LEGACY CARE PARTNERS INC. - Quarter Report: 2017 March (Form 10-Q)

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2017

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

000-28867

(Commission file number)

TRAILBLAZER RESOURCES, INC.

(Exact name of registrant as specified in its charter)

2520 St. Rose Parkway, Suite 319, Henderson, NV 89074

(Address of principal executive offices) (Zip Code)

(800) 787-5439

 (Registrant’s telephone number, including area code)

Not applicable

 (Former name, former address and former fiscal year, if changed since last report)

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

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company   ý
(Do not check if smaller reporting company)		Emerging growth company ☐

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  28,427,288 shares as of May 10, 2017.

 

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TRAILBLAZER RESOURCES, INC.

FORM 10-Q

FOR THE QUARTER ENDED

March 31, 2017

INDEX

 

TRAILBLAZER RESOURCES, INC.
CONDENSED BALANCE SHEETS
(Unaudited)

		March 31,				December 31,
		2017				2016
ASSETS
Current assets:
Cash		$	229			$	349
Total current assets			229				349
Total assets		$	229			$	349
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Convertible notes payable		$	400,000			$	400,000
Accounts payable			57,968				36,436
Note payable			542,500				523,500
Advances from shareholders			344,562				344,562
Note payable to shareholder			26,688				26,688
Accrued expenses			214,536				239,527
Total current liabilities			1,586,254				1,570,713
Revolving convertible note, shareholder			-				-
Total liabilities			1,586,254				1,570,713
Stockholders' deficit:
Common stock - $.001 par value; 100,000,000 shares
authorized, 28,427,288 and 28,344,290 shares issued and outstanding at
March 31, 2017 and December 31, 2016, respectively			28,427				28,344
Common stock payable			-				136,194
Additional paid-in capital			23,523,121				23,336,789
Accumulated deficit			(25,137,573	)			(25,071,691	)
Total stockholders' deficit			(1,586,025	)			(1,570,364	)
Total liabilities and stockholders' deficit		$	229			$	349

TRAILBLAZER RESOURCES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

		For the Three Months Ended March 31,
		2017				2016
Revenue		$	-			$	-
Operating expenses:
General and administrative expenses			40,652				42,541
Total operating expenses			40,652				42,541
Loss from operations			(40,652	)			(42,541	)
Loss on extinguishment of debt			(17,180	)			-
Interest expense			(8,049	)			(10,686	)
			(25,229	)			(10,686	)
Loss before income tax benefit			(65,881	)			(53,227	)
Income tax benefit			-				-
Net loss		$	(65,881	)		$	(53,227	)
Net loss per common share - basic and diluted		$	-			$	-
Weighted average shares outstanding - basic and diluted			28,411,611				28,344,290

TRAILBLAZER RESOURCES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

		Three Months Ended
		March 31,
		2017				2016
Cash flows from operating activities:
Net loss		$	(65,881	)		$	(53,227	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Loss on extinguishment of debt			17,180				-
Changes in operating assets and liabilities:
Accounts payable			21,532				(668	)
Accrued expenses			8,049				10,687
Net cash used in operating activities			(19,120	)			(43,208	)
Cash flows from investing activities:
Net cash used in investing activities			-				-
Cash flows from financing activities:
Increase in short-term notes payable			19,000				46,000
Payments on note payable to shareholder			-				(20,213	)
Increase in short-term notes payable, shareholder			-				16,650
Net cash provided by financing activities			19,000				42,437
Net decrease in cash and cash equivalents			(120	)			(771	)
Cash and cash equivalents:
Beginning of period			349				2,310
End of period		$	229			$	1,539
Supplemental cash flow information:
Cash paid during the period for interest		$	-			$	-
Non-cash investing and financing activities:
Accounts payable paid directly by certain shareholders as advances		$	-			$	-
Conversion of common stock and accrued interest into common stock		$	33,041			$	-

 

 

Note 1.  Nature of Business and Significant Accounting Policies

Trailblazer Resources, Inc., is a public shell company that is seeking a business opportunity. We currently have no ongoing business operations.

