UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 000-27055
CONCORD VENTURES, INC.
------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1472763
(State of Incorporation) (IRS Employer ID Number)
2460 WEST 26TH AVENUE, SUITE 380-C, DENVER, COLORADO, 80211
(Address of principal executive offices)
303-380-8280
(Registrant's Telephone number)
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 past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 11, 2008, there were 2,358,487 shares of the registrant's common
stock, $0.0001 par value, issued and outstanding.
CONCORD VENTURES, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Balance Sheet - September 30, 2008 and December 31, 2007 3
Statement of Operations - Three and Nine months ended September 30,
2008 and 2007 4
Statement of Cash Flows - Three and Nine months ended September 30,
2008 and 2007 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4. Controls and Procedures 26
Item 4T. Controls and Procedures 26
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 27
Item 6. Exhibits 28
SIGNATURES 29
2
PART I
ITEM 1. FINANCIAL STATEMENTS
CONCORD VENTURES, INC.
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2008 2007
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash & Cash Equivalents $ - $ 5,979
Prepayments - 208
--------------- ---------------
Total Current Assets - 6,187
--------------- ---------------
TOTAL ASSETS $ - $ 6,187
=============== ===============
LIABILITIES & STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable $ 130,866 $ 94,366
Accrued Expenses 96,500 89,040
Capital Leases 210,960 210,960
Operating Leases 196,216 196,216
Other Loans 15,514 603
--------------- ---------------
Total Current Liabilities 650,055 591,185
LONG TERM LIABILITIES - -
COMMITMENTS AND CONTINGENCIES (Note. 9)
STOCKHOLDERS' DEFICIT
Class A Common Stock; $0.0001 par value, 100,000,000, 1,148 1,137
shares authorized as at September 30, 2008 and December 31, 2007,
2,358,487 and 2,257,986 shares issued and outstanding as at
September 30, 2008 and December 31, 2007, respectively
Additional Paid In Capital 16,872,734 16,771,323
Accumulated Deficit (17,523,937) (17,357,458)
--------------- ---------------
Total Stockholders' Deficit (650,055) (584,998)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ - $ 6,187
=============== ===============
See accompanying Notes to Financial Statements.
3
CONCORD VENTURES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2008 2007 2008 2007
------------- -------------- ------------ -----------------
OPERATING EXPENSES (INCOME)
Gain on Statute Barred Liabilities $ - $ 100,000 $ - $ (7,229,922)
General & Administrative Expenses 96,715 19,769 165,630 62,348
------------- -------------- ------------ -----------------
Total Operating Expenses (Income) 96,715 119,769 165,630 (7,167,574)
OPERATING PROFIT (LOSS) (96,715) (119,769) (165,630) 7,167,574
Interest and Other Income (Expenses) Net (460) (1,477) (848) (3,169)
------------- -------------- ------------ -----------------
Profit (Loss) before Income Taxes (97,175) (121,247) (166,479) 7,164,405
Provision for Income Taxes - - - -
------------- -------------- ------------ -----------------
NET PROFIT (LOSS) $ (97,175)$ (121,247)$ (166,479)$ 7,164,405
============= ============== ============ =================
NET PROFIT (LOSS) PER COMMON SHARE
Basic & Diluted ($0.04) ($0.06) ($0.07) $3.56
============= ============== ============ =================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic & Diluted 2,300,980 2,032,127 2,272,422 2,010,138
============= ============== ============ =================
See accompanying Notes to Financial Statements.
4
CONCORD VENTURES, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SPETEMBER 30,
2008 2007
------------ -------------
CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES
NET PROFIT (LOSS) $ (166,479) $ 7,164,405
ADJUSTMENTS TO RECONCILE NET PROFIT (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
(Gain) / Loss on Statute Barred Liabilities - (7,229,922)
Stock Issued for Services 75,000 -
CHANGES IN OPERATING ASSETS & LIABILITIES
(Increase) / decrease in Prepaid Expenses 208 (10)
Increase / (decrease) in Accounts Payable 36,500 (3,199)
Increase / (decrease) in Accrued Expenses 7,460 3,169
-------------- -------------
Total Cash Flow provided by (used in) Operating Activities (47,312) (65,556)
CASH FLOW FROM FINANCING ACTIVITIES
Increase in Other Loans 41,333 55,176
Issue of Stock - 50,000
-------------- -------------
Total Cash Flow provided by (used in) Financing Activities 41,333 105,176
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS $ (5,979) $ 39,620
============== =============
Cash and Cash Equivalents at the beginning of the period $ 5,979 $ 39,620
============== =============
Cash and Cash Equivalents at the end of the period $ - $ -
============== =============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $ - $ -
-------------- -------------
Cash paid for income tax $ - $ -
-------------- -------------
No corporate bank account was maintained during the six months ended June 30, 2007.
See accompanying Notes to Financial Statements.
5
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
We were incorporated in August 1998 in the State of Colorado. Effective February
16, 2001, we sold our entire business, and all of our assets, for the benefit of
our creditors under a Chapter 11 reorganization. We were subsequently dismissed
from the Chapter 11 reorganization, effective March 13, 2001, at which time the
last of our remaining directors resigned. On March 13, 2001, we had no business
or other source of income, no assets, no employees or directors, outstanding
liabilities of approximately $8.4 million and had terminated our duty to file
reports under securities law.
In March 2006, we appointed a new board of directors and are now focused on
reaching satisfactory negotiated settlements with our outstanding creditors,
bringing our financial records up to date, seeking a listing on the over the
counter bulletin board, raising debt and/or equity to fund negotiated
settlements with our creditors and to meet our ongoing operating expenses and
attempting to merge with another entity with experienced management and
opportunities for growth in return for shares of our common stock to create
value for our shareholders. There can be no assurance that this series of events
will be successfully completed.
Our business activities over the twelve month period ended December 31, 2007,
were focused on the settlement of our outstanding liabilities and the renewal of
and maintaining our SEC reporting status.
On July 25, 2007, we filed a Form 10-SB12G with the SEC seeking to become a
fully reporting company pursuant to Section 12 (g) of the Securities Exchange
Act of 1934. The filing became effective September 23, 2007, at which time we
succeeded in becoming a fully reporting company pursuant to Section 12 (g) of
the Securities Exchange Act of 1934.
In February 2008, we were re-listed on the OTC Bulletin Board and so are now
listed on both the Pink Sheets and the OTC Bulletin Board and trade under the
symbol of "CCVR".
On April 29, 2008, we held our annual meeting of stockholders at which meeting
the majority of stockholders approved resolutions to re-elect Messrs. Cutler,
Whiting and Green as our directors, reincorporate the Company in Delaware,
authorize an up to 3 for 1 reverse split of our shares of common stock, change
our name to a name to be chosen at the discretion of the Board of directors and
to ratify the appointment of our auditor, Larry O'Donnell, CPA, PC.
