GOOD GAMING, INC. - Quarter Report: 2012 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[X]
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QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012
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OR
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 000-53949
HDS INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Nevada
(State of incorporation)
10 Dorrance Street, Suite 700
Providence, RI 02903
(Address of principal executive offices)
(401) 400-0028
(Registrant’s telephone number)
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days.
YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES [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 the definitions of “large accelerated filer, “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large Accelerated Filer
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Accelerated Filer
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Non-accelerated Filer
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Smaller Reporting Company
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[X]
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(Do not check if smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 5, 2012, there were 347,380,000 shares of the registrant’s $0.001 par value common stock issued and outstanding.
HDS INTERNATIONAL CORP.
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Page
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FINANCIAL STATEMENTS.
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3
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3
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4
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5
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6
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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11
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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13
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CONTROLS AND PROCEDURES.
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13
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RISK FACTORS.
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13
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OTHER INFORMATION.
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13
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EXHIBITS.
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14
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15
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HDS International Corp.
(formerly GMV Wireless, Inc.)
(A Development Stage Company)
(expressed in U.S. dollars)
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September 30,
2012
$
(unaudited)
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December 31,
2011
$
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ASSETS
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Current Assets
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Cash
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15,199
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320,178
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Prepaid expenses and deposits
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–
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7,575
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Total Assets
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15,199
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327,753
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
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Current Liabilities
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Accounts payable and accrued liabilities
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49,008
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6,509
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Accounts payable and accrued liabilities – related party
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38,407
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12,137
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Due to related parties – in default
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300,000
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300,000
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Total Current Liabilities
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387,415
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318,646
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Convertible debentures, net of unamortized discount of $4,363 and $12,669, respectively
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555,637
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487,331
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Total Liabilities
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943,052
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805,977
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Stockholders’ Equity (Deficit)
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Preferred Stock
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Authorized: 25,000,000 preferred shares, with a par value of $0.001 per share
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Issued and outstanding: nil preferred shares
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–
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–
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Class A Preferred Stock
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Authorized: 25,000,000 preferred shares, with a par value of $0.001 per share
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Issued and outstanding: 7,500,000 preferred shares
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7,500
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7,500
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Common Stock
Authorized: 2,000,000,000 common shares, with a par value of $0.001 per share
Issued and outstanding: 347,380,000 common shares
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347,380
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347,380
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Additional paid-in capital
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(345,427)
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(345,427)
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Equity (Deficit) accumulated during the development stage
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(937,306)
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(487,677)
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Total Stockholders’ Equity (Deficit)
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(927,853)
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(478,224)
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Total Liabilities and Stockholders’ Equity (Deficit)
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15,199
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327,753
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(The accompanying notes are an integral part of these financial statements)
HDS International Corp.
(formerly GMV Wireless, Inc.)
(A Development Stage Company)
(expressed in U.S. dollars)
(unaudited)
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For the Three
Months Ended
September 30,
2012
$
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For the Three
Months Ended
September 30,
2011
$
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For the Nine
Months Ended
September 30,
2012
$
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For the Nine
Months Ended
September 30,
2011
$
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Accumulated from
November 3, 2008
(date of inception)
to September 30,
2012
$
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Revenue
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–
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–
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–
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–
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–
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Operating Expenses
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Consulting fees
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105,000
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–
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309,000
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20,000
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489,500
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General and administrative
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18,773
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19,049
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56,376
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21,286
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93,463
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Management fees
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–
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5,000
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–
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20,000
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43,727
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Professional fees
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19,834
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9,556
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40,623
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35,556
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145,229
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Transfer agent fees
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569
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890
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670
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2,508
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18,608
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Total Operating Expenses
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144,176
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34,495
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406,669
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99,350
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790,527
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Loss Before Other Income (Expenses)
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(144,176)
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(34,495)
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(406,669)
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(99,350)
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(790,527)
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Other Expenses (Income)
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Accretion expense
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2,805
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1,342
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8,306
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1,342
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12,437
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Loss (gain) on settlement of debt
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–
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(240,268)
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–
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(240,268)
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(24,552)
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Impairment of intangible assets
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–
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–
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–
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–
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92,538
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Interest expense
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12,246
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7,604
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34,654
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14,642
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66,356
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Total Other Expenses (Income)
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15,051
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(231,322)
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42,960
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224,284
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146,779
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Net Income (Loss) for the Period
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(159,227)
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196,827
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(449,629)
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124,934
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(937,306)
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Net Income (Loss) Per Share, Basic and Diluted
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–
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–
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–
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–
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Weighted Average Shares Outstanding
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347,380,000
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442,790,000
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347,380,000
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505,348,205
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(The accompanying notes are an integral part of these financial statements)
HDS International Corp.