The Company formerly engaged in the manufacture, sale, installation and service of fiberglass tank and piping products through ECC Corrosion, Inc. (“ECC-C”), a former wholly-owned subsidiary of the Company.  On September 2, 2011, the Board of Directors of the Company, acting on the recommendation of its disinterested directors, approved the sale of all of the stock of ECC-C to Jamie and Jennifer Mancl and their affiliated entities who were the majority shareholders of the Company at the time (the “Mancls”) in exchange for substantially all of the Mancls’ shares of the Company’s common stock pursuant to the terms of a Stock Purchase Agreement dated August 12, 2011 (the “ECC-C Sale”).  On October 21, 2011, the Company completed the ECC-C Sale.  

The accompanying unaudited financial statements of Trailblazer Resources, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

In the opinion of the Company, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The Company has no operations during the period presented. Therefore, no new accounting standards issued or effective during the three months ended March 31, 2017 had or are expected to have a material impact on the Company’s results of operations, financial condition, or cash flows.

Note 2.  Going Concern Uncertainty

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At March 31, 2017, the Company had a working capital deficiency of $1,586,025 and an accumulated deficit of $25,137,573 and had incurred a net loss of $65,881 for the three months ended March 31, 2017.

The Company has limited financial resources, has been unprofitable since its inception and currently has no source of revenue generating activities. These factors raise substantial doubt about its ability to continue as a going concern. Management plans to rely on advances from certain shareholders and/or additional borrowing from Global CashSpot Corp to fund its ongoing obligations; however, there is no guarantee that the Company will be able to obtain an adequate amount of funding. If the Company is unable to obtain the necessary funding, the Company may need to liquidate. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 3.  Convertible Notes Payable

In August 2008, the Company began a private placement offering of Units, each Unit consisting of (i) a 3-year, 6% convertible debenture with a conversion price of $2.50 (the “Conversion Price”) per share (subject to adjustment for stock splits and stock dividends) (the “Debentures”), and (ii) a number of warrants equal to the number of shares issuable upon conversion of the principal amount of the Debentures (the “Warrants”). 

At issuance, each Warrant was originally immediately exercisable into shares of common stock for a term of 3 years at $5.00 per share, which was reduced to $1.50 per share in December 2011. As of December 31, 2013, the warrants had been extended through June 2014 and the exercise price had been reduced to $1.00 per share.  The Warrants also provided anti-dilution protection for the following events: reorganization, reclassification, consolidation, merger or sale, subdivision, combination or other dividend of the Company’s common stock. The debt discount created by the detachable warrants was fully amortized before January 1, 2013.

 

 

The private placement was closed on December 14, 2008.  Debentures in the aggregate principal amount of $6,370,000 were sold which included the issuance of 2,548,000 Warrants.  The Debentures are considered to be conventional convertible debt.

Prior to July 2, 2013, the Debentures provided holders the option to convert any accrued interest owed to them at $2.50 per share. On July 2, 2013, the Company's Board of Directors amended the conversion price to be the average of the trading price of the shares for the 21 trading days preceding each conversion date and retroactively adjusted all previously accrued interest conversions since the original maturity dates in 2011.

All outstanding Debentures, totaling $400,000 at both March 31, 2017 and December 31, 2016, are past their maturity dates and are currently due on demand.

In December 2016, certain debenture holders converted $150,000 in outstanding principal and $24,453 in accrued interest payable to 69,782 shares of common stock. The shares were issued in January 2017 and consequently recorded as common stock payable as of December 31, 2016. In addition, debenture holders converted $33,041 in accrued interest payable to 13,216 shares of common stock which were issued in January 2017.

Accrued interest payable as of March 31, 2017 and December 31, 2016 amounted to $106,159 and $133,217, respectively.

Note 4. Note Payable

On April 15, 2015, the Company established a promissory note in the amount of $250,000 with Global CashSpot Corp (GCS). Under the terms of the promissory note, GCS has agreed to advance the Company funds up to $250,000 to fund accounting, legal and other operating costs. The unsecured promissory note is non-interest bearing, and repayment is due within 60 days following notice of demand by GCS. In the event the Company enters into a business combination with GCS, the promissory note shall be deemed paid in full. In September 2015, the Company and GCS agreed to amend the promissory note, increasing its amount to $350,000.  The borrowing amount was further increased to $515,000 and $523,500 in February and August 2016, respectively. During the three months ended March 31, 2017 and 2016, GCS advanced $19,000 and $46,000 under the promissory note, respectively. Outstanding borrowings under this promissory note were $542,500 and $523,500 at March 31, 2017 and December 31, 2016, respectively.

