U.S. Lithium Corp. - Quarter Report: 2014 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
_________________
X . QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
. TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 333-144944
ROSTOCK VENTURES CORP.
(Name of small business issuer in its charter)
Nevada |
| 98-0514250 |
(State of incorporation) |
| (I.R.S. Employer Identification No.) |
2360 Corporate Circle, Suite 4000
Henderson, NV 89074-7722
(Address of principal executive offices)
(702) 866-2500
(Registrant’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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.
X . Yes . 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
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" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
.
Accelerated Filer
.
Non-Accelerated Filer
.
Smaller Reporting Company
X .
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). . Yes X . No
As of May 19, 2014, there were 45,612,559 shares of the registrant’s $0.001 par value common stock issued and outstanding.
1
ROSTOCK VENTURES CORP.
TABLE OF CONTENTS
|
|
|
| Page | |
|
| |
PART I. FINANCIAL INFORMATION |
| |
|
| |
ITEM 1. | FINANCIAL STATEMENTS | 3 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 12 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 14 |
ITEM 4. | CONTROLS AND PROCEDURES | 14 |
|
| |
PART II. OTHER INFORMATION |
| |
|
| |
ITEM 1. | LEGAL PROCEEDINGS | 15 |
ITEM 1A. | RISK FACTORS | 15 |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 15 |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 15 |
ITEM 4. | MINE SAFETY DISCLOSURES | 15 |
ITEM 5. | OTHER INFORMATION | 15 |
ITEM 6. | EXHIBITS | 15 |
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rostock Ventures Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "ROSV" refers to Rostock Ventures Corp.
2
PART I - FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ROSTOCK VENTURES CORP.
(A Development Stage Company)
Financial Statements
For the Period Ended March 31, 2014 (unaudited) and December 31, 2013
Balance Sheets (unaudited)
4
Statements of Operations (unaudited)
5
Statements of Cash Flows (unaudited)
6
Notes to the Financial Statements (unaudited)
7
3
ROSTOCK VENTURES CORP.
(A Development Stage Company)
Balance Sheets
(unaudited)
(The accompanying notes are an integral part of these financial statements)
4
ROSTOCK VENTURES CORP.
(A Development Stage Company)
Statements of Operations
(unaudited)
|
|
| Accumulated from November 2, 2006 (Date of Inception) to March 31, 2014 $ | ||
|
|
| For the three months ended March 31, 2014 $ | For the three months ended March 31, 2013 $ | |
| |||||
Revenues |
|
| – | – | – |
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
Consulting fees |
|
| 9,800 | – | 18,462 |
Foreign exchange gain |
|
| – | – | (4,396) |
General and administrative |
|
| 690 | 4,645 | 138,960 |
License fee |
|
| 396,000 | – | 396,000 |
Management fees |
|
| 6,000 | 6,000 | 67,000 |
Mineral exploration costs |
|
| – | – | 62,145 |
Professional fees |
|
| 12,000 | 9,000 | 182,892 |
|
|
|
|
|
|
Total Operating Expenses |
|
| 424,490 | 19,645 | 861,063 |
|
|
|
|
|
|
Loss Before Other Income |
|
| (424,490) | (19,645) | (861,063) |
|
|
|
|
|
|
Other Income |
|
|
|
|
|
|
|
|
|
|
|
Interest and accretion expense |
|
| (6,729) | (3,809) | (59,742) |
Forgiveness of debt |
|
| – | – | 19,100 |
|
|
|
|
|
|
Net Loss |
|
| (431,219) | (23,454) | (901,705) |
Net Loss per Share – Basic and Diluted |
|
| (0.01) | (0.00) |
|
Weighted Average Shares Outstanding – Basic and Diluted |
|
| 43,650,755 | 41,412,559 |
|
|
|
|
|
|
|
(The accompanying notes are an integral part of these financial statements)
5
ROSTOCK VENTURES CORP.