(formerly GMV Wireless, Inc.)
(A Development Stage Company)
(expressed in U.S. dollars)
(unaudited)
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For the Nine
Months Ended
September 30,
2012
$
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For the Nine
Months Ended
September 30,
2011
$
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Accumulated from
November 3, 2008
(date of inception)
to September 30,
2012
$
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Operating Activities
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Net income (loss)
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(449,629)
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124,934
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(937,306)
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Adjustment to reconcile net income (loss) to cash used in operating activities:
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Accretion expense
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8,306
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1,342
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12,437
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Gain on settlement of debt
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–
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(240,268)
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(24,552)
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Impairment of intangible asset
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–
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–
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92,538
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Stock-based compensation
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–
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–
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2,227
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Shares issued for management fees
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–
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–
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7,000
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Changes in operating assets and liabilities:
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Prepaid expense and deposits
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7,575
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(9,542)
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–
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Accounts payable and accrued liabilities
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42,499
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6,347
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76,560
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Accounts payable and accrued liabilities - related
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26,270
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4,007
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38,407
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Due to related parties
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–
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–
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11,965
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Net Cash Used in Operating Activities
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(364,979)
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(113,180)
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(720,724)
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Investing Activities
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Acquisition of intangible assets
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–
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–
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(10,000)
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Net Cash Used by Investing Activities
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–
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–
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(10,000)
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Financing activities
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Proceeds from loan payable
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60,000
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710,600
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709,600
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Repayment of loan payable
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–
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(149,449)
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(149,449)
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Proceeds from related parties
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–
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–
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2,649
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Repayment to related parties
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–
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–
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(25,000)
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Capital contribution
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–
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–
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200,600
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Proceeds from the issuance of common stock
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–
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–
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7,523
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Net Cash Provided by Financing Activities
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60,000
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561,151
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745,923
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Increase (decrease) in Cash
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(304,979)
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447,971
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15,199
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Cash, Beginning of Period
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320,178
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33,034
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–
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Cash, End of Period
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15,199
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481,005
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15,199
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Supplemental Disclosures
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Interest paid
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–
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–
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–
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Income tax paid
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–
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–
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–
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Non-cash investing and financing activities
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Forgiveness of related party debt
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–
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–
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2,649
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Issuance of common shares for acquisition of assets
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–
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250,000
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250,000
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Issuance of preferred shares for acquisition of assets
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–
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7,500
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7,500
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Issuance of note payable for acquisition of assets
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–
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325,000
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325,000
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(The accompanying notes are an integral part of these financial statements)
HDS International Corp.
(formerly GMV Wireless, Inc.)
(A Development Stage Company)
(expressed in U.S. dollars)
1. Nature of Operations and Continuance of Business
HDS International Corp. (formerly GMV Wireless, Inc.) (the “Company”) was incorporated on November 3, 2008 under the laws of the State of Nevada. A substantial portion of the Company’s activities has involved developing a business plan and establishing contacts and visibility in the marketplace and the Company has not generated any revenue to date. The Company plans to engage in the business of providing renewable energy and eco-sustainability solutions based on its licensed technologies.