On August 22, 2008, we issued 75,000 of restricted common stock, valued at
$75,000, to three consultants (25,000 shares each) as compensation for services
they had provided to us One of the consultants is an existing shareholder of
ours. We further issued 26,421 shares of restricted common stock to David
Cutler, our President and director, in full settlement of the our debt to Mr.
Cutler as at June 30, 2008 of $26,421.
On October 6, 2008, we filed preliminary Schedule 14a prior to calling a special
meeting of shareholders to facilitate our reincorporation in Delaware.
6
Basis of Presentation:
The accompanying unaudited financial statements of Concord Ventures, Inc. have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion the financial statements include all
adjustments (consisting of normal recurring accruals) necessary in order to make
the financial statements not misleading. Operating results for the three and
nine months ended September 30, 2008 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2008. For more
complete financial information, these unaudited financial statements should be
read in conjunction with the audited financial statements for the year ended
December 31, 2007 included in our Form10-KSB filed with the SEC.
Significant Accounting Policies:
Cash and Cash Equivalents -- Cash and cash equivalents consist of cash and
highly liquid debt instruments with original maturities of less than three
months. All cash balances were distributed for the benefit of our creditors
following the sale of our entire business and all our assets, effective February
16, 2001, as part of our Chapter 11 reorganization. Following the sale of 50,000
shares of our common stock for $50,000 cash during the fiscal year ended
December 31, 2007, we re-established a balance of cash and cash equivalents.
Impairment of Long-Lived and Intangible Assets -- In the event that facts and
circumstances indicated that the cost of long-lived and intangible assets may be
impaired, an evaluation of recoverability was performed. If an evaluation was
required, the estimated future undiscounted cash flows associated with the asset
were compared to the asset's carrying amount to determine if a write-down to
market value or discounted cash flow value was required.
Financial Instruments -- The estimated fair values for financial instruments was
determined at discrete points in time based on relevant market information.
These estimates involved uncertainties and could not be determined with
precision. The carrying amounts of notes receivable, accounts receivable,
accounts payable and accrued liabilities approximated fair value because of the
short-term maturities of these instruments. The fair value of notes payable
approximated to their carrying value as generally their interest rates reflected
our effective annual borrowing rate.
Income Taxes -- We account for income taxes under the liability method, which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statements and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Comprehensive Income (Loss) -- Comprehensive income is defined as all changes in
stockholders' equity (deficit), exclusive of transactions with owners, such as
capital investments. Comprehensive income includes net income or loss, changes
in certain assets and liabilities that are reported directly in equity such as
7
translation adjustments on investments in foreign subsidiaries and unrealized
gains (losses) on available-for-sale securities. From our inception there were
no differences between our comprehensive loss and net loss.
Our comprehensive profit / (loss) was identical to our net profit / (loss) for
the three and nine months ended September 30, 2008 and 2007.
Income (Loss) Per Share -- The income (loss) per share is presented in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share. SFAS No. 128 replaced the presentation of
primary and fully diluted earnings (loss) per share (EPS) with a presentation of
basic EPS and diluted EPS. Basic EPS is calculated by dividing the income or
loss available to common stockholders by the weighted average number of common
stock 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. Diluted EPS was the same as Basic EPS
for the three and nine months ended September 30, 2008 and 2007 as the exercise
price of our outstanding stock options was substantially in excess of our share
price throughout these periods.
Stock-Based Compensation -- As permitted under the SFAS No. 123, Accounting for
Stock-Based Compensation, we account for our stock-based compensation in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees. As such, compensation expense is
recorded on the date of grant if the current market price of the underlying
stock exceeds the exercise price. Certain pro forma net income and EPS
disclosures for employee stock option grants are also included in the notes to
the financial statements as if the fair value method as defined in SFAS No. 123
had been applied. Transactions in equity instruments with non-employees for
goods or services are accounted for by the fair value method.
Use of Estimates -- The preparation of our consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates. Due to uncertainties inherent in the estimation process, it is
possible that these estimates could be materially revised within the next year.
Recently Issued Accounting Pronouncements-- In December 2007, the FASB issued
SFAS No. 141 (Revised 2007), Business Combinations, or SFAS No. 141R. SFAS No.
141R will change the accounting for business combinations. Under SFAS No. 141R,
an acquiring entity will be required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-date fair value with
limited exceptions. SFAS No. 141R will change the accounting treatment and
disclosure for certain specific items in a business combination. SFAS No. 141R
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. Accordingly, any business combinations we engage in
will be recorded and disclosed following existing GAAP until January 1, 2009. We
expect SFAS No. 141R will have an impact on accounting for business combinations
once adopted but the effect is dependent upon acquisitions at that time.
In March 2008, the FASB issued Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and
expands the disclosure requirements of Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." It requires qualitative
8
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about credit-risk-related contingent features in derivative
agreements. SFAS No. 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. The Company does
not anticipate the adoption of SFAS No. 161 will have a material impact on its
results of operations, cash flows or financial condition.
In April 2008, the FASB issued FSP FAS 142-3, "Determination of the Useful Life
of Intangible Assets" ("FSP FAS 142-3"). FSP FAS 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, "Goodwill and Other Intangible Assets". FSP FAS 142-3 also requires
expanded disclosure related to the determination of intangible asset useful
lives. FSP FAS 142-3 is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal
years. The Company does not expect that the adoption of FSP FAS 142-3 will have
a material effect on its consolidated results of operations or financial
condition.
In May 2008, the FASB issued FASB Staff Position (FSP) No. APB 14-1 "Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)" (FSP APB 14-1). FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or
other assets) on conversion to separately account for the liability (debt) and
equity (conversion option) components of the instrument in a manner that
reflects the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008 on a retroactive
basis and will be adopted by the Company in the first quarter of fiscal 2009.
The Company does not expect the adoption of FSP APB 14-1 to have a material
effect on its results of operations and financial condition.
In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB
Staff Position ("FSP") EITF 03-6-1, "Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities." This FSP
provides that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. The FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Upon adoption, companies are required
to retrospectively adjust earnings per share data (including any amounts related
to interim periods, summaries of earnings and selected financial data) to
conform to provisions of this FSP. The Company does not anticipate the adoption
of FSP EITF 03-6-1 will have a material impact on its results of operations,
cash flows or financial condition.
2. GOING CONCERN AND LIQUIDITY:
At September 30, 2008, we had no assets, no operating business or other source
of income, outstanding liabilities totaling $650,055 and a stockholder' deficit
of $650,055.
In our financial statements for the fiscal years ended December 31, 2007 and
2006, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2007 and 2006, have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and
9
commitments in the normal course of business. At December 31, 2007, we had a
working capital deficit of $584,998 and reported an accumulated deficit of
$17,357,458.
Consequently, we are now dependent on raising additional equity and/or debt to
fund any negotiated settlements with our outstanding creditors and meet our
ongoing operating expenses. There is no assurance that we will be able to raise
the necessary equity and, or, debt that we will need to be able to negotiate
acceptable settlements with our outstanding creditors or fund our ongoing
operating expenses.