Note 5.  Advances From Shareholders

Subsequent to the divestiture of the Company’s operating entity (ECC-C) on October 21, 2011, the Company’s operating expenses have been funded primarily by advances from certain shareholders.  Going forward, the Company will continue to incur ongoing professional fees in connection with being a public company. As of both March 31, 2017 and December 31, 2016, $327,062, is owed to certain shareholders who have made unsecured advances to the Company to fund operations. Included in the balance in each year is a $125,000 advance bearing a 3.5% interest rate, and is due upon demand. The remaining shareholder advance balances at March 31, 2017 and December 31, 2016 are non-interest bearing and due upon demand.

On February 21, 2013, the Company established a revolving convertible line of credit arrangement in the amount of $250,000 with Diversified Equities Partners, LLC (DEP) as described in Note 7. Revolving Convertible Note, Shareholder.

During 2015, the Company repaid $50,000 of shareholder advances, funded entirely by the proceeds of the note payable from GCS, discussed in Note 4. Note Payable.

During the three months ended March 31, 2017, $1,079 and $1,099, of interest expense was incurred on advances from shareholders, all of which was outstanding and included in accrued expenses at March 31, 2017.  Accrued interest payable as of March 31, 2017 and December 31, 2016 amounted to $22,104 and $21,024, respectively. All advances are unsecured, non-interest bearing, and due on demand.

Note 6.  Note Payable to Shareholder

 

 

Note 7.   Revolving Convertible Note, Shareholder

On February 21, 2013, the Company established an unsecured revolving convertible note in the amount of $250,000 with DEP.  Under the terms of the note, DEP agreed to make loans to the Company during the three-year term of the revolving credit commitment period.  Interest accrued on the unpaid principal balance at a rate of eight percent per annum and required quarterly payments beginning May 31, 2013; however, none of the interest has been paid as of December 31, 2016. DEP waived its right to call payment on the loan if all accrued interest was paid prior to February 21, 2016.

Note 8.  Stockholders’ Equity

Stock Issuances and Warrants

In December 2016, five convertible debenture holders converted $150,000 in outstanding principal and $24,453 in accrued interest payable to 69,782 shares of common stock. The shares were issued in January 2017 and consequently recorded as common stock payable of $136,194 as of December 31, 2016. In addition, debenture holders converted $33,041 in accrued interest payable to 13,216 shares of common stock which were issued in January 2017. As of January 20, 2017, 82,998 shares have been issued in conjunction with these conversions and related accrued interest.

There were no common stock or warrant issuances during the three months ended March 31, 2016.

There were no common stock or warrant issuances during the three months ended March 31, 2017 and 2016.

Note 9.  Loss Per Share

The Company computes loss per share using two different methods, basic and diluted, and presents per share data for all periods in which statements of operations are presented. Basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted average number of common stock and common stock equivalents outstanding during the period so long as the effect of including the common stock equivalents is not anti-dilutive.

 

 

The following tables provide a reconciliation of the numerators and denominators used in calculating basic and diluted loss per share for the three months ended March 31, 2017 and 2016:

The following common stock equivalents have been excluded from the diluted per share calculations since they are anti-dilutive:

(1)

At March 31, 2017 and 2016, there were outstanding convertible debentures equivalent to 160,000 and 220,000 common shares.

(2)

At March 31, 2017 and 2016, there were no outstanding warrant equivalents.

(3)

At March 31, 2017 and 2016, there were no outstanding options equivalents.

(4)

At March 31, 2017 and 2016, there were no outstanding revolving convertible note equivalents.