(A Development Stage Company)
Statements of Cash Flows
(unaudited)
| For the three months ended March 31, 2014 $ | For the three months ended March 31, 2013 $ | Accumulated from November 2, 2006 (Date of Inception) to March 31, 2014 $ |
Operating Activities |
|
|
|
Net loss | (431,219) | (23,454) | (901,705) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
Accretion Expense | 1,479 | – | 1,915 |
Forgiveness of debt | – | – | (19,100) |
Impairment of mineral exploration costs | – | – | 22,025 |
Imputed interest | 866 | 866 | 16,285 |
Shares issued for consulting services | 9,800 | – | 9,800 |
Shares issued for license fee | 396,000 | – | 396,000 |
Changes in operating assets and liabilities: |
|
|
|
Accounts payable and accrued liabilities | 4,509 | 7,993 | 70,398 |
Due to related party | 4,850 | 4,500 | 36,969 |
Net Cash Used In Operating Activities | (13,715) | (10,095) | (367,413) |
|
|
|
|
Investing Activities |
|
|
|
Acquisition of mineral properties | – | – | (22,025) |
Net Cash Used In Investing Activities | – | – | (22,025) |
|
|
|
|
Financing Activities |
|
|
|
Proceeds from related parties | – | – | 9,950 |
Repayment to related parties | – | – | (5,000) |
Proceeds from note payable | 10,000 | – | 197,576 |
Proceeds from note payable – related party | – | 10,095 | 43,300 |
Proceeds from issuance of shares | – | – | 144,421 |
Net Cash Provided By Financing Activities | 10,000 | 10,095 | 390,247 |
|
|
|
|
Increase (Decrease) in Cash | (3,715) | – | 809 |
|
|
|
|
Cash – Beginning of Period | 4,524 | – | – |
|
|
|
|
Cash – End of Period | 809 | – | 809 |
|
|
|
|
Non Cash Investing and Financing Activities |
|
|
|
Debt discount | 10,000 | – | 16,000 |
|
|
|
|
Supplemental Disclosures |
|
|
|
Interest paid | – | – | – |
Income tax paid | – | – | – |
|
|
|
|
(The accompanying notes are an integral part of these financial statements)
6
ROSTOCK VENTURES CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
1.
Organization and Nature of Operations
Rostock Ventures Corp. (the “Company”) was incorporated in the State of Nevada on November 2, 2006 and is a natural resource exploration and production company engaged in the exploration, acquisition, and development of mineral properties in the United States. The Company is an exploration stage company as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company hold 59 mineral claims in the Tintina Gold Belt in Yukon, Canada and is in the process of exploring these claims, as well as raising additional capital for future acquisitions. On March 12, 2014, the Company signed a license agreement to acquire certain licenses and trademarks. The Company is currently re-evaluating its business operations and objectives within mineral exploration, and into a different sector.
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at March 31, 2014, the Company has not earned revenue, has a working capital deficit of $317,284, and an accumulated deficit of $901,705. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Summary of Significant Accounting Policies
a)
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is December 31.
b)
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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 the recoverability of mineral properties, share based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of March 31, 2014 and December 31, 2013, there were no cash equivalents.
7
ROSTOCK VENTURES CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
2.
Summary of Significant Accounting Policies (continued)
d)
Mineral Property Costs
The Company has been in the exploration stage since its formation on November 2, 2006 and has not yet realized any revenues from its planned operations. Mineral property acquisition and exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
e)
Asset Retirement Obligations
The Company follows the provisions of ASC 410, Asset Retirement and Environmental Obligations, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.
f)
Basic and Diluted Net Loss per Share
The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 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 income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
g)
Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Foreign currency transactions are primarily undertaken in Canadian dollars. Foreign currency transactions are translated to United States dollars in accordance with ASC 830, Foreign Currency TranslationMatters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
h)
Financial Instruments
Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 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. ASC 820 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.
8
ROSTOCK VENTURES CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
2.
Summary of Significant Accounting Policies (continued)
h)
Financial Instruments (continued)
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 Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, note payables, and amounts due to related party. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
i)
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.
j)
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
k)
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 March 31, 2014 and December 31, 2013, the Company has no items representing comprehensive income or loss.
9
ROSTOCK VENTURES CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
2.
Summary of Significant Accounting Policies (continued)
l)
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. As at March 31, 2014 and December 31, 2013, the Company did not grant any stock options.
m)
Recent 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.
3.