3. ASSETS
At September 30, 2008 we had no assets.
4. ACCOUNTS PAYABLE
Following the sale of all of our business and assets effective February 16,
2001, the proceeds from the sale were insufficient to repay all of our
liabilities. Indeed the sale proceeds were only sufficient to pay certain of our
secured liabilities. No proceeds were available to repay any of our unsecured
creditors. Accordingly, the majority of the balance of accounts payable
represents liabilities outstanding since we filed for Chapter 11 protection in
December 2000.
In the period April 1, 2003 through December 31, 2006, our outstanding accounts
payable which had been incurred, prior to our dismissal from our Chapter 11
reorganization under the state laws of California, Delaware, Florida,
Indianapolis, Maryland, Nebraska, North Carolina, Pennsylvania, Texas and
Vermont were statute barred. Accordingly, we recognized a gain on these statute
barred liabilities of $315,000 during that period.
During the year ended December 31, 2007, our outstanding accounts payable which
had been incurred, prior to our dismissal from our Chapter 11 reorganization,
under the state laws of Arizona, Colorado, Georgia, Massachusetts, Minnesota,
Mississippi, New Jersey, New York, Oregon, South Dakota, Tennessee, Washington
and Wisconsin were statute barred. Accordingly, we recognized a gain on statute
barred liabilities of $1.6 million.
As a result of the impact of the statute of limitation on our outstanding
liabilities, during the year ended December 31, 2007, our outstanding accounts
payable had been reduced from in excess of $2 million to approximately $94,000.
The increase in accounts payable during the nine months ended September 30, 2008
reflects the legal and professional fees incurred in making the company a fully
reporting company pursuant to Section 12 (g) of the Securities Exchange Act of
1934, achieving a re-listing on the OTC Bulletin Board and holding a
shareholders' meeting in April 2008.
5. CUSTOMER PREPAYMENTS
Prior to filing for Chapter 11 protection in December 2000, our customers
prepaid us for the services we were to provide to them. Effective February 16,
2001, we sold our entire business and all our assets and ceased to provide any
ongoing services. At that time, the purchaser of our business declined to
provide services to customers who had already paid us and would only provide
10
services to customers who paid them on an ongoing basis. Consequently, this
balance represents a liability to customers who had made prepayments to us prior
to December 2000 in respect of respect of services we were to deliver after
February 16, 2001, and who never received such services from us or from the
purchaser of our business. Accordingly, this liability was unchanged at December
31, 2006 and 2005.
During the year ended December 31, 2007, our outstanding liability in respect of
customer prepayments was statute barred and accordingly we recognized a gain on
statute barred liabilities of $1.1 million the period in respect of these
statute barred customer prepayments.
As a result of the impact of the statute of limitation on our outstanding
liability for customer prepayments, during the year ended December 31, 2007, our
outstanding liability for customer prepayments was reduced from $1.1 million to
$0.
6. ACCRUED EXPENSES
Accrued expenses related to accrued employee costs outstanding at the date we
filed bankruptcy and accrued interest expenses in respect of our outstanding
liabilities.
No additional accrual was required for employee costs from the date on which we
filed for bankruptcy as all post bankruptcy employee cost were paid in full and
we had no employees from February 16, 2001.
No additional accrual for interest expense was required in respect of unpaid
liabilities outstanding at the date of our dismissal from bankruptcy in March
13, 2001 in the financial years ended December 31, 2006, 2005, and 2004 as we
believe our outstanding liabilities could be settled in full for the values then
reflected on our balance sheet.
Interest was accrued at 8% on the loan made to us by Mr. David J Cutler, an
officer and director of the Company.
During the year ended December 31, 2007, $552,000 of our accruals in respect of
both outstanding liabilities and interest on liabilities outstanding at the date
of our bankruptcy were statute barred and accordingly we recognized a gain on
statute barred liabilities of $552,000 on the release of these accruals.
As a result of the impact of the statute of limitation on our outstanding
liability for accrued liabilities, during the year ended December 31, 2007, our
outstanding liability for accrued liabilities was reduced from $642,000 to
$89,000.
7. CAPITAL AND OPERATING LEASES
Effective December 2000, when we filed for bankruptcy, we recognized in full the
outstanding liabilities under all our capital and operating leases.
In the April 1, 2003 through December 31, 2006, our outstanding liabilities
under capital and operating leases which, had been entered into prior to our
dismissal from our Chapter 11 reorganization, under the state laws of
California, Delaware, Florida, Indianapolis, Maryland, Nebraska, North Carolina,
Pennsylvania, Texas and Vermont were statute barred. Accordingly, we recognized
a gain on statute barred liabilities of $422,000 in the period.
11
During the year ended December 31, 2007, our outstanding liabilities under
capital and operating leases which had been entered into prior to our dismissal
from our Chapter 11 reorganization, under the state laws of Arizona, Colorado,
Georgia, Massachusetts, Minnesota, Mississippi, New Jersey, New York, Oregon,
South Dakota, Tennessee, Washington and Wisconsin were statute barred.
Accordingly we recognized a gain on statute barred liabilities of $2.7 million
As a result of the impact of the statute of limitation on our outstanding
liabilities under capital and operating leases, during the year ended December
31, 2007, our outstanding liabilities under capital and operating leases had
been reduced from in excess of $3.5 million to approximately $407,000.
8. OTHER LOANS
Other loans represent the loan made to us by one of our directors and officer,
Mr. David J. Cutler.
In the period from his appointment in March 2006 through September 2006, Mr.
David Cutler, a director and our Chief Executive Officer and Chief Financial
Officer, incurred more than $50,000 on our behalf in bringing our affairs up to
date, principally on settling certain of our outstanding liabilities, legal and
accounting fees and directors' remuneration. In September 2006, Mr. Cutler
agreed to convert $50,000 of this loan to us into equity on a basis to be
determined by an independent third party valuation. In September 2006, our
independent directors authorized an initial issue of 510,000 shares of our
common stock, representing 50.3% of our total issued and outstanding shares of
our common stock, to Mr. Cutler, pending the completion of the independent third
party valuation. In November 2006, the independent third party valuation of our
shares of common stock was completed and on the basis of this third party
valuation our independent directors authorized the issue of an additional
897,644 shares of our common stock to Mr. Cutler as the balance of the equity to
which he was entitled on the conversion of his $50,000 loan to us into equity.
Following this second issue of equity to Mr. Cutler, he owned a total of
1,407,644 shares of our common stock representing 70% of our total issued and
outstanding shares of our common stock at that time.
On December 3, 2007, we issued 87,055 shares of our restricted common stock to
David J Cutler, one of our directors, in full and final settlement of the
$87,055 loan Mr. Cutler had outstanding with, including accrued interest of
$5,634, in respect of services and funding he has provided to the us in the
period October 2006 through November 2007. The share issue was authorized by the
independent members of our Board of Directors
Interest is accrued on the loan at 8% per annum.