Note 10.  Subsequent Events

 

On December 8, 2016, the Company entered into a mutually binding letter of intent to acquire Global CashSpot Corp (“GCS”). Under the letter of intent, the Company will issue 37,809,039 newly issued shares of the Company in exchange for all outstanding shares of GCS. Both parties intended that the transaction would close within 60 days, unless extended by mutual agreement of both parties. On February 8, 2017, the parties agreed to extend the date by which closing would occur to March 31, 2017. As a condition precedent to closing, the Company will obtain all necessary shareholder authorizations to change its name to Global CashSpot Corp, and bring its SEC reporting obligations current. Subsequent to March 31, 2017, the Company and GCS have mutually agreed to extend the closing date to June 30, 2017 to allow GCS to satisfy remaining due diligence and compliance issues. GCS is a Financial Technology Company (Fintech) deploying a proprietary card-to-card global money transfer technology that is anticipated to enable more than 2 billion consumers around the world (approximately 80 million in the U.S.), who are un-banked, severely under-banked or self- banked to transfer money card-to-card-cross-border, real-time, any-time from any computer or mobile device from anywhere in the world, using a MasterCard® branded Global CashSpot® pre-paid debit card.

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2017 to the date of these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.

 

 

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

The discussion contained herein contains “forward-looking statements” that involve risk and uncertainties.  These statements may be identified by the use of terminology such as “believes,” “expects,”  “may,” “should” or “anticipates” or expressing this terminology negatively or similar expressions or by discussions of strategy.  The cautionary statements made in our Annual Report on Form 10-K, filed April 17, 2017, should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q.  Our actual results could differ materially from those discussed in this report.  The following discussion should be read in conjunction with the financial statements and the related notes included herein as Item 1.

Accounting Policies and Estimates

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on the results that we report in our financial statements.  Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.  

We have identified the accounting policies that we consider critical in Note 1 “Nature of Business and Significant Accounting Policies” of the notes to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.  The accounting policies and estimates described in that report are contained in Note 1 “Nature of Business and Significant Accounting Policies,” of the notes to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016, which includes a discussion of the policies identified in this report and other significant accounting policies and should be read in conjunction with this report.

Overview

Trailblazer Resources, Inc., formerly Energy Composites Corporation (“we,” “us,” “our,” or the “Company”), a Nevada corporation, currently has no business operations.

The Company had one operating subsidiary, ECC Corrosion, Inc. (“ECC-C”), which was sold on October 21, 2011 due to the continuing losses that the Company had incurred since the reverse acquisition in October 2008. Formerly known as Advanced Fiberglass Technologies (“AFT”), ECC-C was incorporated in the state of Wisconsin on January 1, 2005, following nearly ten years operating as M&W Fiberglass, LLC (“M&W”). Founded in 1995 by Jamie and Jennifer Mancl, M&W was the operating entity that developed and operated AFT’s business. In January 2005, M&W transferred all operating assets and liabilities into a newly formed S-Corporation: AFT.  On September 1, 2010, AFT changed its name to ECC Corrosion, Inc.

On October 21, 2011, the Company sold all of the stock of ECC-C to Jamie and Jennifer Mancl and their affiliated entities (the “Mancls”) in exchange for substantially all of the Mancls’ shares of the Company’s common stock (the “ECC-C Sale”). These shares were then cancelled, reducing the number of shares issued and outstanding of the Company to 22,752,955. In addition, we changed the name of the Company to “Trailblazer Resources, Inc.” effective October 17, 2011.

Results of Operations

We currently do not generate any revenues, but incur general and administrative expenses related to our status as a publicly-held company, such as legal, accounting and transfer agent fees, as well as other applicable expenses such as investor relations expenses.

The three months ended March 31, 2017 compared to the three months ended March 31, 2016.

 

 

General and administrative expenses

Total general and administrative expenses were $40,652 and $42,541 for the three months ended March 31, 2017 and 2016, respectively, consisting of legal, accounting and other professional fees. The nominal decrease is due to lower legal and accounting costs associated with efforts to become current in the Company’s SEC filings compared to the prior year.

The Company’s net loss from operations was $40,652 and $42,541 for the three months ended March 31, 2017 and 2016, respectively. The decrease in our net loss from operations was due to lower general and administrative costs and consulting expenses in the current year as discussed above.