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated no revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As of September 30, 2012, the Company had a working capital deficit of $372,216 and an accumulated deficit of $937,306. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Summary of Significant Accounting Policies
a) Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is December 31.
b) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of September 30, 2012 and December 31, 2011, the Company had no cash equivalents.
d) Beneficial Conversion Features
From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.
HDS International Corp.
(formerly GMV Wireless, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
e) Development Stage Company
The Company is currently considered a development stage company as defined by ASC 915-10-05. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date. An entity remains in the development stage until such time as, among other factors, revenues have been realized. To date, the development stage of the Company’s operations consists of developing the business model and marketing concepts.
f) Basic and Diluted Net Loss Per Share
The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
g) Interim Financial Statements
These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
h) Comprehensive Loss
ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at September 30, 2012, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
i) Financial Instruments
ASC 820, “Fair Value Measurements”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
HDS International Corp.
(formerly GMV Wireless, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s balance sheet as at September 30, 2012 as follows:
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Fair Value Measurements Using
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Quoted prices in
active markets for
identical instruments
(Level 1)
$
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Significant other
observable inputs
(Level 2)
$
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Significant
unobservable inputs
(Level 3)
$
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Balance,
September 30, 2012
$
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Convertible debenture
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–
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–
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555,637
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555,637
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The carrying values of all of our other financial instruments, which include accounts receivable, accounts payable and accrued liabilities, and due to related parties approximate their current fair values because of their nature and respective maturity dates or durations.
j) Recent Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The adoption of this guidance did not have a material impact on the Company’s financial statements.
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 did not have a material impact on the Company’s financial statements.
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HDS International Corp.
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(formerly GMV Wireless, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
k) Recent Accounting Pronouncements (continued)
In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s financial statements.
In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The adoption of this guidance did not have a material impact on the Company’s financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3. Related Party Transactions
a) As at September 30, 2012, the Company owes $334,657 (December 31, 2011 - $312,137) to a company controlled by officers and directors of the Company. The amounts owing are unsecured, bears interest at 10% per annum, and due by August 15, 2012. As at September 30, 2012, the Company has recorded accrued interest of $34,657 included in accounts payable and accrued liabilities – related party. As at September 30, 2012, the amount owed and the accrued interest are in default pursuant to the agreement.
b) As of September 30, 2012, the Company has incurred $32,250 (December 31, 2011 - $9,000) to the President and CEO of the Company for consulting services. As at September 30, 2012 the Company recorded a related party accounts payable of $3,750 included in accounts payable and accrued liabilities – related party.
4. Convertible Debenture
a) In August 2011, the Company issued a convertible debenture to a non-related party for $500,000, comprised of payments of $100,000 on August 19, 2011, $150,000 on August 26, 2011, and $250,000 on September 6, 2011. Under the terms of the note, the amount owing is unsecured, due interest of 3% per annum, and due on or before February 19, 2013. As at September 30, 2012, accrued interest of $16,808 has been recorded in accrued liabilities.
The convertible debenture also grants the right of the Company to convert its debt into common shares of the Company at any time at a conversion price of $0.25 per share. For the first payment of $100,000 on August 19, 2011, the Company recorded beneficial conversion of $16,800 relating to the number of convertible shares (400,000 shares) and the excess of the fair value of the share price and the conversion price. No beneficial conversion was recorded for the $150,000 and $250,000 payments, as the fair value of the Company’s share prices was less than the conversion price on the date of issuance. For the period ended September 30, 2012, the Company recorded accretion expense of $8,306.
HDS International Corp.
(formerly GMV Wireless, Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
4. Convertible Debenture (continued)
b) On June 29, 2012, the Company issued three separate convertible drawdown note payables of $50,000 each, with $20,000 of each note being received on June 29, 2012 and the remaining $30,000 for each note to be received on or before August 3, 2012. Under the terms of the note, the amount owing is unsecured, due interest of 6% per annum, and due on or before December 31, 2013. As at September 30, 2012, the second instalments for each of the notes had not been received and are in default in accordance with the agreements. As at September 30, 2012, accrued interest of $921 has been recorded in accrued liabilities.