In the nine month period ended September 30, 2008, Mr. Cutler and Burlingham
Corporate Finance, Inc., a company in which Mr. Cutler is the principal
shareholder, have advanced to us a an additional $40,963 to fund the costs of
our ongoing overhead expenses.
On August 22, 2008, we issued 26,421 shares of restricted common stock to David
Cutler, our President and a director, in full settlement of the our debt to Mr.
Cutler as at June 30, 2008, including accrued interest of $26,421.
12
9. COMMITMENTS:
Capital and Operating Leases
During the year ended December 31, 2007, our outstanding liabilities under
capital and operating leases which had been entered into prior to our dismissal
from our Chapter 11 reorganization effective March 13, 2001, under the state
laws of Arizona, Colorado, Georgia, Massachusetts, Minnesota, Mississippi, New
Jersey, New York, Oregon, South Dakota, Tennessee, Washington and Wisconsin were
statute barred. Accordingly, we recognized a gain on statute barred liabilities
of $2.7 million.
As a result of the impact of the statute of limitation on our outstanding
liabilities under capital and operating leases, during the year ended December
31, 2007, our outstanding liabilities under capital and operating leases had
been reduced from in excess of $3.5 million to approximately $407,000.
10. CONVERTIBLE SUBORDINATED NOTES:
During the year ended December 31, 2000, the Company had initiated a private
offering of convertible subordinated notes for $600,000. The notes were
convertible into shares of the Company's Class A Common Stock at a ratio of 833
shares per $50,000 of notes (implied conversion rate of $60.00 per share). The
notes were to be immediately converted upon the filing of a registration
statement with the SEC. In addition to the convertible note, each note holder
was issued a detachable warrant to purchase 208 shares of the Company's Class A
Common Stock for each of the $50,000 notes. The notes accrued interest at 10%
per annum and matured one year from the date funded.
Prior to the year ended December 31, 2000, we modified the terms of the private
offering and those notes already issued. The terms were modified such that the
notes were convertible into shares of our Class A common stock at the ratio of
2,500 shares per $50,000 of notes (implied conversion rate of $20.00 per share).
Each note holder was to receive warrants to purchase 675 shares of our Class A
common stock for each $50,000 of notes. The notes were to accrue interest at 10%
per annum with maturity one year from the date funded. After the modification of
terms, the Company issued an additional $825,000 in promissory notes.
In March 2001, the holders of the convertible subordinated notes received a
payment of $42,072 from the proceeds of the sale of our business assets at the
time. During the year ended December 31, 2007, the debt associated with these
notes became statute barred and consequently, we no longer have any liability
outstanding in respect to this convertible debt.
Prior to the year ended December 31, 2006, all of the outstanding warrants
issued in connection with this financing expired.
During the three months ended March 31, 2007, our liability in respect of this
convertible debt became statute barred and consequently we no longer have any
liability outstanding in respect of this convertible debt.
During the year ended December 31, 2007, we issued 100,000 shares of our common
stock, valued at $100,000 ($1.00 per share), in settlement of a disputed claim
in respect of these liabilities.
13
11. RELATED PARTY TRANSACTIONS
During the year ended December 31, 2006, we paid approximately $7,500 to the
Aster Management Network in consultancy fees fro their assistance in bringing
our financial affairs up to date. Aster Management Network is owned by Marshall
E Aster, formerly our Chief Financial Officer.
In the period from his appointment in March 2006 through September 2006, Mr.
David Cutler, a director and our Chief Executive Officer and Chief Financial
Officer, incurred more than $50,000 on our behalf in bringing our affairs up to
date, principally on settling certain of our outstanding liabilities, legal and
accounting fees and directors' remuneration. In September 2006, Mr. Cutler
agreed to convert $50,000 of this loan to us into equity on a basis to be
determined by an independent third party valuation. In September 2006, our
independent directors authorized an initial issue of 510,000 shares of our
common stock, representing 50.3% of our total issued and outstanding shares of
our common stock, to Mr. Cutler, pending the completion of the independent third
party valuation. In November 2006, the independent third party valuation of our
shares of common stock was completed and on the basis of this third party
valuation our independent directors authorized the issue of an additional
897,644 shares of our common stock to Mr. Cutler as the balance of the equity to
which he was entitled on the conversion of his $50,000 loan to us into equity.
Following this second issue of equity to Mr. Cutler, he owned a total of
1,407,644 shares of our common stock representing 70% of our total issued and
outstanding shares of our common stock at that time.
Following our ten for one reverse split in November 2006, we issued 25,000
shares of our common stock to each of our two non-executive directors, Messrs
Whiting and Green, as remuneration for their services to us (50,000 share of
common stock in total).
On December 3, 2007, we issued 87,055 shares of our restricted common stock to
David J Cutler, one of our directors, in full and final settlement of the
$87,055 loan Mr. Cutler had outstanding with, including accrued interest of
$5,634, in respect of services and funding he has provided to the us in the
period October 2006 through November 2007. The share issue was authorized by the
independent members of our Board of Directors.
During the financial year ended December 31, 2007, we paid $10,000 of Mr.
Cutler's remuneration to Burlingham Corporate Finance, Inc. ("Burlingham") in
the form of consulting fees. Mr. Cutler is the principal shareholder of
Burlingham.
During the nine months ended September 30, 2008, we paid $45,000 of Mr. Cutler's
remuneration to Burlingham in the form of consulting fees.
In the nine months ended September 30, 2008, Mr. Cutler and Burlingham Corporate
Finance, Inc., a company in which Mr. Cutler is the principal shareholder, have
advanced to us a further $40,963 to fund the costs of our ongoing overhead
expenses.
On August 22, 2008, we issued 26,421 shares of restricted common stock to David
Cutler, our President and a director of ours, in full settlement of the our debt
to Mr. Cutler as at June 30, 2008, including accrued interest, of $26,421.
14
On August 22, 2008 we issued 25,000 shares of restricted common stock, valued at
$25,000, to one of our shareholders for consulting services performed for us.
12. STOCKHOLDERS' DEFICIT:
Common Stock
We were authorized to issue 20,000,000 shares of common stock, par value $0.0001
per share. The common stock was segregated into two classes: Class A and Class
B. Of the 20,000,000 shares of common stock, 19,970,000 shares were designated
as Class A and 30,000 was designated as Class B.
On August 22, 2008, we issued 75,000 of restricted common stock, valued at
$75,000, to three consultants (25,000 shares each) as compensation for services
they had provided to us. One of the consultants is an existing shareholder of
ours. We further issued 26,421 shares of restricted common stock to David
Cutler, our President and a director of ours, in full settlement of the our debt
to Mr. Cutler as at June 30, 2008 of $26,421.