The Company recognized $17,180 and $0 of loss on extinguishment of debt during the three months ended March 31, 2017 and 2016, respectively. The 2017 loss arose as a result of the certain convertible noteholders exchanging accrued interest from convertible debt of $33,041 in exchange for shares of company common stock with an aggregate fair market value of $50,221 on the respective conversion dates in January 2017.

Interest expense

Interest expense was $8,049 for the three months ended March 31, 2017 compared to $10,686 for the three months ended March 31, 2016.  Interest expense during the three months ended March 31, 2017 and 2016 consisted of accrued interest on (a) convertible promissory notes of $5,983 and $8,205, (b) a revolving convertible note of $1,079 and $1,088, and (c) notes payable to a related party of $987 and $1,393, respectively.

Income tax benefit

The Company has established a full valuation allowance against its deferred tax assets because the Company believes it is more likely than not, that the net deferred tax assets will not be realized, and therefore, there is no tax provision recorded for the three months ended March 31, 2017 and 2016.

Net loss

The Company’s net loss was $65,881 for the three months ended March 31, 2017, compared to $53,227 for the three months ended March 31, 2016, due to the factors described above.  

Liquidity and Capital Resources

At March 31, 2017, the corporate shell company had cash of $229 and a working capital deficiency of $1,586,025 as compared to cash of $349 and a working capital deficiency of $1,570,364 at December 31, 2016. These conditions, and the Company's recurring operating losses, raise substantial doubt as to our ability to continue as a going concern.

Operating Cash Flows

Operating cash flows used cash of $19,120 and $43,208 during the three months ended March 31, 2017 and 2016, respectively. All operating cash was used to pay various accounts payable and other accrued expenses.

 

 

Investing Cash Flows

There were no investing transactions during the three months ended March 31, 2017 and 2016.

Financing Cash Flows

Financing cash flow activities for the three months ended March 31, 2017 and 2016 consisted of: (1) an increase in short-term notes payable of $19,000 and $46,000, (2) payments on short-term note payable of $0 and $20,213, and (3) an increase in short-term notes payable, shareholder of $0 and $16,650, respectively.

Debenture Financing

From August 2008 to December 2008, we raised $6,370,000 by selling units, each unit consisting of (i) a 3-year, 6% convertible debenture (the “Debentures”) with a conversion price of $2.50 per share (subject to adjustment for stock splits and stock dividends), and (ii) a number of warrants equal to the number of shares issuable upon conversion of the principal amount of the Debenture (the “Warrants”). The Debentures sold included the issuance of 2,548,000 Warrants. Each Warrant was originally exercisable into shares of common stock for a term of 3 years at $5.00 per share. The Warrants also provided anti-dilution protection for the following events: reorganization, reclassification, consolidation, merger or sale; subdivision, combination or dividend of our common stock. The Warrants expired June 30, 2014.

 

At March 31, 2017 and December 31, 2016, Debentures totaling $400,000 were outstanding and currently due.  Many of the remaining Debenture holders have elected to receive interest in the form of stock, lowering our cash outlays for debt service on the Debentures. Since the Company does not have the capital resources at this time to repay these Debentures, we are working with the Debenture holders in an attempt to convert them to common stock, extend or otherwise renegotiate their terms. In December 2016, certain debenture holders converted $150,000 in outstanding principal and $24,453 in accrued interest payable to 69,782 shares of common stock. Additionally, 13,216 shares were issued to pay $33,041 of accrued interest for non-converting debentures in January 2017.  The shares were issued in January 2017.

Revolving Convertible Note Financing

On February 21, 2013; the Company established an unsecured revolving convertible note in the amount of $250,000 with DEP.  Under the terms of the note, DEP had agreed to make loans to the Company during the three-year term of the revolving credit commitment period.  Interest accrued on the unpaid principal balance at a rate of eight percent per annum and required quarterly payments beginning May 31, 2013; however, none of the interest has been paid as of March 31, 2017.

During 2016, the entire $250,000 principal balance of the revolving note was repaid, funded entirely by the proceeds of the note payable from GCS, discussed in Note 4. Note Payable. Accrued expenses include $49,260 of interest due to shareholders relating to this revolving convertible note as of March 31, 2017 and December 31, 2016, respectively.

