GOOD GAMING, INC. - Quarter Report: 2013 June (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 JUNE 30, 2013
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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 August 14, 2013, there were 377,203,075 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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EXHIBITS.
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15
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HDS International Corp.
(A Development Stage Company)
(expressed in U.S. dollars)
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June 30,
2013
(unaudited)
$
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December 31,
2012
$
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ASSETS
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Current Assets
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Cash
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9,608
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12,650
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Prepaid expenses
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113
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–
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Total Current Assets
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9,721
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12,650
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Other Assets
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Deferred financing costs
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4,310
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–
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Total Assets
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14,031
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12,650
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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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295,360
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119,732
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Accounts payable and accrued liabilities – related parties
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114,121
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57,219
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Due to related parties
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300,000
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300,000
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Total Current Liabilities
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709,481
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476,951
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Non-Current Liabilities
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Convertible debenture, net of unamortized discount of $31,128
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1,372
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–
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Total Liabilities
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710,853
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476,951
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Stockholders’ Equity (Deficit)
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Preferred Stock
Authorized: 25,000,000 preferred shares, with a par value of $0.001 per share
Issued and outstanding: nil preferred shares
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–
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–
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Class A Preferred Stock
Authorized: 25,000,000 preferred shares, with a par value of $0.001 per share
Issued and outstanding: 7,500,000 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: 377,203,075 and 376,603,075 shares, respectively
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377,203
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376,603
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Additional paid-in capital
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321,775
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283,875
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Deficit accumulated during the development stage
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(1,403,300)
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(1,132,279)
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Total Stockholders’ Equity (Deficit)
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(696,822)
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(464,301)
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Total Liabilities and Stockholders’ Equity (Deficit)
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14,031
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12,650
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(The accompanying notes are an integral part of these consolidated financial statements)
HDS International Corp.
(A Development Stage Company)
(expressed in U.S. dollars)
(unaudited)
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For the Three
Months Ended
June 30,
2013
$
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For the Three
Months Ended
June 30,
2012
$
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For the Six
Months Ended
June 30,
2013
$
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For the Six
Months Ended
June 30,
2012
$
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Accumulated from
November 3, 2008
(date of inception)
to June 30,
2013
$
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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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102,750
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103,500
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214,500
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204,000
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806,750
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General and administrative
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442
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20,636
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3,103
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37,603
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100,838
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Management fees
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–
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–
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–
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–
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43,727
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Professional fees
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25,893
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12,289
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35,393
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20,789
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210,853
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Transfer agent fees
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82
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101
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251
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101
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18,859
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Total Operating Expenses
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129,167
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136,526
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253,247
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262,493
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1,181,027
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Loss Before Other Expenses (Income)
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(129,167)
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(136,526)
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(253,247)
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(262,493)
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(1,181,027)
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Other Expenses (Income)
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Accretion expense
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–
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2,758
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–
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5,501
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16,800
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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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10,377
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11,218
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17,774
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22,408
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94,017
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Loss (gain) on settlement of debt
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–
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–
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–
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–
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18,918
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Total Other Expenses (Income)
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10,377
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13,976
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17,774
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27,909
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222,273
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Net Loss for the Period
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(139,544)
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(150,502)
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(271,021)
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(290,402)
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(1,403,300)
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Net 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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377,203,075
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347,380,000
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376,885,045
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347,380,000
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(The accompanying notes are an integral part of these consolidated financial statements)
HDS International Corp.
(A Development Stage Company)
(expressed in U.S. dollars)
(unaudited)
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For the Six Months
Ended June 30,
2013
$
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For the Six Months
Ended June 30,
2012
$
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Accumulated from
November 3, 2008
(date of inception)
to June 30,
2013
$
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Operating Activities
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Net loss
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(271,021)
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(290,402)
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(1,403,300)
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Adjustment to reconcile net loss to cash used in operating activities:
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Accretion of debt discount
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1,372
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5,501
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18,172
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Amortization of deferred financing costs
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190
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–
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190
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Loss (gain) on settlement of debt
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–
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–
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18,918
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Impairment of intangible assets
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–
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–
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92,538
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Shares issued for management fees
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6,000
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–
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13,000
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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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Changes in operating assets and liabilities:
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Prepaid expense and deposits
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(113)
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6,708
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(113)
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Accounts payable and accrued liabilities
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175,628
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6,633
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342,967
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Accounts payable and accrued liabilities – related
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56,902
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14,959
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114,121
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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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(31,042)
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(256,601)
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(789,315)
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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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Deferred financing costs
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(4,500)
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–
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(4,500)
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Proceeds from convertible debenture
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32,500
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–
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32,500
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Proceeds from loan payable
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–
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60,000
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709,600
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Repayments of loan payable
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–
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–
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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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Repayments 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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42,523
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Net Cash Provided by Financing Activities
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28,000
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60,000
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808,923
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Change in Cash
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(3,042)
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(196,601)
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9,608
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Cash, Beginning of Period
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12,650
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320,178
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–
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Cash, End of Period
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9,608
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123,577
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9,608
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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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Debt discount due to beneficial conversion feature
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32,500
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–
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32,500
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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 to settle debt
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–
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–
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580,055
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Issuance of common shares for acquisition of assets
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–
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–
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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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–
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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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–
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325,000
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(The accompanying notes are an integral part of these consolidated financial statements)
HDS International Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
1. Nature of Operations and Continuance of Business
HDS International Corp. (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.
On June 11, 2012, HDS Energy and Ecosystems NB, Ltd., the Company’s wholly owned subsidiary, was incorporated in the Province of New Brunswick, Canada to manage the operations and other business development efforts.
Going Concern
These consolidated 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 June 30, 2013, the Company had a working capital deficiency of $699,760 and an accumulated deficit of $1,403,300. 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 consolidated 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) Principles of Consolidation
The consolidated financial statements for the periods ending June 30, 2013 and December 31, 2012 include the accounts of HDS International Corp. and HDS Energy and Ecosystems NB, Ltd., the Company’s wholly owned subsidiary effective June 11, 2012. All intercompany transactions and balances have been eliminated in consolidation.
b) Basis of Presentation
These consolidated 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.
c) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 long-lived assets, convertible debentures, 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.
d) 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 June 30, 2013 and December 31, 2012, the Company had no cash equivalents.
e) Intangible Assets
Intangible assets are carried at the purchased cost less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally from fifteen to twenty years.
HDS International Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
f) Impairment of Long-Lived Assets
Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
g) 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.
h) 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.
i) 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.
j) Interim Consolidated Financial Statements
These interim unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated 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.
k) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, Income Taxes, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
l) 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 June 30, 2013 and December 31, 2012, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
HDS International Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
m) Financial Instruments
ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, 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.
The carrying values of all of our other financial instruments, which include 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.
n) Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:
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Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
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·
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Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
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The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.
HDS International Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
n) Recent Accounting Pronouncements (continued)
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.
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. Convertible Debenture
On June 7, 2013, the Company entered into a $32,500 convertible debenture with a non-related party. Under the terms of the debenture, the amount is unsecured, bears interest at 8% per annum, and matures on December 7, 2014. The note is convertible into shares of common stock 180 days after the date of issuance (December 4, 2013) at a conversion rate of 50% of the average of the five lowest closing bid prices of the Company’s common stock for the thirty trading days ending one trading date prior to the date the conversion notice is sent by the holder to the Company. As at June 30, 2013, the Company recorded accrued interest of $164 (December 31, 2012 - $nil), which has been included in accounts payable and accrued liabilities.
In accordance with ASC 470-20, “Debt with Conversion and Other Options”, the Company recognized the intrinsic value of the embedded beneficial conversion feature of $32,500 as additional paid-in capital and an equivalent discount which will be charged to operations over the term of the convertible note. During the six months ended June 30, 2013, the Company had amortized $1,372 (December 31, 2012 - $nil) of the debt discount to interest expense. As at June 30, 2013, the carrying value of the debenture was $1,372 (December 31, 2012 - $nil).
4. Related Party Transactions
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a)
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As at June 30, 2013, the Company owes $300,000 (December 31, 2012 - $300,000) to a company controlled by officers and directors of the Company. The amount owing is unsecured, bears interest at 10% per annum, and due on demand. As at June 30, 2013, the Company has recorded accrued interest of $57,096 (December 31, 2012 - $42,219) which has been included in accounts payable and accrued liabilities – related parties.
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|
b)
|
As at June 30, 2013, the Company owes $18,725 (December 31, 2012 - $nil) to companies under common control by officers and directors of the Company which has been included in accounts payable and accrued liabilities – related parties. The amounts owing are unsecured, non-interest bearing, and due on demand.
|
|
c)
|
For the period ended June 30, 2013, the Company incurred $22,500 (December 31, 2012 - $43,500) to the President and CEO of the Company for consulting services. As at June 30, 2013, the Company owes $37,500 (December 31, 2012 - $15,000), which has been included in accounts payable and accrued liabilities – related parties. The amounts owing are unsecured, non-interest bearing, and due on demand.
|
|
d)
|
For the period ended June 30, 2013, the Company incurred $800 (December 31, 2012 - $nil) to the President and CEO of the Company for reimbursement of expenses which has been included in accounts payable and accrued liabilities – related parties.
|
5. Common Stock
On January 2, 2013, the Company issued 600,000 common shares with a fair value of $6,000 for consulting services. The fair value of the common shares was determined by using the closing trading price on the measurement date.
HDS International Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(expressed in U.S. dollars)
6. 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. On October 1, 2012, the Board of Directors reviewed the consulting agreement and adjusted the consulting fee from $3,750 to $3,000 per month beginning October 2012.
|
During the period ended June 30, 2013, the Company incurred $18,000 (December 31, 2012 - $38,250) in consulting fees relating to this agreement, of which $24,000 (December 31, 2012 - $6,000) is recorded in the account payable balance as at June 30, 2013.
|
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 period ended June 30, 2013, the Company incurred $165,000 (December 31, 2012 - $330,000) in consulting fees relating to this agreement, of which $241,000 (December 31, 2012 - $91,000) is recorded in the account payable balance as at June 30, 2013.
|
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 year ended June 30, 2013, the Company incurred $22,500 (December 31, 2012 - $43,500) in consulting fees relating to this agreement, of which $37,500 (December 31, 2012 - $15,000) is recorded in the account payable – related parties balance as at June 30, 2013.
|
d)
|
On January 2, 2013, the Company entered into a consulting agreement with The Holden Group, LLC (the “Consultant”) whereby the Company paid the Consultant $2,000 and issued 600,000 restricted common shares of the Company upon the execution of the agreement as well as pay $500 on each of the first, second and third month anniversaries of the agreement.
|
7. Subsequent Events
On July 15, 2013, the Company entered into a $27,500 convertible debenture with a non-related party. Under the terms of the debenture, the amount is unsecured, bears interest at 8% per annum, and matures on January 16, 2015. The note is convertible into shares of common stock 180 days after the date of issuance (January 11, 2014) at a conversion rate of 50% of the average of the five lowest closing bid prices of the Company’s common stock for the thirty trading days ending one trading date prior to the date the conversion notice is sent by the holder to the Company.
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, 2012.
RESULTS OF OPERATIONS
Working Capital
|
|
June 30,
2013
$
|
December 31,
2012
$
|
|
Current Assets
|
9,721
|
12,650
|
|
Current Liabilities
|
709,481
|
476,951
|
|
Working Capital (Deficit)
|
(699,760)
|
(464,301)
|
Cash Flows
|
|
June 30,
2013
$
|
June 30,
2012
$
|
|
Cash Flows from (used in) Operating Activities
|
(31,042)
|
(256,601)
|
|
Cash Flows from (used in) Financing Activities
|
28,000
|
60,000
|
|
Net Increase (decrease) in Cash During Period
|
(3,042)
|
(196,601)
|
Operating Revenues
We have not generated any revenues since inception.
Operating Expenses and Net Loss
Operating expenses for the three months ended June 30, 2013 were $129,167 compared with $136,526 for the three months ended June 30, 2012. The decrease in operating expenses was attributed to a decrease in consulting fees of $750, transfer again fees of 19 and general and administrative fees of $20,194 for day-to-day operating costs offset by an increase in professional fees of $13,604. For the six months ended June 30, 2013 the Company incurred operating expenses of $253,247 compared with $262,493 for the six months ended June 30, 2012. The decrease in operating expenses was attributed to a decrease in general and administrative fees of $34,500 for day-to-day operating costs offset by an increase in consulting fees of $10,500, professional fees of $14,604 and transfer agent fees of $150.
During the six months ended June 30, 2013, the Company recorded a net loss of $271,021 compared with net loss of $290,402 for the six months ended June 30, 2012. In addition to the above, the Company incurred a decrease of $4,634 of interest expense relating to debt balances and $5,501 of accretion expense for the fair value of the beneficial conversion feature on the convertible note issued in August 2011 which was fully accreted during fiscal 2012.
Liquidity and Capital Resources
As at June 30, 2013, the Company’s cash balance was $9,608 and total assets was $14,031, compared to cash balance and total assets of $12,650 as at December 31, 2012. The decrease in the cash balance was attributed to the use of cash during the period for day-to-day activities. The increase in total assets was attributed to an increase in deferred finance costs.
As at June 30, 2013, the Company had total liabilities of $710,853 compared with total liabilities of $476,951 as at December 31, 2012. The increase in total liabilities is attributed to an increase of account payable and accrued liabilities of $232,530, $175,628 of which pertained to trade accounts payable and $56,902 pertained to related party accounts payable and accrued liabilities, as well as an increase in convertible debenture of $1,372, net of unamortized discount.
As at June 30, 2013, the Company has a working capital deficit of $699,760 compared with working capital deficit of $464,301 at December 31, 2012 with the increase in the working capital deficit attributed to the decrease of $3,402 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 as noted above.
Cashflow from Operating Activities
During the six months ended June 30, 2013, the Company used $31,042 of cash for operating activities compared to the use of $256,601 of cash for operating activities during the six months ended June 30, 2012. The decrease in the use of cash for operating activities was attributed to the fact that the Company incurred less for general and administrative costs for the period for day-to-day activities which was offset by an increase in consulting fees related to the renewable energy and eco-sustainable technologies owned, as well as small increases for professional and transfer agent fees and the issuance of shares for management fees.
Cashflow from Financing Activities
During the six months ended June 30, 2013, the Company received $28,000 of proceeds from financing activities compared to $60,000 during the six months ended June 30, 2012. The decrease in proceeds from financing activities was due to the Company issuing a smaller loan this year than in the previous year, offset by incurring deferred financing costs.
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 consolidated 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 consolidated 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 consolidated financial statements. A complete summary of these policies is included in the notes to our consolidated 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 March 28, 2013, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
There was no change in our internal control over financial reporting during the quarter ended June 30, 2013 that has materially affected, or is 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.
|
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
|
|
|
10.17
|
Professional Services Consulting Agreement with the Holden
Group, LLC – June 6, 2013.
|
8-K
|
6/17/13
|
10.1
|
|
|
10.18
|
Convertible Promissory Note – June 7, 2013.
|
8-K
|
6/17/13
|
10.2
|
|
|
10.19
|
Securities Purchase Agreement – June 7, 2013.
|
8-K
|
6/17/13
|
10.3
|
|
|
10.20
|
Convertible Promissory Note – July 15, 2013.
|
8-K
|
7/24/13
|
10.1
|
|
|
10.21
|
Securities Purchase Agreement – July 15, 2013.
|
8-K
|
7/24/13
|
10.2
|
|
|
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
|
|||
|
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 14th day of August, 2013.
|
HDS INTERNATIONAL CORP.
|
||
|
(the “Registrant”)
|
||
|
BY:
|
TASSOS RECACHINAS
|
|
|
Tassos Recachinas
|
||
|
President, Principal Executive Officer, Principal Accounting Officer, Principal Financial Officer
|
||
|
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
|
|
|
10.17
|
Professional Services Consulting Agreement with the Holden
Group, LLC – June 6, 2013.
|
8-K
|
6/17/13
|
10.1
|
|
|
10.18
|
Convertible Promissory Note – June 7, 2013.
|
8-K
|
6/17/13
|
10.2
|
|
|
10.19
|
Securities Purchase Agreement – June 7, 2013.
|
8-K
|
6/17/13
|
10.3
|
|
|
10.20
|
Convertible Promissory Note – July 15, 2013.
|
8-K
|
7/24/13
|
10.1
|
|
|
10.21
|
Securities Purchase Agreement – July 15, 2013.
|
8-K
|
7/24/13
|
10.2
|
|
|
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
|
|||
|
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-