At our shareholders meeting held in October 2006, our shareholders voted to
increase the authorized number of our shares of Class A common stock from
19,970,000 to 100,000,000.
Class A Common Stock
The holders of our Class A Common Stock are entitled to one vote for each share
held on record on each matter submitted to a vote of shareholders. Cumulative
voting for election of directors is not permitted. Holders of Class A Common
Stock have no preemptive rights or rights to convert their Class A Common Stock
into any other securities.
At our shareholders meeting held in October 2006, our shareholders voted to
authorize a reverse split of our common stock on a basis up to one for ten which
took effect on November 10, 2006. Consequently, all numbers of shares reported
on these financial statements have been restated to reflect the impact of this
one for ten reverse split.
At our shareholders meeting held in April 2008, our shareholders voted to
authorize a reverse split of our common stock on a basis up to one for three.
This reverse split has not been made effective as yet.
PREVIOUS PERIOD ISSUANCES
On September 11, 2007, we issued 100,000 shares of our common stock with a value
of $100,000 ($1.00 per share) in settlement of a disputed claim in connection
with our convertible subordinated loan notes, which were statute barred during
this period.
On September 25, 2007, we issued 50,000 shares of our restricted common stock in
exchange for cash of $50,000 ($1.00 per share).
On September 25, 2007, we issued 10,000 shares of our restricted common stock as
payment of consulting services valued at $10,000 ($1.00 per share).
15
On December 3, 2007, we issued 87,055 shares of our restricted common stock to
David J Cutler, one of our directors, in full and final settlement of the
$87,055 loan Mr. Cutler had outstanding with us, including accrued interest of
$5,634, in respect of services and funding he has provided to the us in the
period October 2006 through November 2007. The share issue was authorized by the
independent members of our Board of Directors.
Class B Common Stock
2,865 of these shares were issued in exchange for similar securities of LanXtra
as partial consideration for the purchase of LanXtra's business, and were
callable by us at $70 per share. The holders of Class B Common Stock had the
right to sell the Class B Common Stock to us at $70 per share or convert their
shares to equivalent units of our Class A Common Stock until March 31, 2000, at
which time no holder of Class B Common Stock had exercised the put option. On
that date, pursuant to our Articles of Incorporation, (i) each share of Class B
Common Stock terminated; (ii) our authority to issue Class B Common Stock
terminated; and (iii) the only other Class of Common Stock, which had until that
time been designated as Class A Common Stock, was designated as Common Stock.
Stock Options
Effective March 19, 1999, we adopted a stock option plan (the "Plan"). The Plan
provides for grants of incentive stock options, nonqualified stock options and
restricted stock to designated employees, officers, directors, advisors and
independent contractors. The Plan authorized the issuance of up to 75,000 shares
of Class A Common Stock. Under the Plan, the exercise price per share of a
non-qualified stock option must be equal to at least 50% of the fair market
value of the common stock at the grant date, and the exercise price per share of
an incentive stock option must equal the fair market value of the common stock
at the grant date.
The following table summarizes stock option activity under the Plan:
Under the Stock Option Plan: Other Grants:
------------------------------------------- --------------------
Granted to Granted to
Non-Employees Non-Employees
-------------------- -------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------- -------- -------- --------
Outstanding at December 31, 2007 2,000 $45.00 - -
Granted - - - -
Exercised - - - -
Canceled - - - -
--------- --------- ----------- ----------
Outstanding at September 30, 2008 2,000 $45.00 - -
========= ========= =========== ==========
Exercisable at September 30, 2008 2,000 $45.00 - -
========= ========= =========== ==========
Exercisable at December 31, 2007 2,000 $45.00 - -
========= ========= =========== ==========
16
13. INCOME TAXES
We had losses since our Inception, and therefore were not subject to federal or
state income taxes. We have accumulated tax losses available for carryforward in
excess $17 million. The carryforward is subject to examination by the tax
authorities and expires at various dates through the year 2064. The Tax Reform
Act of 1986 contains provisions that may limit the NOL carryforwards available
for use in any given year upon the occurrence of certain events, including
significant changes in ownership interest. Consequently following the issue more
than 50% of our total authorized and issued share capital in September 2006 to
Mr. Cutler, one of our directors, our ability to use these losses is
substantially restricted by the impact of section 382 of the Internal Revenue
Code.
14. SUBSEQUENT EVENTS
On October 6, 2008, we filed preliminary Schedule 14a prior to calling a special
meeting of shareholders to facilitate our reincorporation in Delaware.
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto and the other financial information
included elsewhere in this report. This discussion contains forward-looking
statements that involve risks and uncertainties. We believe that our
expectations are based on reasonable assumptions within the bounds of our
knowledge of our business and operations: there can be no assurance that actual
results will not differ materially from our expectations. Such forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated, including but not limited
to, our ability to reach satisfactorily negotiated settlements with our
outstanding creditors, raise debt and/or equity to fund negotiated settlements
with our creditors and to meet our ongoing operating expenses and merge with
another entity with experienced management and opportunities for growth in
return for shares of our common stock to create value for our shareholders. You
are urged to carefully consider these factors, as well as other information
contained in this Annual Report on Form 10-KSB and in our other periodic reports
and documents filed with the SEC.
OVERVIEW
We were incorporated in August 1998 in the State of Colorado. Effective February
16, 2001, we sold our entire business, and all of our assets, for the benefit of
our creditors under a Chapter 11 reorganization. We were subsequently dismissed
from the Chapter 11 reorganization, effective March 13, 2001, at which time the
last of our remaining directors resigned. On March 13, 2001, we had no business
or other source of income, no assets, no employees or directors, outstanding
liabilities of approximately $8.4 million and had terminated our duty to file
reports under securities law.
In March 2006, we appointed a new board of directors and are now focused on
reaching satisfactory negotiated settlements with our outstanding creditors,
bringing our financial records up to date, seeking a listing on the over the
counter bulletin board, raising debt and/or equity to fund negotiated
settlements with our creditors and to meet our ongoing operating expenses and
attempting to merge with another entity with experienced management and
opportunities for growth in return for shares of our common stock to create
value for our shareholders. There can be no assurance that this series of events
will be successfully completed.
Our business activities over the twelve month period ended December 31, 2007,
were focused on the settlement of our outstanding liabilities and the renewal of
and maintaining our SEC reporting status.
On July 25, 2007, we filed a Form 10-SB12G with the SEC seeking to become a
fully reporting company pursuant to Section 12 (g) of the Securities Exchange
Act of 1934. The filing became effective September 23, 2007, at which time we
succeeded in becoming a fully reporting company pursuant to Section 12 (g) of
the Securities Exchange Act of 1934.
In February 2008, we were re-listed on the OTC Bulletin Board and so are now
listed on both the Pink Sheets and the OTC Bulletin Board and trade under the
symbol "CCVR."
18
On April 29, 2008, we held our annual meeting of stockholders at which meeting
the majority of stockholders approved resolutions to re-elect Messrs. Cutler,
Whiting and Green as our directors, reincorporate the Company in Delaware,
authorize an up to 3 for 1 reverse split of our shares of common stock, change
our name to a name to be chosen at the discretion of the Board of directors and
to ratify the appointment of our auditor, Larry O'Donnell, CPA, PC.
On August 22, 2008, we issued 75,000 of restricted common stock, valued at
$75,000, to three consultants (25,000 shares each) as compensation for services
they had provided to us One of the consultants is an existing shareholder of
ours. We further issued 26,421 shares of restricted common stock to David
Cutler, our President and a director of ours, in full settlement of the our debt
to Mr. Cutler as at June 30, 2008 of $26,421.
On October 6, 2008, we filed preliminary Schedule 14a prior to calling a special
meeting of shareholders to facilitate our reincorporation in Delaware.
PLAN OF OPERATIONS
Our plan of operation is to reach satisfactory negotiated settlements with our
outstanding creditors, obtain debt or equity finance to fund negotiated
settlements with our creditors and to meet our ongoing operating expenses, seek
a listing on the over the counter bulletin board and attempt to merge with
another entity with experienced management and opportunities for growth in
return for shares of our common stock to create value for our shareholders.
There is can be no assurance that this series of events can be successfully
completed, that any such business will be identified or that any stockholder
will realize any return on their shares after such a transaction has been
completed. In particular there is no assurance that any such business will be
located or that any stockholder will realize any return on their shares after
such a transaction. Any merger or acquisition completed by us can be expected to
have a significant dilutive effect on the percentage of shares held by our
current stockholders. We believe we are an insignificant participant among the
firms which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns that have significantly
greater financial and personnel resources and technical expertise than we have.
In view of our limited financial resources and limited management availability,
we will continue to be at a significant competitive disadvantage compared to our
competitors.
General Business Plan
- --------------------------------
We intend to seek, investigate and, if such investigation warrants, acquire an
interest in business opportunities presented to us by persons or firms which
desire to seek the advantages of an issuer who has complied with the Securities
Act of 1934 (the "1934 Act"). We will not restrict our search to any specific
business, industry or geographical location, and we may participate in business
ventures of virtually any nature. This discussion of our proposed business is
purposefully general and is not meant to be restrictive of our unlimited
discretion to search for and enter into potential business opportunities. We
anticipate that we may be able to participate in only one potential business
venture because of our lack of financial resources.
19
We may seek a business opportunity with entities which have recently commenced
operations, or that desire to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service, or for other corporate purposes. We may acquire assets
and establish wholly owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries.
We expect that the selection of a business opportunity will be complex. Due to
general economic conditions, rapid technological advances being made in some
industries and shortages of available capital, we believe that there are
numerous firms seeking the benefits of an issuer who has complied with the 1934
Act. Such benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all stockholders and other factors.
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. We have, and will continue to have, essentially
no assets to provide the owners of business opportunities. However, we will be
able to offer owners of acquisition candidates the opportunity to acquire a
controlling ownership interest in an issuer who has complied with the 1934 Act
without incurring the cost and time required to conduct an initial public
offering.
The analysis of new business opportunities will be undertaken by, or under the
supervision of, our Board of Directors. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through present associations of our director, professional advisors or
by our stockholders. In analyzing prospective business opportunities, we will
consider such matters as (i) available technical, financial and managerial
resources; (ii) working capital and other financial requirements; (iii) history
of operations, if any, and prospects for the future; (iv) nature of present and
expected competition; (v) quality, experience and depth of management services;
(vi) potential for further research, development or exploration; (vii) specific
risk factors not now foreseeable but that may be anticipated to impact the
proposed activities of the company; (viii) potential for growth or expansion;
(ix) potential for profit; (x) public recognition and acceptance of products,
services or trades; (xi) name identification; and (xii) other factors that we
consider relevant. As part of our investigation of the business opportunity, we
expect to meet personally with management and key personnel. To the extent
possible, we intend to utilize written reports and personal investigation to
evaluate the above factors.
We will not acquire or merge with any company for which audited financial
statements cannot be obtained within a reasonable period of time after closing
of the proposed transaction.
Acquisition Opportunities
- ------------------------------------
In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture, or licensing
agreement with another company or entity. We may also acquire stock or assets of
an existing business. Upon consummation of a transaction, it is probable that
our present management and stockholders will no longer be in control of us. In
addition, our sole director may, as part of the terms of the acquisition
20
transaction, resign and be replaced by new directors without a vote of our
stockholders, or sell his stock in us. Any such sale will only be made in
compliance with the securities laws of the United States and any applicable
state.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon exemption from registration under application federal
and state securities laws. In some circumstances, as a negotiated element of the
transaction, we may agree to register all or a part of such securities
immediately after the transaction is consummated or at specified times
thereafter. If such registration occurs, it will be undertaken by the surviving
entity after it has successfully consummated a merger or acquisition and is no
longer considered an inactive company. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
our securities may have a depressive effect on the value of our securities in
the future. There is no assurance that such a trading market will develop.
While the actual terms of a transaction cannot be predicted, it is expected that
the parties to any business transaction will find it desirable to avoid the
creation of a taxable event and thereby structure the business transaction in a
so-called "tax-free" reorganization under Sections 368(a)(1) or 351 of the
Internal Revenue Code (the "Code"). In order to obtain tax-free treatment under
the Code, it may be necessary for the owner of the acquired business to own 80%
or more of the voting stock of the surviving entity. In such event, our
stockholders would retain less than 20% of the issued and outstanding shares of
the surviving entity. This would result in significant dilution in the equity of
our stockholders.
As part of our investigation, we expect to meet personally with management and
key personnel, visit and inspect material facilities, obtain independent
analysis of verification of certain information provided, check references of
management and key personnel, and take other reasonable investigative measures,
to the extent of our limited financial resources and management expertise. The
manner in which we participate in an opportunity will depend on the nature of
the opportunity, the respective needs and desires of both parties, and the
management of the opportunity.
With respect to any merger or acquisition, and depending upon, among other
things, the target company's assets and liabilities, our stockholders will in
all likelihood hold a substantially lesser percentage ownership interest in us
following any merger or acquisition. The percentage ownership may be subject to
significant reduction in the event we acquire a target company with assets and
expectations of growth. Any merger or acquisition can be expected to have a
significant dilutive effect on the percentage of shares held by our
stockholders.
We will participate in a business opportunity only after the negotiation and
execution of appropriate written business agreements. Although the terms of such
agreements cannot be predicted, generally we anticipate that such agreements
will (i) require specific representations and warranties by all of the parties;
(ii) specify certain events of default; (iii) detail the terms of closing and
the conditions which must be satisfied by each of the parties prior to and after
such closing; (iv) outline the manner of bearing costs, including costs
associated with the Company's attorneys and accountants; (v) set forth remedies
on defaults; and (vi) include miscellaneous other terms.