 

 

Note Payable Financing

 

On April 15, 2015, we established a promissory note in the amount of $250,000 with Global CashSpot Corp (GCS). Under the terms of the promissory note, GCS has agreed to advance the Company funds up to $250,000 to fund accounting, legal and other operating costs. The unsecured promissory note is non-interest bearing, and repayment is due within 60 days following notice of demand by GCS. In the event the Company enters into a business combination with GCS, the promissory note shall be deemed paid in full. In September 2015, the Company and GCS agreed to amend the promissory note, increasing its amount to $350,000. The borrowing amount was further increased to $515,000 and $523,500 in February and August 2016, respectively.  During the three months ended March 31, 2017, GCS advanced $19,000 under the promissory note. Outstanding borrowings under this promissory note were $542,500 and $523,500 at March 31, 2017 and December 31, 2016, respectively.

Going Forward

The illiquidity and continuing losses suffered by ECC-C led to its sale to the Mancls in exchange for their shares in the Company.  This allows the Company to potentially acquire another business operation, which hopefully will have a greater potential for profitability.  The Company will still need to convert, extend or otherwise renegotiate the terms of the Debentures and other financings described above.  The Company is relying upon the limited funds provided from shareholders to continue to operate as a public company in good standing while we look for a target business. The Company anticipates that any acquisition with a target company will be consummated primarily through the issuance of the Company's shares of stock, as we do not have sufficient cash to use for such purposes.

We will need to seek additional funding for our operations and ongoing general and administrative expenses. Our current plan is to identify and evaluate industries and business opportunities in order to identify a suitable acquisition target for the Company. We cannot give any assurance that we will be successful in this effort or that if a suitable acquisition target is obtained, it will result in profitable operations nor can we give any assurances that we will obtain adequate funding to stay in business until a suitable acquisition target is identified.

Off-Balance Sheet Arrangements

As of March 31, 2017, we did not have any off-balance sheet arrangements.

Item 3.      Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

Item 4.      Controls and Procedures

Evaluation of Disclosure Controls and Procedures and Changes in Internal Controls

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Interim Chief Executive Officer and Interim Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

 

 

As of March 31, 2017, our management, with the participation of our Interim Chief Executive Officer and Interim Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Based on this evaluation, the Interim Chief Executive Officer and Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure because of the material weakness relating to internal controls that are described in Item 9A of the Company’s Form 10-K for the year ended December 31, 2016, filed April 17, 2017.  

Notwithstanding the material weaknesses that existed as of March 31, 2017, our Interim Chief Executive Officer and Interim Chief Financial Officer concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the financial position, results of operations and cash flows of the Company and its subsidiaries in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.      Legal Proceedings

We are not currently involved in any pending or threatened legal proceedings.

Item 1A.   Risk Factors

Not applicable to smaller reporting companies.

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

During the quarter ended March 31, 2017, we issued 69,782 shares of common stock as payment of $150,000 in outstanding principal and $24,453 of accrued interest on our convertible Debentures to five accredited investor Debenture holders.  In addition, we issued 13,216 shares to pay $33,041 of accrued interest to six other accredited investor Debenture holders who did not convert their Debentures into shares.  No underwriters were used in the above stock transactions.  We relied upon the exemption from registration contained in Section 4(a)(2) and/or Rule 506 as to all of the transactions as the investors were deemed to be sophisticated with respect to the investment in the securities due to their financial condition and involvement in our business or were accredited investors.  Restrictive legends were placed on the certificates evidencing the securities issued in all of the above transactions.

Item 3.      Defaults Upon Senior Securities

None.

Item 4.      Mine Safety Disclosures

Not applicable.

Item 5.      Other Information

Not applicable.

 

 

Item 6.      Exhibits

(1)

Filed as an exhibit to the Current Report on Form 8-K dated October 14, 2008, filed October 17, 2008.

(2)

Filed as an exhibit to the Current Report on Form 8-K dated October 21, 2011, filed October 27, 2011.

(3)

Filed as an exhibit to the Current Report on Form 8-K dated December 15, 2008, filed December 19, 2008.

(4)

Filed as an exhibit to the Current Report on Form 8-K dated February 21, 2013, filed February 27, 2013.

*In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.