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 September 30, 2014
Commission file number 0-54856
DYNAMIC
APPLICATIONS CORP.
(Exact Name Of Registrant
As Specified In Its Charter)
| Delaware | 98-0573566 |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| 14 Sha'arey Nikanor Street, Tel-Aviv, Israel | 68032 |
| (Address of Principal Executive Offices) | (ZIP Code) |
Registrant's Telephone Number, Including Area Code: +(972) 3-7523922
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 is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company .
| Large accelerated filer ¨ | Accelerated filer ¨ | Non-Accelerated filer ¨ | Smaller reporting company x |
On November 14, 2014, the Registrant had 63,036,078 shares of common stock issued and outstanding.
| Item |
Description |
Page |
|||
|---|---|---|---|---|---|
PART I - FINANCIAL INFORMATION |
|||||
| ITEM 1. | FINANCIAL STATEMENTS | 3 | |||
| Balance Sheets | 4 | ||||
| Statements of Operations | 5 | ||||
| Statements of Cash Flows | 6 | ||||
| Notes to Financial Statements | 7 | ||||
| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS. | 8 | |||
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 10 | |||
| ITEM 4. | CONTROLS AND PROCEDURES. | 10 | |||
PART II - OTHER INFORMATION |
|||||
| ITEM 1. | LEGAL PROCEEDINGS. | 11 | |||
| ITEM 1A. | RISK FACTORS. | 11 | |||
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 11 | |||
| ITEM 3. | DEFAULT UPON SENIOR SECURITIES. | 11 | |||
| ITEM 4. | MINE SAFETY DISCLOSURE. | 11 | |||
| ITEM 5. | OTHER INFORMATION. | 11 | |||
| ITEM 6. | EXHIBITS. | 11 | |||
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Back to Table of Contents
| Dynamic Applications Corp. | ||||
| (A Development Stage Company) | ||||
| Balance Sheets | ||||
| Back to Table of Contents | ||||
| September 30, 2014 | ||||
| (Unaudited) | December 31, 2013 |
|||
ASSETS |
||||
| Current assets: | ||||
| Cash | $ | 1,389,368 | $ | 2,469 |
| Total current assets | 1,389,368 | 2,469 | ||
| Property and equipment, net | 25,675 | - | ||
| Other assets | 21,966 | - | ||
| Total Assets | $ | 1,437,009 | $ | 2,469 |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
||||
| Current liabilities: | ||||
| Accounts payable -trade | $ | 12,158 | $ | - |
| Accrued expenses | 40,052 | 4,000 | ||
| Accrued interest | - | 13,863 | ||
| Advances payable to related parties | 28,436 | 28,436 | ||
| Convertible notes payable, net of discount | - | 81,880 | ||
| Total current liabilities | 80,646 | 128,179 | ||
| Total liabilities | 80,646 | 128,179 | ||
| Stockholders' equity (deficit): | ||||
| Preferred stock, $0.00001 par value; 20,000,000 shares authorized; none issued and outstanding | - | - | ||
| Common stock, $0.00001 par value; 500,000,000 shares authorized; and | ||||
| 63,036,078 and 21,641,450 issued and outstanding at Sept. 30, 2014 and Dec. 31, 2013, respectively | 632 | 217 | ||
| Additional paid in capital | 6,934,876 | 697,278 | ||
| Deficit accumulated during development stage | (5,579,145) | (823,205) | ||
| Total stockholders' equity (deficit) | 1,356,363 | (125,710) | ||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 1,437,009 | $ |
2,469 |
| See notes to unaudited interim financial statements. | ||||
| Dynamic Applications Corp. | ||||||||||
| (A Development Stage Company) | ||||||||||
| Statements of Operations | ||||||||||
| For the Three and Nine-Month Periods Ended September 30, 2014 and 2013 and From Inception (March 7, 2008) to September 30, 2014 | ||||||||||
| (Unaudited) | ||||||||||
| Back to Table of Contents | ||||||||||
For the period |
||||||||||
For the three |
For the three |
For the nine |
For the nine |
from Inception |
||||||
Months ended |
Months ended |
Months ended |
Months ended |
(March 7, 2008) to |
||||||
September 30, 2014 |
September 30, 2013 |
September 30, 2014 |
September 30, 2013 |
September 30, 2014 |
||||||
Revenues |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
| