KonaTel, Inc. - Quarter Report: 2014 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to____________

Commission File No. 001-10171

WESTCOTT PRODUCTS CORPORATION

(Exact name of the issuer as specified in its charter)

8867 South Capella Way

Sandy, Utah  84093

(Address of Principal Executive Offices)

(801) 631-7969

(Registrant Telephone Number)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  Yes [X]   No [  ]  (The Registrant does not maintain a website.)

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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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 [X] No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended.

PART I - FINANCIAL STATEMENTS

Item 1. Financial Statements.

March 31, 2014

C O N T E N T S

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See accompanying notes to condensed financial statements.

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See accompanying notes to condensed financial statements.

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Westcott Products Corporation

(A Development Stage Company)

Notes to Condensed Financial Statements

March 31, 2014

(Unaudited)

NOTE 1 BASIS OF PRESENTATION

The accompanying financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The interim financial statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2013. The results of operations for the period ended March 31, 2014, are not necessarily indicative of the operating results for the full year.

NOTE 2 LIQUIDITY/GOING CONCERN

The Company has minimal assets of $6,755 in cash, nor has it established operations, and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. It is the intent of the Company to seek a merger with an existing, well-capitalized operating company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 RELATED PARTY TRANSACTIONS

The Company had expenses and accounts payable to a shareholder in the amount of $2,347 during the quarter. 200,000 shares of common stock were issued for debt cancellation of $2,000. See Note 4.  The balance due to the shareholder is $94,291 as of March 31, 2014. The unsecured loan bears no interest and is due on demand.  However, the Company imputes interest on the loan at 10% per annum.  Imputed interest expense on related party loans for the three-month periods ended March 31, 2014 and 2013 totaled $2,862 and $2,393, respectively.  

NOTE 4 SALES OF UNREGISTERED SECURITIES

On or about February 10, 2014, the Company issued 1,384,200 shares of common stock, comprised of “restricted securities” defined in Rule 144 of the Securities and Exchange Commission.  200,000 of the shares were issued for debt cancellation of $2,000 and the remaining shares were issued for cash proceeds of $11,842.

NOTE 5 RECENT ACCOUNTING PRONOUNCEMENTS

The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operation, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.

 NOTE 6 OTHER MATTERS

On January 8, 2014, the Company entered into a non-binding Letter of Intent (the “LOI”) to acquire a corporation that was to be formed by a limited liability company engaged in the business of acquiring and developing oil and gas properties. The LOI contemplated the funding of the planned operations of the corporation to be acquired, which would be the acquisition, development and exploration of oil and gas properties.  On receipt of required funding, the limited liability company would assign its interest in certain oil and gas leases to the corporation to be formed and acquired and enter into certain agreements whereby it would act as an independent contractor to such corporation and provide services

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and personnel to develop, drill, operate and maintain the assigned oil and gas leases and any wells developed on such properties for a period of 12 months; and to allow such corporation a 25% participation interest, at such corporation’s election, to participate for up to 25% of the limited liability company’s share of each other drilling operation in the state where the assigned leases were situated.  The LOI is subject to various conditions, including certain funding requirements, none of which have been met as of the date these financial statements were presented.  The parties continue to work towards a conclusion of the conditions of the LOI to complete the acquisition; however, no assurance can be given that the various conditions of the LOI will be satisfied or that this acquisition will be completed.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Statements

Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.

Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Plan of Operations

Our Company’s plan of operation for the next 12 months is to: (i) consider guidelines of industries in which our Company may have an interest; (ii) adopt a business plan regarding engaging in business in any selected industry; and (iii) to commence such operations through funding and/or the acquisition of a going concern engaged in any industry selected.

During the next 12 months, our only foreseeable cash requirements will relate to maintaining our good standing; the payment of our Securities and Exchange Commission and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), reporting filing expenses, including associated legal and accounting fees; costs incident to reviewing or investigating any potential business venture; and maintaining our good standing as a corporation in our state of organization.  Because a principal shareholder has been paying all of the operating expenses, management does not anticipate that we will have to raise additional funds during the next 12 months.

Our common stock currently trades on the Over-the-Counter Bulletin Board (OTCBB) under the symbol WSPD.

Results of Operations

Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

We had no operations during the quarterly period ended March 31, 2014, nor do we have operations as of the date of this filing.  General and administrative expenses were $4,814 for the March 31, 2014, period, compared to $2,300 for the March 31, 2013, period. General and administrative expenses for the three months ended March 31, 2014, were comprised mainly of accounting, transfer and other operating fees.  The increase in general and administrative expenses for the 2014 quarterly period over the 2013 quarterly period was limited to increased operating expenses.  We had a net loss of $7,676 for the March 31, 2014, period compared to a net loss of $4,693 for the March 31, 2013, period.  The increase in the net loss for the March 31, 2014, period over the 2013 period is due to increased operating expenses.

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Six Months Ended March 31, 2014 Compared to Six Months Ended March 31, 2013

We had no operations during the six month period ended March 31, 2014, except the seeking and investigation of a potential business venture to acquire, and those activities comprise our present operations as of the date of this filing. General and administrative expenses were $9,114 for the March 31, 2014, period compared to $7,450 for the March 31, 2013, period.  General and administrative expenses for the six months ended March 31, 2014, were comprised mainly of accounting and operating fees.  We had a net loss of $14,799 for the March 31, 2014, period compared to a net loss of $12,091 for the March 31, 2013, period.  

Liquidity and Capital Requirements

We had $6,755 in cash and no other cash equivalents on hand at March 31, 2014.  Operating activities for the quarterly period ending March 31, 2014, reduced our cash by $5,087. If additional funds are required in excess of our cash on hand, such funds may be advanced by management or shareholders as loans to us.  During the quarterly period ended March 31, 2014, expenses and accounts payable were paid by a principal shareholder in the amount of $2,347, and during the quarterly period ended March 31, 2013, additional expenses paid by a principal shareholder totaled $4,070. The aggregate amount of $94,291 of such expenses is outstanding as of March 31, 2014, is non-interest bearing, unsecured and due on demand.  However, we impute interest on the loan at 10% per annum.  Imputed interest expense on related party loans for the three-month periods ended March 31, 2014, and 2013, totaled $2,862 and $2,393, respectively.  Because we have not completed any acquisition or venture and continue to seek a potential business venture to acquire, it is impossible to predict the amount of any future loan amounts.

Off-Balance Sheet Arrangements

None.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

Not required.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including our President, Vice President and Secretary, who are our only executive officers, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our management, including our President, Vice President and Secretary, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Based upon that evaluation, our President, Vice President and Secretary have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

During the fiscal quarter covered by this Quarterly Report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

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Item 1A. Risk Factors

Not required.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On or about February 10, 2014, we issued 1,384,200 shares of our common stock, comprised of “restricted securities” as defined in Securities and Exchange Commission Rule 144.  200,000 of these shares were issued for debt cancellation of $2,000, and the remaining shares were issued for cash proceeds of $11,842.

We issued all of these securities to persons who were “accredited investors” as that term is defined in  Rule 501(a) of Regulation D of the Securities and Exchange Commission; and each such person had prior access to all material information about us prior to the offer and sale of these securities. We believe that the offer and sale of these securities were exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof, and Rule 506(b) of Regulation D of the Securities and Exchange Commission.

Item 3. Defaults Upon Senior Securities

None; not applicable.

Item 4. Mine Safety Disclosure

We have no mining activities.

Item 5. Other Information

(i)

At its meeting held on February 10, 2014, our Board of Directors unanimously resolved to elect Everett Will Gray II  to serve:  (i) as a director of the Company until the next annual meeting of stockholders or his prior resignation or termination; and (ii) as the Secretary of the Company until the next annual meeting of the Board of Directors or his prior resignation or termination.