The convertible debentures also grant the right of the Holder and the Company to convert its debt into common shares of the Company at any time at a conversion price of $0.01 per share. No beneficial conversion feature was recorded for the, as the fair value of the Company’s share prices was less than the conversion price on the date of issuance.
5. Commitments
a) On October 12, 2011, the Company entered into a verbal consulting agreement with a non-related party whereby the Company will pay a monthly consulting fee for services provided in the amounts of $3,000. The agreement is for a one month term automatically renewing in each successive month unless earlier terminated. On July 18, 2012, the Board of Directors reviewed the consulting agreement and authorized an increase to the monthly consulting fee from $3,000 to $3,750 per month beginning July 2012. During the nine months ended September 30, 2012, the Company incurred $29,250 in consulting fees relating to this agreement.
b) On October 12, 2011, the Company entered into a consulting agreement with a non-related party whereby the Company will pay a monthly consulting fee for services provided in the amounts of $27,500. The agreement is for a one month term automatically renewing in each successive month unless earlier terminated. During the nine month period ended September 30, 2012, the Company incurred $247,500 in consulting fees relating to this agreement.
c) On October 12, 2011, the Company entered into a consulting agreement with the President and CEO of the Company whereby the Company will pay a monthly consulting fee for services provided in the amounts of $3,000. The agreement is for a one month term automatically renewing in each successive month unless earlier terminated. On June 10, 2012, the Board of Directors authorized an increase to the monthly consulting fee from $3,000 to $6,000 per month beginning June 2012. On July 18, 2012, the Board of Directors reviewed the consulting agreement and adjusted the monthly consulting fee to $3,750 beginning July 2012. During the nine months ended September 30, 2012, the Company incurred $32,250 in consulting fees relating to this agreement.
6. Subsequent Events
We have evaluated subsequent events through the date of issuance of the financial statements, and did not have any material recognizable subsequent events after September 30, 2012.
Forward Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
We are considered a start-up corporation. Our auditors have issued a going concern opinion on the financial statements for the year ended December 31, 2011.
RESULTS OF OPERATIONS
Working Capital
|
|
September 30, 2012
$
|
December 31, 2011
$
|
|
Current Assets
|
15,199
|
327,753
|
|
Current Liabilities
|
387,415
|
318,646
|
|
Working Capital (Deficit)
|
(372,216)
|
9,107
|
Cash Flows
|
|
September 30, 2012
$
|
September 30, 2011
$
|
|
Cash Flows from (used in) Operating Activities
|
(364,979)
|
(113,180)
|
|
Cash Flows from (used in) Financing Activities
|
60,000
|
561,151
|
|
Net Increase (decrease) in Cash During Period
|
(304,979)
|
447,971
|
Operating Revenues
We have not generated any revenues since inception.
Operating Expenses and Net Loss
Operating expenses for the three months ended September 30, 2012 were $144,176 compared with $34,495 for the three months ended September 30, 2011. The increase in operating expenses was attributed to an increase in, professional fees of $10,278 and consulting expenses of $105,000 offset by decrease in general and administrative expenses of $276 for day-to-day operating costs, transfer agent fees of $321 and management fees of $5,000. For the nine months ended September 30, 2012, the Company incurred operating expenses of $406,669 compared with $99,350 for the nine months ended September 30, 2011. The increase of $307,319 is attributed to an increase of $289,000 of consulting fees, $5,067 in professional fees and $35,090 of general and administrative expenses offset by a decrease of $20,000 of management fees, and $1,838 of transfer agent fees as there was a change in management during the period.
