase Agreement. Vero waived any payment of accrued
interest on the loan.
In connection with the closing of the transactions under the amended
Purchase Agreement, proceeds from the sale of shares thereunder were used by the
Company to pay transfer agent fees ($16,800), auditor fees ($3,600), legal fees
($30,000) and miscellaneous expenses ($2,129).
On August 20, 2008, Margie Blackwell and Jeff Andrews resigned as directors
of the Company. The resignation of these directors was not the result of any
disagreement with us on any matters relating to our operations, policies or
practices. Following these resignations, Kevin R. Keating, our sole remaining
director reduced the size of the Board to one director.
Our principal place of business is located at 190 Lakeview Way, Vero Beach,
FL 32963. Our telephone number is (772) 231-7544.
Current Business of Issuer
We currently have no operations but are seeking to acquire an ongoing
business. Our principal business objective for the next 12 months and beyond
such time will be to achieve long-term growth potential through a combination
with an operating business rather than immediate, short-term earnings. We will
not restrict our potential candidate target companies to any specific business,
industry or geographical location and, thus, may acquire any type of business.
No assurance can be given that we will ever complete a business combination with
an operating company.
To date, we have made no efforts to identify a possible business
combination. As a result, we have not conducted negotiations or entered into a
letter of intent concerning any target business. We intend to commence search
for an operating business suitable for a business combination after this
Registration Statement becomes effective and we are a reporting company under
the Exchange Act.
Under SEC Rule 12b-2 under the Securities Act of 1933, as amended (the
"Securities Act"), we qualify as a "shell company," because we have no or
nominal assets (other than cash) and no or nominal operations. We intend to
comply with the periodic reporting requirements of the Exchange Act for so long
as we are subject to those requirements.
The analysis of new business opportunities will be undertaken by or under
the supervision of Kevin R. Keating, our sole officer and director. As of this
date, we have not entered into any definitive agreement with any party, nor have
there been any specific discussions with any potential business combination
candidate regarding business opportunities for us. We have unrestricted
flexibility in seeking, analyzing and participating in potential business
opportunities. In our efforts to analyze potential acquisition targets, we will
consider the following kinds of factors:
(i) Potential for growth, indicated by new technology, anticipated
market expansion or new products;
(ii) Competitive position as compared to other firms of similar size
and experience within the industry segment as well as within the industry
as a whole;
(iii) Strength and diversity of management, either in place or
scheduled for recruitment;
17
(iv) Capital requirements and anticipated availability of required
funds, to be provided by the Company or from operations, through the sale
of additional securities, through joint ventures or similar arrangements or
from other sources;
(v) The cost of participation by the Company as compared to the
perceived tangible and intangible values and potentials;
(vi) The extent to which the business opportunity can be advanced;
(vii) The accessibility of required management expertise, personnel,
raw materials, services, professional assistance and other required items;
and
(viii) Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling,
our management will attempt to analyze all factors and circumstances and make a
determination based upon reasonable investigative measures and available data.
Potentially available business opportunities may occur in many different
industries, and at various stages of development, all of which will make the
task of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Due to our limited capital available for
investigation, we may not discover or adequately evaluate adverse facts about
the opportunity to be acquired.
Plan of Operations
The Company's current business strategy and plan of operation has been to
investigate and, if such investigation warrants, acquire a target operating
company or business seeking the perceived advantages of being a publicly held
corporation. Our principal business objective for the next 12 months and beyond
such time will be to achieve long-term growth potential through a combination
with a business rather than immediate, short-term earnings. The Company will not
restrict our potential candidate target companies to any specific business,
industry or geographical location and, thus, may acquire any type of business.
The Company does not currently engage in any business activities that
provide cash flow. The costs of investigating and analyzing business
combinations for the next 12 months and beyond such time will be paid with money
in our treasury or with additional amounts, as necessary, to be loaned to or
invested in us by our stockholders, management or other investors.
During the next 12 months we anticipate incurring costs related to the
filing of Exchange Act reports, and consummating a business combination.
We believe we will be able to meet these costs through use of funds in our
treasury and additional amounts to be loaned by or invested in us by our
stockholders, management or other investors. Currently, however, 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. Our ability to continue as a going concern is also dependent
on our ability to find a suitable target operating company and enter into a
possible business combination with such operating company. Management's plan
includes obtaining additional funds by equity financing prior to or in
connection with a business combination and/or related party advances; however,
there is no assurance of additional funding being available.
The Company may consider an operating business which has recently commenced
operations, is a developing company in need of additional funds for expansion
into new products or markets, is seeking to develop a new product or service, or
is an established business which may be experiencing financial or operating
difficulties and is in need of additional capital. In the alternative, a
business combination may involve the acquisition of, or merger with, a company
which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding, among other
things, the time delays, significant expense, and loss of voting control which
may occur in a public offering.
18
Our sole officer and director has not had any preliminary contact or
discussions with any representative of any other entity regarding a business
combination with us. Any target business that is selected may be a financially
unstable company or an entity in its early stages of development or growth,
including entities without established records of sales or earnings. In that
event, we will be subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. In addition, we may effect a business combination with an entity in
an industry characterized by a high level of risk, and, although our management
will endeavor to evaluate the risks inherent in a particular target business,
there can be no assurance that we will properly ascertain or assess all
significant risks.
Our management anticipates that it will likely be able to effect only one
business combination, due primarily to our limited financing and the dilution of
interest for present and prospective stockholders, which is likely to occur as a
result of our management's plan to offer a controlling interest to a target
business in order to achieve a tax-free reorganization. This lack of
diversification should be considered a substantial risk in investing in us,
because it will not permit us to offset potential losses from one venture
against gains from another.
The Company anticipates that the selection of a business combination will
be complex and extremely risky. Because of general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, our management believes that there are numerous firms seeking even the
limited additional capital which we will have and/or the perceived benefits of
becoming a publicly traded corporation. Such perceived benefits of becoming a
publicly traded corporation include, among other things, facilitating or
improving the terms on which additional equity financing may be obtained,
providing liquidity for the principals of and investors in a business, creating
a means for providing incentive stock options or similar benefits to key
employees, and offering greater flexibility in structuring acquisitions, joint
ventures and the like through the issuance of stock. Potentially available
business combinations may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex.
We do not currently intend to retain any entity to act as a "finder" or a
consultant to identify and/or analyze the merits of potential target businesses.
However, we may elect to do so in the future.
Results of Operation
For the three and six month periods ended December 31, 2008 and 2009, the
Company had no revenues from continuing operations. It is unlikely the Company
will have any revenues unless it is able to effect an acquisition or merger with
an operating company, of which there can be no assurance. It is management's
assertion that these circumstances may hinder the Company's ability to continue
as a going concern.
Three months ended December 31, 2009 and 2008
---------------------------------------------
For the three months ended December 31, 2009, the Company had a net loss of
$4,906, comprised of (a) accounting fees of $1,395 incurred in relation to the
audit of the Company's financial statements for the fiscal year ended June 30,
2009 and the review of the Company's financial statements for the fiscal quarter
ended September 30, 2009, (b) management fees of $3,000 incurred in relation to
a broad range of managerial and administrative services provided by Vero
Management, LLC, (c) Edgar filing fees of $299, and (d) interest expense of $212
on certain loans to related parties.
19
For the three months ended December 31, 2008, the Company had a net loss of
$14,556, comprised of (a) accounting fees of $2,668 incurred in relation to the
audit of the Company's financial statements for the fiscal year ended June 30,
2008 and the review of the Company's financial statements for the fiscal quarter
ended September 30, 2008, (b) management fees of $9,000 incurred in relation to
a broad range of managerial and administrative services provided by Vero
Management, LLC, (c) Edgar filing fees of $689, (d) stock transfer agent fees of
$2,100, and (e) miscellaneous expenses of $99.
One of the primary reasons for the reduction in net loss for the three
month periods ended December 31, 2008 and 2009 was the reduction of the monthly
management fee paid to Vero for managerial and administrative services which was
reduced from $3,000 to $1,000 effective July 1, 2009.
Six months ended December 31, 2009 and 2008
-------------------------------------------
For the six months ended December 31, 2009, the Company had a net loss of
$12,623, comprised of (a) accounting fees of $5,396 incurred in relation to the
annual audit and quarterly reviews of the Company's financial statements, (b)
management fees of $6,000 incurred in relation to a broad range of managerial
and administrative services provided by Vero Management, LLC, (c) Edgar filing
fees of $834, and (d) interest expense of $393 on certain loans to related
parties.
For the six months ended December 31, 2008, the Company had a net loss of
$30,419, comprised of (a) accounting fees of $6,668 incurred in relation to the
annual audit and quarterly reviews of the Company's financial statements, (b)
management fees of $18,000 incurred in relation to a broad range of managerial
and administrative services provided by Vero Management, LLC, (c) Edgar filing
fees of $2,661, (d) stock transfer agent fees of $2,525, (e) registered agent
and Nevada annual report fees of $399, and (f) miscellaneous expenses of $166.
One of the primary reasons for the reduction in net loss for the six month
periods ended December 31, 2008 and 2009 was the reduction of the monthly
management fee paid to Vero for managerial and administrative services which was
reduced from $3,000 to $1,000 effective July 1, 2009.
Liquidity and Capital Resources
As of December 31, 2009, the Company had assets equal to $682, comprised
exclusively of cash. The Company's current liabilities as of December 31, 2009
included: (a) $42,000 owed to Vero for management services, (b) $14,000 owed to
certain related parties under revolving loan agreements, and (c) $393 for
interest owed to certain related parties under revolving loan agreements.
The following is a summary of the Company's cash flows provided by (used
in) operating, investing, and financing activities for the six months ended
December 31, 2009 and 2008:
Six months ended December 31,
2009 2008
-------- --------
Operating activities $ (6,230) $(20,317)
Investing activities -- --
Financing activities 4,000 --
-------- --------
Net effect on cash $ (2,230) $(20,317)
======== ========
On January 9, 2009, Vero entered into a revolving loan agreement with the
Company under which Vero has agreed to advance the Company up to $14,000 from
time to time to provide the Company with working capital. On January 9, 2009,
the Company received an initial advance from Vero totaling $7,000. On August 13,
2009, the Company received an additional advance from Vero totaling $2,500. . On
January 8, 2010, the Company received an additional advance under its revolving
loan from Vero totaling $3,500. Vero is owned and controlled by Kevin R.
Keating, the Company's sole officer and director and a principal stockholder of
the Company.
20
On January 9, 2009, Lionsridge Capital, LLC ("Lionsridge") entered into a
revolving loan agreement with the Company under which Lionsridge has agreed to
advance the Company up to $6,000 from time to time to provide the Company with
working capital. On January 9, 2009, the Company received an initial advance
from Lionsridge totaling $3,000. On August 19, 2009, the Company received an
additional advance from Lionsridge totaling $1,500. On January 8, 2010, the
Company received an additional advance from Lionsridge totaling $1,500.
Lionsridge is a principal stockholder of the Company. Lionsridge is owned and
controlled by Frederic M. Schweiger.
As of December 31, 2009, the Company had received aggregate advances of
$9,500 from Vero and $4,500 from Lionsridge under the revolving loan agreements.
The revolving loan agreements provide that: (i) all advances are due and payable
in full on the occurrence of a change of control of the Company, and (ii)
interest will accrue on outstanding advances at a rate of 6% per annum
commencing July 1, 2009.
The Company currently has nominal assets, no active business operations and
no sources of revenues. The Company is dependent upon the receipt of capital
investment or other financing to fund its ongoing operations and to execute its
business plan of seeking a combination with a private operating company. In
addition, the Company is dependent upon certain related parties to provide
continued funding and capital resources. If continued funding and capital
resources are unavailable at reasonable terms, the Company may not be able to
implement its plan of operations. Our financial statements indicate that without
additional capital, there is substantial doubt as to our ability to continue as
a going concern.
Going Concern
We currently have no source of operating revenue, and have only limited
working capital with which to pursue our business plan, which contemplates the
completion of a business combination with an operating company. The amount of
capital required to sustain operations until the successful completion of a
business combination is subject to future events and uncertainties. It may be
necessary for us to secure additional working capital through loans or sales of
common stock, and there can be no assurance that such funding will be available
in the future. These conditions raise substantial doubt about our ability to
continue as a going concern. Our auditor has issued a "going concern"
qualification as part of his opinion in the Audit Report for the year ended June
30, 2009, and our unaudited financial statements for the quarter ended December
31, 2009 include a "going concern" footnote.
Critical Accounting Policies
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires estimates and assumptions that affect the reported amounts of assets
and liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. The
SEC has defined a company's critical accounting policies as the ones that are
most important to the portrayal of the company's financial condition and results
of operations, and which require the company to make its most difficult and
subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. We believe that our estimates and assumptions are
reasonable under the circumstances; however, actual results may vary from these
estimates and assumptions. We have identified in Note 2 - "Summary of Accounting
Policies" to the Financial Statements contained in this quarterly report certain
critical accounting policies that affect the more significant judgments and
estimates used in the preparation of the financial statements.
21
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources and would be
considered material to investors.
Contractual Obligations
As a "smaller reporting company" as defined by Item 10 of Regulation S-K,
the Company is not required to provide this information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a "smaller reporting company" as defined by Item 10 of Regulation S-K,
the Company is not required to provide information required by this Item.
Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our reports filed pursuant to the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules, regulations and related forms, and that
such information is accumulated and communicated to our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
As of December 31, 2009, we carried out an evaluation, under the
supervision and with the participation of our principal executive officer and
our principal financial officer of the effectiveness of the design and operation
of our disclosure controls and procedures. Based on this evaluation, our
principal executive officer and our principal financial officer concluded that
our disclosure controls and procedures were effective as of the end of the
period covered by this report.
Changes in Internal Controls
There have been no changes in our internal controls over financial
reporting during the quarter ended December 31, 2009 that have materially
affected or are reasonably likely to materially affect our internal controls.
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings.
To the best knowledge of our sole officer and director, the Company is not
a party to any legal proceeding or litigation.
Item 1A. Risk Factors.
As a "smaller reporting company" as defined by Item 10 of Regulation S-K,
the Company is not required to provide information required by this Item. See
the Company's Annual Report for the year ended June 30, 2009 ("Annual Report")
filed with the Securities and Exchange Commission, which identifies and
discloses certain risks and uncertainties including, without limitation, those
"Risk Factors" included in Item 1A of the Annual Report.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit Number Exhibit Description
- -------------- -------------------
3.1* Amended and Restated Articles of Incorporation filed with
the State of Nevada on August 14, 2008
3.2* Amended and Restated By-laws adopted August 12, 2008
4.1** Revolving Loan Agreement by and between the Company and Vero
Management, L.L.C. dated January 9, 2009
4.2** Revolving Loan Agreement by and between the Company and
Lionsridge Capital, LLC dated January 9, 2009
4.3*** Amendment to Revolving Loan Agreement by and between the
Company and Vero Management, L.L.C. dated June 30, 2009
4.4*** Amendment to Revolving Loan Agreement by and between the
Company and Lionsridge Capital, LLC dated June 30, 2009
10.1* Securities Purchase Agreement between KIG Investors II, LLC
and the Company dated November 14, 2007
10.2* First Amendment to Securities Purchase Agreement between KIG
Investors II, LLC and the Company dated June 19, 2008
10.3* Assignment of Amended Securities Purchase Agreement by KIG
Investors II, LLC to Lionsridge Capital, LLC dated June 20,
2008
10.4* Assignment of Amended Securities Purchase Agreement by KIG
Investors II, LLC to Kevin R. Keating dated June 20, 2008
10.5* Registration Rights Agreement between Kevin R. Keating and
the Company dated June 23, 2008
10.6* Registration Rights Agreement between Lionsridge Capital,
LLC and the Company dated June 23, 2008
10.7* Registration Rights Agreement between Garisch Financial,
Inc. and the Company dated June 26, 2008
10.8* Settlement and Release Agreement between Leon Leibovich and
the Company dated November 14, 2007
10.9* Revolving Loan Agreement between Keating Investments, LLC
and the Company dated November 17, 2007
23
10.10* Revolving Loan Agreement between Vero Management L.L.C. and
the Company dated May 5, 2008
10.11* Consulting Agreement between Garisch Financial, Inc. and the
Company dated June 26, 2008
10.12* Agreement between the Company and Vero Management, L.L.C.,
dated as of July 1, 2008
10.13**** Amendment to Agreement between the Company and Vero
Management, L.L.C., dated as of July 1, 2009
31.1 Certification of the Company's Principal Executive Officer
and Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002, with respect to the
registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2009
32.1 Certification of the Company's Principal Executive Officer
and Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
* Filed as an exhibit to the Company's Registration Statement on Form 10,
as filed with the Securities and Exchange Commission on September 22, 2008
and incorporated herein by this reference.
** Filed as an exhibit to the Company's Form 8-K, as filed with the
Securities and Exchange Commission on January 12, 2009 and incorporated
herein by this reference.
*** Filed as an exhibit to the Company's Form 10-K, as filed with the
Securities and Exchange Commission on August 19, 2009 and incorporated
herein by this reference.
**** Filed as an exhibit to the Company's Form 10-Q, as filed with the
Securities and Exchange Commission on October 29, 2009 and incorporated
herein by this reference.
Exhibits 31.1 and 32.1 are attached hereto.
24
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: January 19, 2010 FOREX365, INC.
By: /s/ Kevin R. Keating
------------------------
Kevin R. Keating
President, Secretary and Director
25