My Gray is 38 years old.   He is a seasoned oil executive who has operated in excess of over 300+ wells within Southeastern New Mexico and West Texas since 2008.  During this time as an operator, Mr. Gray was directly responsible for oversight of all facets of operations in addition to managing both executive and field personnel.  Mr. Gray is proficient in the planning, implementation, and oversight of capital expenditure programs; the preparation of  in-house  reserves, the establishment and working with various 3^rd party reserve engineering firms; production analysis; regulatory compliance with both state and federal agencies; the preparation of monthly and quarterly statements; sourcing and managing commercial and mezzanine credit facilities; business development; joint interest billing and lease operating statement analysis.

Mr. Gray was Cross Border Resources, Inc.’s, formerly Doral Energy Corp, Chairman and CEO from December 10, 2008 to May 31, 2012.  While serving as the Chairman and CEO of Cross Border Resources, Mr. Gray arranged for over $80MM in credit facilities in addition to accessing capital markets in order to meet drilling demands.  Additionally, Mr. Gray has been solely responsible for $73MM worth of Acquisition and Divestures transactions since 2008 comprising a mix of both operated and non-operated assets within the Permian Basin.  

After Mr. Gray’s departure from Cross Border Resources Inc. on May 31, 2012, he was recruited by Mr. J.P. Bryan to serve as EVP & Head of Capital Markets and Business Development for Resaca Exploitation, a Torch Energy portfolio company headquartered in Houston, Texas.  While serving in this capacity, Mr. Gray was responsible for oversight of field personnel, oversight and analysis of lease operating statements, preparing and implementing monthly budget expenditures in addition to communication of corporate matters to institutional investors.  Mr. Gray reported directly to Mr. J.P. Bryan, Resaca’s Chairman and Chief Executive Officer.  Mr. Gray resigned from Resaca Exploitation on December 14, 2012 to pursue other personal interests.

Mr. Gray received his B.S. in Business Management from Texas State University in 1998. While attending Texas State University, Mr. Gray was a member of the Men’s Varsity Golf Team, earning Southland Conference All-Academic Honors, as well as being a member of the 1997 Southland Conference Golf Championship Team.

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Mr. Gray does not have any family relationship with any of the Company’s other directors, executive officers or nominees to serve in any such position.

There were no material transactions, or series of similar transactions, during our last fiscal year, or any currently proposed transactions, or series of similar transactions, to which we were or are to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years and in which Mr. Gray or any member of his immediate family had an interest.

(ii)

On January 8, 2014, we entered into a non-binding Letter of Intent (the “LOI”) to acquire a corporation that was to be formed by a limited liability company engaged in the business of acquiring and developing oil and gas properties.  The LOI contemplated the funding of the planned operations of the corporation to be acquired, which would be the acquisition, development and exploration of oil and gas properties.  On receipt of the anticipated funding, the limited liability company would assign its interest in certain oil and gas leases to the corporation to be formed and acquired and enter into certain agreements whereby it would act as an independent contractor to such corporation and provide services and personnel to develop, drill, operate and maintain the assigned oil and gas leases and any wells developed on such properties for a period of 12 months; and to allow such corporation a 25% participation interest, as such corporation’s election, to participate for up to 25% of the limited liability company’s share of each other drilling operation in the state where the assigned leases were situated.  The LOI was subject to various conditions, including the funding requirements, none of which have been met as of the date of this Quarterly Report.  The parties continue to work towards a conclusion of the conditions of the LOI to complete the acquisition; however, no assurance can be given that the various conditions of the LOI will be satisfied or that this acquisition will be completed.

Item 6. Exhibits

(a) Exhibits

*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

(b) Reports on Form 8-K

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTCOTT PRODUCTS CORPORATION

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

WESTCOTT PRODUCTS CORPORATION

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