During the nine months ended September 30, 2012, the Company recorded a net loss of $449,629 compared with net income of $124,934 for the nine months ended September 30, 2011. In addition to the above, the Company incurred an increase of $20,012 of interest expense relating to debt balances and accretion expense of $6,964 for the fair value of the beneficial conversion feature on the convertible note issued in August 2011 offset by a decrease of $240,268 in gain on settlement of debt.
Liquidity and Capital Resources
As at September 30, 2012, the Company’s cash balance and total assets were $15,199 compared to cash balance of $320,178 and total assets of $327,753 as at December 31, 2011. The decrease in the cash balance was attributed to the use of cash during the period for day-to-day activities. The decrease in total assets was attributed to the decrease in cash noted above and the decrease in prepaid expenses and deposits of $7,575 relating to the amortization of prepaid insurance and membership costs.
As at September 30, 2012, the Company had total liabilities of $943,052 compared with total liabilities of $805,977 as at December 31, 2011. The increase in total liabilities is attributed to an increase of account payable and accrued liabilities of $68,769, $42,499 of which pertained to trade accounts payable and $26,270 pertained to related party accounts payable and accrued liabilities as well as an increase in the convertible debenture due to the accretion of the discount of the convertibility feature of $8,306 along with $60,000 of additional loan proceeds received.
As at September 30, 2012, the Company has a working capital deficit of $372,216 compared with working capital of $9,107 at December 31, 2011 with the decrease in the working capital attributed to the decrease of $304,979 in cash held to pay for day-to-day activities of the Company and an increase in accounts payable and accrued liabilities during the period and a decrease of $5,575 relating to the amortization of prepaid insurance and membership costs.
Cashflow from Operating Activities
During the nine months ended September 30, 2012, the Company used $364,979 of cash for operating activities compared to the use of $113,180 of cash for operating activities during the nine months ended September 30, 2011. The increase in the use of cash for operating activities was attributed to the fact that the Company incurred larger amounts for general and administrative costs for the period for day-to-day activities as well as an increase in consulting fees related to the renewable energy and eco-sustainable technologies owned.
Cashflow from Financing Activities
During the nine months ended September 30, 2012, the Company received $60,000 of proceeds from financing activities compared to $561,151 during the nine months ended September 30, 2011. The decrease in proceeds from financing activities was due to the fact that the Company was only able to raise $60,000 from the issuance of a note payable in the period ended September 30 2012, compared with $710,6000 of notes payable raised in the period ended September 30, 2011 which was offset by repayments on the loan payable of $149,449.
Subsequent Developments
None
Going Concern
We have not attained profitable operations and are dependent upon the continued financial support from our shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from our future business. These factors raise substantial doubt regarding our ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management 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 revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are not effective due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on April 16, 2012, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
On September 24, 2012, we announced we have entered into a research and development cooperation agreement with National Research Centre—“Kurchatov Institute” located in Moscow, Russia.
On September 25, 2012, we announced that the deposit transaction restriction (“deposit chill”), placed on our common stock by The Depository Trust Company (DTC) in January, has been lifted.
On September 28, 2012, we announced that the United States Patent & Trademark Office granted patent no. 8,197,857 “Method for Eliminating Carbon Dioxide from Waste Gases”, which we license.
On October 22, 2012, we announced the formation of a wholly-owned Canadian-based subsidiary, HDS Energy and Ecosystems NB, Ltd, headquartered in Saint John, New Brunswick, Canada.