Notes Payable
a)
As at March 31, 2014, the Company owes $134,244 (December 31, 2013 - $134,244) of notes payable to shareholders of the Company. The amounts owing are unsecured, due interest ranging from 6-10% per annum, and are due on demand. As at March 31, 2014, accrued interest of $34,592 (December 31, 2013 - $31,725) has been recorded in accrued liabilities.
b)
As at March 31, 2014, the Company owes $35,131 (December 31, 2013 - $35,131) of notes payable to shareholders of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand. As at March 31, 2014, the Company has recorded imputed interest calculated at 10% per annum, of $16,285 (December 31, 2013 - $15,419) which is recorded as additional paid-in capital.
c)
As at March 31, 2014, the Company owes $55,500 (December 31, 2013 - $55,500) of notes payable to non-related parties. The amounts owing is unsecured, due interest at 10% per annum, and due on demand. As at March 31, 2014, the Company has recorded accrued interest of $6,712 (December 31, 2013 - $5,344) has been recorded in accrued liabilities.
d)
On February 5, 2014, the Company entered into a loan agreement with a non-related party for proceeds of $10,000. The amount owing is unsecured, due interest at 10% per annum, is due on February 5, 2016 and is convertible into common shares of the Company at $0.005 per share. The Company recorded beneficial conversion feature of $10,000 and during the quarter ended March 31, 2014, recorded accretion expense of $740. As at March 31, 2014, the carrying value of the note payable is $740 (December 31, 2013 - $nil) and accrued interest of $148 (December 31, 2013 - $nil) has been recorded in accrued liabilities.
e)
On November 8, 2013, the Company entered into a loan agreement with a non-related party for proceeds of $6,000. The amount owing is unsecured, due interest at 10% per annum, is due on November 8, 2015 and is convertible into common shares of the Company at $0.005 per share. The Company recorded beneficial conversion feature of $6,000 and during the quarter ended December 31, 2013, recorded accretion expense of $740. As at December 31, 2013, the carrying value of the note payable is $1,175 (December 31, 2013 - $436) and accrued interest of $235 (December 31, 2013 - $87) has been recorded in accrued liabilities.
4.
License Agreement
On March 12, 2014, the Company signed a license agreement to acquire certain licenses and trademarks in exchange for the issuance of 4,000,000 common shares of the Company with a fair value of $396,000 using the end-of-day trading price of the Company’s common shares on the date of issuance. The amount has been recorded as an expense, as the Company has not generated any revenues from the license and there is no certainty as to the ability to generate positive cash flows from the license in the future. Refer to Note 6(b).
10
ROSTOCK VENTURES CORP.
(An Exploration Stage Company)
Notes to the Financial Statements
5.
Related Party Transactions
a)
As at March 31, 2014, the Company owed $46,919 (December 31, 2013 - $42,069) to the President and Director of the Company. The amount owing is unsecured, non-interest bearing, and due on demand.
b)
During the period ended March 31, 2014, the Company incurred $6,000 (December 31, 2013 - $24,000) of management fees to the President and Director of the Company. The Company is committed to monthly management fees of $1,000 until such time as the agreement is cancelled by the President and Director or by the Company. During August 2011, the agreement was amended increasing the management fee to $2,000 per month.
c)
During the period ended March 31, 2014, the Company paid $1,150 to the President and Director of the Company.
6.
Common Shares
a)
On February 12, 2014, the Company entered into an agreement to issue 200,000 common shares at $0.049 per share to a member of the Company’s Board of Advisors for services relating to business and technology strategy issues. The common shares were issued on March 6, 2014. The common shares were valued using the end-of-day trading price for the Company’s common shares on the agreement date.
b)
On March 12, 2014, the Company issued 4,000,000 common shares with a fair value of $396,000 to Windward International, LLC for the license agreement as noted in Note 4. The common shares were valued using the end-of-day trading price for the Company’s common shares on the agreement date.
7.
Subsequent Events
We have evaluated subsequent events through to the date of issuance of the financial statements, and did not have any material recognizable subsequent events after March 31, 2014 with the exception of the following:
a)
On April 14, 2014, the Company entered into a Letter of Intent with Weed Media to purchase marketing and consulting services to develop the iWeedz website. Under the terms of the Letter of Intent, the Company shall issue a total of 100,000 shares with a fair value based on the end of day trading price of the Company’s common stock on the date of issuance, and marketing and development cost of $2,000 per month. As of the date of this Report, the Letter of Intent has expired and no shares have been issued.
b)
On April 25, 2014, the Company entered into a loan agreement with a non-related party for proceeds of $7,500. The amount owing is unsecured, due interest at 10% per annum, and is due on April 25, 2016. The loan is convertible into common shares of the Company at a conversion price of $0.005 per share.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
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.