As stated above, we will not acquire or merge with any entity which cannot
provide independent audited financial statements within a reasonable period of
time after closing of the proposed transaction. If such audited financial
21
statements are not available at closing, or within time parameters necessary to
insure our compliance within the requirements of the 1934 Act, or if the audited
financial statements provided do not conform to the representations made by that
business to be acquired, the definitive closing documents will provide that the
proposed transaction will be voidable, at the discretion of our present
management. If such transaction is voided, the definitive closing documents will
also contain a provision providing for reimbursement for our costs associated
with the proposed transaction.
Competition
- -----------------
We believe we are an insignificant participant among the firms which engage in
the acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than we have. In view of our limited
financial resources and limited management availability, we will continue to be
at a significant competitive disadvantage compared to our competitors.
Investment Company Act 1940
- -----------------------------------------
Although we will be subject to regulation under the Securities Act of 1933, as
amended, and the 1934 Act, we believe we will not be subject to regulation under
the Investment Company Act of 1940 (the "1940 Act") insofar as we will not be
engaged in the business of investing or trading in securities. In the event we
engage in business combinations that result in us holding passive investment
interests in a number of entities, we could be subject to regulation under the
1940 Act. In such event, we would be required to register as an investment
company and incur significant registration and compliance costs. We have
obtained no formal determination from the SEC as to our status under the 1940
Act and, consequently, any violation of the 1940 Act would subject us to
material adverse consequences. We believe that, currently, we are exempt under
Regulation 3a-2 of the 1940 Act.
Liquidity and Capital Resources
At September 30, 2008, we had no assets, no operating business or other source
of income, outstanding liabilities totaling $650,055 and a stockholder' deficit
of $650,055.
In our financial statements for the fiscal years ended December 31, 2007 and
2006, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2007 and 2006, 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. At December 31, 2007, we had a
working capital deficit of $584,998 and reported an accumulated deficit of
$17,357,458.
Consequently, we are now dependent on raising additional equity and/or debt to
fund any negotiated settlements with our outstanding creditors and meet our
ongoing operating expenses. There is no assurance that we will be able to raise
the necessary equity and, or, debt that we will need to be able to negotiate
acceptable settlements with our outstanding creditors or fund our ongoing
operating expenses.
22
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2007
Gain on Statute Barred Liabilities
During the three months ended September 30, 2007, we incurred a loss of $100,000
in respect of statute barred liabilities. We issued 100,000 shares of our common
stock, valued at $100,000, in settlement of a disputed claim in respect of our
convertible subordinated loan notes. No gain or loss on statute barred
liabilities was recognized in the three month ended September 30, 2008.
General and Administrative Expenses
During the three months ended September 30, 2008, we incurred $96,715 in general
and administrative expenses compared to $19,769 in the three months ended
September 30, 2007, an increase of $76,946. The increase was largely due to the
75,000 shares of restricted common stock, valued at $75,000, that we issued to
three consultants (25,000 shares each) as compensation for services they had
provided to us One of the consultants is an existing shareholder of ours.
Operating Profit (Loss)
In the three months ended September 30, 2008, we recognized an operating loss of
$96,715 compared to an operating loss of $119,769 in the three months ended
September 30, 2007, an increase of $23,054, due to the factors as discussed
above.
Interest Expense
We recognized an interest expense of $460 during the three months ended
September 30, 2008, compared to $1,477 during the three months ended September
30, 2007, a decrease of $1,017. This interest expense relates to the interest
accrued on the loan made to us by one of our directors. The decrease in the
amount of interest between the two periods reflects the decrease in the average
principal balance of the loan made to us by one of our directors between the two
periods following the capitalization of $87,055 and $26,421 of the outstanding
balance in December 2007 and August 2008, respectively.
Profit / (Loss) before Income Tax
In the three months ended September 30, 2008, we recognized a loss before income
tax of $97,175 compared to a loss before income tax of $119,769 in the three
months ended September 30, 2007, an increase of $22,594 due to the factors
discussed above.
Provision for Income Taxes
No provision for income taxes was required in the three months ended September
30, 2008 or 2007 as we generated tax losses in these periods.
23
Net Profit / (Loss) and Comprehensive Profit / (Loss)
In the three months ended September 30, 2008, we recognized a net loss of
$97,175 compared to a net loss of $119,769 in the three months ended September
30, 2007, an increase of $22,594 due to the factors discussed above.
The comprehensive loss was identical to the net loss in both the three months
ended September 30, 2008 and 2007.
NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2007
Gain on Statute Barred Liabilities
During the nine months ended September, 2008, we recognized no gain or loss on
statute barred liabilities compared to a gain of $7,229,922 in the nine months
ended September 30, 2007, an increase of $7,229,922.
During the nine months ended September 30, 2007, outstanding liabilities, which
had been incurred, prior to our dismissal from our Chapter 11 reorganization,
were statute barred under the state laws of Arizona, Colorado, Georgia,
Massachusetts, Minnesota, Mississippi, New Jersey, New York, Oregon, South
Dakota, Tennessee, Washington, and Wisconsin and we recognized a gain on these
statute barred liabilities of 7,329.922. This gain was offset by a $100,000 loss
on statute barred liabilities when we issued 100,000 shares of our common stock,
valued at $100,000, in settlement of a disputed claim in respect of our
convertible subordinated loan notes.
No outstanding liabilities became statute barred in the nine months ended
September 30, 2008.
General and Administrative Expenses
During the nine months ended September 30, 2008, we incurred $165,630 in general
and administrative expenses compared to $62,348 in the nine months ended
September 30, 2007, an increase of $103,282. $75,000 of this increase was due to
the 75,000 shares of restricted common stock, valued at $75,000, that we issued
to three consultants (25,000 shares each) as compensation for services they had
provided to us One of the consultants is an existing shareholder of ours. The
balance of the increase was largely due legal fees and other costs incurred
during the nine months ended June 30, 2008 in becoming a fully reporting company
pursuant to Section 12 (g) of the Securities Exchange Act of 1934, being
re-listed on the OTC Bulletin Board and holding a shareholders' meeting in April
2008. No such legal fees or other costs were incurred in then nine months ended
September 30, 2007.
Operating Profit / (Loss)
In the nine months ended September 30, 2008, we recognized an operating loss of
$(165,630) compared to an operating profit of $7,167,574 in the nine months
ended September 30, 2007, a decrease of $7,333,204 due to the factors as
discussed above.
24
Interest Expense
We recognized an interest expense of $848 during the nine months ended September
30, 2008, compared to $3,169 during the nine months ended September30, 2007, a
decrease of $2,321. This interest expense relates to the interest accrued on the
loan made to us by one of our directors. The decrease in the amount of interest
between the two periods reflects the decrease in the average principal balance
of the loan made to us by our director between the two periods following the
capitalization of $87,055 and $26,421 of the outstanding balance in December
2007 and August 2008 respectively .