ITEM 6. EXHIBITS.
|
Exhibit
|
Incorporated by reference
|
Filed
|
|||
|
Number
|
Description of Exhibit
|
Form
|
Date
|
Number
|
herewith
|
|
3.1
|
Articles of Incorporation.
|
S-1
|
3/24/09
|
3.1
|
|
|
3.2
|
Bylaws.
|
S-1
|
3/24/09
|
3.2
|
|
|
3.3
|
Amended and Restated Articles of Incorporation.
|
8-K
|
6/14/11
|
3.1a
|
|
|
3.4
|
Amended and Restated Articles of Incorporation.
|
8-K
|
8/17/11
|
3.1
|
|
|
10.1
|
Management Agreement between the Company and Mr. Mark Simon dated March 23, 2010.
|
10-K
|
4/07/10
|
10.1
|
|
|
10.2
|
Promissory Note issued to Newton Management Ltd. dated September 28, 2010.
|
8-K
|
10/08/10
|
10.1
|
|
|
10.3
|
Amended Management Agreement between the Company and Mr. Mark Simon dated October 1, 2010.
|
8-K
|
11/10/10
|
10.1
|
|
|
10.4
|
Investors Relations Services Agreement with Blue Chip IR dated October 1, 2010.
|
10-Q
|
11/15/10
|
10.3
|
|
|
10.5
|
Share Exchange Agreement with AmeriSure Pharmaceuticals LLC dated May 13, 2011.
|
8-K
|
5/16/11
|
10.1
|
|
|
10.6
|
Promissory Note to Amerisure Pharmaceuticals, LLC dated June 20, 2011.
|
8-K
|
6/29/11
|
10.1
|
|
|
10.7
|
Promissory Note to Serik Enterprises, Inc.
|
8-K
|
8/12/11
|
10.1
|
|
|
10.8
|
Settlement Agreement with Vail International Ltd.
|
8-K
|
8/12/11
|
10.2
|
|
|
10.9
|
Settlement Agreement with Newton Management Ltd.
|
8-K
|
8/12/11
|
10.3
|
|
|
10.10
|
Settlement Agreement with Mark Simon.
|
8-K
|
8/12/11
|
10.4
|
|
|
10.11
|
Settlement Agreement with Carrillo Huettel, LLC.
|
8-K
|
8/12/11
|
10.5
|
|
|
10.12
|
Asset Acquisition Agreement.
|
8-K
|
8/17/11
|
10.1
|
|
|
10.13
|
Promissory Note with Hillwinds Ocean Energy, LLC.
|
8-K
|
8/17/11
|
10.2
|
|
|
10.14
|
Settlement Agreement and General Mutual Release with Serik Enterprises, Inc.
|
10-Q
|
11/21/11
|
10.14
|
|
|
10.15
|
Draw Down Convertible Promissory Note.
|
10-Q
|
11/21/11
|
10.15
|
|
|
10.16
|
Intellectual Property License Agreement with Hillwinds Energy Development Corporation.
|
10-K
|
4/16/12
|
10.1
|
|
|
14.1
|
Code of Ethics.
|
10-K
|
3/29/11
|
||
|
31.1
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
X
|
|||
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
X
|
|||
|
99.1
|
Press Release dated September 24, 2012.
|
X
|
|||
|
99.2
|
Press Release dated September 25, 2012.
|
X
|
|||
|
99.3
|
Press Release dated September 28, 2012.
|
X
|
|||
|
99.4
|
Press Release dated October 22, 2012.
|
X
|
|||
|
101.INS
|
XBRL Instance Document.
|
X
|
|||
|
101.SCH
|
XBRL Taxonomy Extension – Schema.
|
X
|
|||
|
101.CAL
|
XBRL Taxonomy Extension – Calculations.
|
X
|
|||
|
101.LAB
|
XBRL Taxonomy Extension – Labels.
|
X
|
|||
|
101.PRE
|
XBRL Taxonomy Extension – Presentation.
|
X
|
|||
|
101.DEF
|
XBRL Taxonomy Extension – Definition.
|
X
|
|||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 19th day of November, 2012.
|
HDS INTERNATIONAL CORP.
|
||
|
(the “Registrant”)
|
||
|
BY:
|
TASSOS RECACHINAS
|
|
|
Tassos Recachinas
|
||
|
President
|
||
|
Exhibit
|
Incorporated by reference
|
Filed
|
|||
|
Number
|
Description of Exhibit
|
Form
|
Date
|
Number
|
herewith
|
|
3.1
|
Articles of Incorporation.