RESULTS OF OPERATIONS
Working Capital
| March 31, 2014 $ | December 31, 2013 $ |
Current Assets | 809 | 4,524 |
Current Liabilities | 318,093 | 308,734 |
Working Capital (Deficit) | (317,284) | (304,210) |
Cash Flows
| Three months ended March 31, 2014 $ | Three months ended March 31, 2013 $ |
Cash Flows from (used in) Operating Activities | (13,715) | (10,095) |
Cash Flows from (used in) Investing Activities | - | - |
Cash Flows from (used in) Financing Activities | 10,000 | 10,095 |
Net Increase (decrease) in Cash during period | (3,715) | - |
Operating Revenues
From November 2, 2006 (date of inception) to March 31, 2014, the Company did not record any revenues.
Operating Expenses and Net Loss
Operating expenses for the three months ended March 31, 2014 was $424,490 compared to $19,645 for the three months ended March 31, 2013. The increase in operating expenses was due to license fees of $396,000 relating to the issuance of 4,000,000 common shares for the acquisition of licenses and trademarks, which were valued using the end-of-day trading price of the Company’s common shares on the date of issuance. In addition, the Company incurred consulting fees of $9,800 for director services, and an increase of $3,000 in professional fees relating to increased legal costs.
Net loss for the three months ended March 31, 2014 was $431,219 compared with a net loss of $23,454 for the three months ended March 31, 2013. In addition to operating expenses, the Company incurred interest and accretion expense of $6,729 (2013 - $3,809) relating to the costs from outstanding notes payable, which are unsecured and due interest at 10% per annum.
12
Liquidity and Capital Resources
As at March 31, 2014, the Company’s cash balance and total assets were $809 compared to $4,524 as at December 31, 2013. The decrease in cash and total assets were due to the use of funds for operating activity, as the Company only raised $10,000 in financing to support operating costs.
As at March 31, 2014, the Company had total liabilities of $320,008 compared with total liabilities of $309,170 as at December 31, 2013. The increase in total liabilities was due to an increase of $4,509 in accounts payable and accrued liabilities relating to the timing difference and the lack of sufficient cash flow to repay outstanding obligations as they became due, increase of $4,850 in amounts to related parties for unpaid management fees, and an increase in notes payable of $1,915 after accounting for unamortized discount of a note payable with a face value of $10,000 that is unsecured, bears interest at 10% per annum, and is due on February 5, 2016.
As at March 31, 2014, the Company had a working capital deficit of $317,284 compared with a working capital deficit of $304,210 as at December 31, 2013. The increase in working capital deficit was due to the use of cash on hand during the year, and the fact that proceeds received from financing activities were used to repay outstanding operating obligations of the Company.
Cashflow from Operating Activities
During the three months ended March 31, 2014, the Company used $13,715 of cash for operating activities compared to the use of $10,095 of cash for operating activities during the three months ended March 31, 2013. The decrease in cash used for operating activities is due to the fact that the Company had limited cash flows and only raised $10,000 in proceeds from financing activities during the period.
Cashflow from Investing Activities
During the three months ended March 31, 2014 and 2013, the Company did not have any investing activities.
Cashflow from Financing Activities
During the three months ended March 31, 2014, the Company received proceeds of $10,000 in financing activities from the issuance of a note payable, which is unsecured, bears interest at 10% per annum, and is due on February 5, 2016. During the three months ended March 31, 2013, the Company received proceeds of $10,095 relating from the issuance of a note payable from a related party.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
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.
13
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2014, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on April 4, 2014, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Changes in Internal Control over Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
14
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A.
RISK FACTORS
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.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
1.
Quarterly Issuances:
On February 12, 2014, the Company entered into an agreement to issue 200,000 common shares at $0.049 per share to a member of the Company’s Board of Advisors for services relating to business and technology strategy issues. The common shares were issued on March 6, 2014. The common shares were valued using the end-of-day trading price for the Company’s common shares on the agreement date.
On March 12, 2014, the Company issued 4,000,000 common shares with a fair value of $396,000 to Windward International, LLC for the license agreement as noted in Note 4. The common shares were valued using the end-of-day trading price for the Company’s common shares on the agreement date.
2.