Profit / (Loss) before Income Tax
In the nine months ended September 30, 2008, we recognized a loss before income
tax of $(166,479) compared to a profit before income tax of $7,164,405 in the
nine months ended September 30, 2007, a decrease of $7,330,884 due to the
factors discussed above in connection with the decreases in operational
expenses.
Provision for Income Taxes
No provision for income taxes was required in the nine months ended June 30,
2008 as we generated tax losses in the period. No provision for income taxes was
required in the nine months ended September 30, 2007, as we had sufficient carry
forward tax losses to offset the profits arising in the period.
Net Profit / (Loss) and Comprehensive Profit / (Loss)
In the nine months ended September 30, 2008, we recognized a net loss of
$166,479 compared to a net profit of $7,164,405 in the nine months ended
September 30, 2007, a decrease of $7,330,884 due to the factors discussed
previously.
The comprehensive profit (loss) was identical to the net profit (loss) in both
the nine months ended September 30, 2008 and 2007.
CASH FLOW INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2007
At September 30, 2008, we had no assets, no operating business or other source
of income, outstanding liabilities totaling $650,055 and a stockholder' deficit
of $650,055.
In our financial statements for the fiscal years ended December 31, 2007 and
2006, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2007 and 2006, 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. At December 31, 2007, we had a
working capital deficit of $584,998 and reported an accumulated deficit of
$17,357,458.
Net cash used in operations in the nine months ended September 30, 2008, was
$47,312 compared to net cash used in operations in the nine months ended
September 30, 2007 of $65,556, a decrease of $18,244. In the nine months ended
September 30, 2008, our net loss, adjusted for non-cash items, resulted in a
negative cash flow of $91,479, which was partially offset by a positive cash
25
flow of $44,167 generated from the net movement in our operating assets and
liabilities. . In the nine months ended September 30, 2007, our net profit,
adjusted for non-cash items, resulted in a negative cash flow of $65,517 and the
net movement in our operating assets and liabilities resulted in further
negative cash flow of $39.
No cash was provided by or used in investing activities during the nine months
ended September 30, 2008.
Net cash provided by financing activities during the nine months ended September
30, 2008, was $41,333 compared to $105,176 during the nine months ended
September 30, 2007, a decrease of $63,846. During the nine months ended
September 30, 2008 $41,333 was provided to us by of our directors by way of
loan. This compares with the nine months ended September 30, 2007 $41,333 was
provided to us by of our directors by way of loan and we issued 50,000 shares of
our common stock for cash consideration of $50,000.
Consequently, we are now dependent on raising additional equity and/or debt to
fund any negotiated settlements with our outstanding creditors and meet our
ongoing operating expenses. There is no assurance that we will be able to raise
the necessary equity and/or debt that we will need to be able to negotiate
acceptable settlements with our outstanding creditors or fund our ongoing
operating expenses.
ITEM 3. QUANTATIVE 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 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in reports that we file or submit
under the 1934 Act is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and
forms.
ITEM 4T. CONTROLS AND PROCEDURES
Management's Quarterly Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of our assets;
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(ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation
(iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended September
30, 2008. We believe that internal control over financial reporting is
effective. We have not identified any, current material weaknesses considering
the nature and extent of our current operations and any risks or errors in
financial reporting under current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
There have been no changes in the issuer's internal control over financial
reporting identified in connection with the evaluation required by paragraph (d)
of Rule 240.15d-15 that occurred during the issuer's last fiscal quarter that
has materially affected, or is reasonable likely to materially affect, the
issuer's internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No legal proceedings are pending or threatened to the best of our knowledge.
ITEM 2. CHANGES IN SECURITIES
The Company made the following unregistered sales of its securities from July1,
2008 through September 30, 2008.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
- ----------------- ------------------------- -------------- ------------------------------- ---------------------------------
8/22/08 Common Stock 25,000 Consulting Services Business Associate
- ----------------- ------------------------- -------------- ------------------------------- ---------------------------------
8/22/08 Common Stock 25,000 Consulting Services Business Associate
- ----------------- ------------------------- -------------- ------------------------------- ---------------------------------
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DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
- ----------------- ------------------------- -------------- ------------------------------- ---------------------------------
8/22/08 Common Stock 25,000 Consulting Services Business Associate
- ----------------- ------------------------- -------------- ------------------------------- ---------------------------------
8/22/08 Common Stock 26,421 Payment of Debt of $26,421 Officer & Director
Exemption From Registration Claimed
All of the sales by the Company of its unregistered securities were made by the
Company in reliance upon Section 4(2) of the Securities Act of 1933, as amended
(the "1933 Act"). All of the individuals and/or entities listed above that
purchased the unregistered securities were almost all existing shareholders, all
known to the Company and its management, through pre-existing business
relationships, as long standing business associates, and officers and directors.
All purchasers were provided access to all material information, which they
requested, and all information necessary to verify such information and were
afforded access to management of the Company in connection with their purchases.
All purchasers of the unregistered securities acquired such securities for
investment and not with a view toward distribution, acknowledging such intent to
the Company. All certificates or agreements representing such securities that
were issued contained restrictive legends, prohibiting further transfer of the
certificates or agreements representing such securities, without such securities
either being first registered or otherwise exempt from registration in any
further resale or disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are in default under the terms of certain capital and operating leases as
described in Note 7. Capital and Operating Leases in the Notes to Financial
Statements above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held an Annual Meeting of Stockholders on April 29, 2008, and the results of
the stockholder voting were as follows:
Resolution 1: To elect three (3) directors to hold office until the
next annual meeting of stockholders or until their respective
successors have been elected and qualified: Nominees David Cutler,
Wesley Whiting and Redgie Green:
David Cutler Wesley Whiting Redgie Green
FOR 1,673,753 1,807,553 1,795,053
WITHHOLD 146,300 12,500 12,500
Resolution 2: To consider and act upon a proposal to authorize the
Company to reincorporate in the State of Delaware:
FOR 1,820,053
AGAINST 0
ABSTAIN 0
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Resolution 3: To authorize a reverse split of the common stock issued
and outstanding on an up to one new share for three old shares basis:
FOR 1,581,090
AGAINST 146,652
ABSTAIN 92,311
Resolution 4: To authorize a change in the name of the Company to a new
name to be chosen in the discretion of the Board of Directors:
FOR 1,819,921
AGAINST 12
ABSTAIN 120
Resolution 5: To ratify the appointment of our auditors, Larry
O'Donnell, CPA, PC.
FOR 1,807,553
AGAINST 0
ABSTAIN 12,500
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
SIGNATURES
In accordance with the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONCORD VENTURES, INC.
Date: November 12, 2008 By: /s/ DAVID J. CUTLER
---------------------------------
David J Cutler
Chief Executive Officer, &
Chief Financial Officer
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