|
S-1
|
3/24/09
|
3.1
|
|
|
3.2
|
Bylaws.
|
S-1
|
3/24/09
|
3.2
|
|
|
3.3
|
Amended and Restated Articles of Incorporation.
|
8-K
|
6/14/11
|
3.1a
|
|
|
3.4
|
Amended and Restated Articles of Incorporation.
|
8-K
|
8/17/11
|
3.1
|
|
|
10.1
|
Management Agreement between the Company and Mr. Mark Simon dated March 23, 2010.
|
10-K
|
4/07/10
|
10.1
|
|
|
10.2
|
Promissory Note issued to Newton Management Ltd. dated September 28, 2010.
|
8-K
|
10/08/10
|
10.1
|
|
|
10.3
|
Amended Management Agreement between the Company and Mr. Mark Simon dated October 1, 2010.
|
8-K
|
11/10/10
|
10.1
|
|
|
10.4
|
Investors Relations Services Agreement with Blue Chip IR dated October 1, 2010.
|
10-Q
|
11/15/10
|
10.3
|
|
|
10.5
|
Share Exchange Agreement with AmeriSure Pharmaceuticals LLC dated May 13, 2011.
|
8-K
|
5/16/11
|
10.1
|
|
|
10.6
|
Promissory Note to Amerisure Pharmaceuticals, LLC dated June 20, 2011.
|
8-K
|
6/29/11
|
10.1
|
|
|
10.7
|
Promissory Note to Serik Enterprises, Inc.
|
8-K
|
8/12/11
|
10.1
|
|
|
10.8
|
Settlement Agreement with Vail International Ltd.
|
8-K
|
8/12/11
|
10.2
|
|
|
10.9
|
Settlement Agreement with Newton Management Ltd.
|
8-K
|
8/12/11
|
10.3
|
|
|
10.10
|
Settlement Agreement with Mark Simon.
|
8-K
|
8/12/11
|
10.4
|
|
|
10.11
|
Settlement Agreement with Carrillo Huettel, LLC.
|
8-K
|
8/12/11
|
10.5
|
|
|
10.12
|
Asset Acquisition Agreement.
|
8-K
|
8/17/11
|
10.1
|
|
|
10.13
|
Promissory Note with Hillwinds Ocean Energy, LLC.
|
8-K
|
8/17/11
|
10.2
|
|
|
10.14
|
Settlement Agreement and General Mutual Release with Serik Enterprises, Inc.
|
10-Q
|
11/21/11
|
10.14
|
|
|
10.15
|
Draw Down Convertible Promissory Note.
|
10-Q
|
11/21/11
|
10.15
|
|
|
10.16
|
Intellectual Property License Agreement with Hillwinds Energy Development Corporation.
|
10-K
|
4/16/12
|
10.1
|
|
|
14.1
|
Code of Ethics.
|
10-K
|
3/29/11
|
||
|
31.1
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
X
|
|||
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
X
|
|||
|
99.1
|
Press Release dated September 24, 2012.
|
X
|
|||
|
99.2
|
Press Release dated September 25, 2012.
|
X
|
|||
|
99.3
|
Press Release dated September 28, 2012.
|
X
|
|||
|
99.4
|
Press Release dated October 22, 2012.
|
X
|
|||
|
101.INS
|
XBRL Instance Document.
|
X
|
|||
|
101.SCH
|
XBRL Taxonomy Extension – Schema.
|
X
|
|||
|
101.CAL
|
XBRL Taxonomy Extension – Calculations.
|
X
|
|||
|
101.LAB
|
XBRL Taxonomy Extension – Labels.
|
X
|
|||
|
101.PRE
|
XBRL Taxonomy Extension – Presentation.
|
X
|
|||
|
101.DEF
|
XBRL Taxonomy Extension – Definition.
|
X
|
|||
-16-