Subsequent Issuances:
Subsequent to the quarter, we did not issue any unregistered securities other than as previously disclosed.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
EXHIBITS
Exhibit Number | Description of Exhibit | Filing |
3.01 | Articles of Incorporation | Filed with the SEC on July 30, 2007 as part of our Registration Statement on Form SB-2. |
3.02 | Bylaws | Filed with the SEC on July 30, 2007 as part of our Registration Statement on Form SB-2. |
10.01 | Assignment Agreement between the Company and Marino Specogna dated May 10, 2010 | Filed with the SEC on May 13, 2010 as part of our Current Report on Form 8-K. |
10.02 | Promissory Note between the Company and Tucker Investments dated February 23, 2011 | Filed with the SEC on April 12, 2012 as part of our Annual Report on Form 10-K. |
10.03 | Subscription Agreement between the Company and Enavest Internacional S.A. dated May 20, 2011 | Filed with the SEC on June 15, 2011 as part of our Annual Report on Form 8-K. |
10.04 | Promissory Note with Pop Holdings Ltd. Dated April 25, 2012 | Filed with the SEC on May 11, 2012 as part of our Quarterly Report on Form 10-Q. |
10.05 | Promissory Note with Pop Holdings Ltd. dated April 25, 2012 | Filed with the SEC on May 11, 2012 as part of our Quarterly Report on Form 10-Q. |
10.06 | Promissory Note with Pop Holdings Ltd. dated May 14, 2012 | Filed with the SEC on September 12, 2012 as part of our Quarterly Report on Form 10-Q. |
10.07 | Promissory Note with Pop Holdings Ltd. dated November 16, 2012 | Filed with the SEC on November 19, 2012 as part of our Quarterly Report on Form 10-Q. |
16
10.08 | Promissory Note with Robert Seeley dated February 4, 2013 | Filed with the SEC on April 15, 2013 as part of our Annual Report on Form 10-K. |
10.09 | Promissory Note with Pop Holdings Ltd. dated February 13, 2013 | Filed with the SEC on April 15, 2013 as part of our Annual Report on Form 10-K. |
10.10 | Promissory Note with Pop Holdings Ltd. dated May 29, 2013 | Filed with the SEC on August 12, 2013 as part of our Quarterly Report on Form 10-Q. |
10.11 | Promissory Note with Aspir Corporation dated August 2, 2013 | Filed with the SEC on November 8, 2013 as part of our Quarterly Report on Form 10-Q. |
10.12 | Promissory Note with Aspir Corporation dated September 5, 2013 | Filed with the SEC on November 8, 2013 as part of our Quarterly Report on Form 10-Q. |
10.13 | Convertible Promissory Note with Robert Seeley dated November 8, 2013 | Filed with the SEC on April 4, 2014 as part of our Annual Report on Form 10-K. |
10.14 | Convertible Promissory Note with Robert Seeley dated February 5, 2014 | Filed with the SEC on April 4, 2014 as part of our Annual Report on Form 10-K. |
10.15 | Advisory Board Agreement with Todd Ellison dated February 12, 2014 | Filed with the SEC on April 4, 2014 as part of our Annual Report on Form 10-K. |
10.16 | Patent, Technical Information and Trade Mark License Agreement with Windward International LLC dated March 12, 2014 | Filed with the SEC on April 4, 2014 as part of our Annual Report on Form 10-K. |
10.17 | Convertible Promissory Note with Robert Seeley dated April 25, 2014 | Filed herewith. |
14.01 | Code of Ethics | Filed with the SEC on March 29, 2011, as part of our Annual Report on Form 10-K. |
16.01 | Letter from Malone & Bailey, LLP dated March 9, 2010 | Filed with the SEC on March 9, 2010 as part of our Current Report on Form 8-K. |
31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. |
31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. |
32.01 | CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. |
101.INS* | XBRL Instance Document | Filed herewith. |
101.SCH* | XBRL Taxonomy Extension Schema Document | Filed herewith. |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. |
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document | Filed herewith. |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. |
*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
17
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
| ROSTOCK VENTURES CORP. |
Dated: May 20, 2014 |
| /s/ Gregory Rotelli |
|
| By: GREGORY ROTELLI |
|
| Its: President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary and Treasurer |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Dated: May 20, 2014 | /s/ Gregory Rotelli |
| By: GREGORY ROTELLI Its: Director |
18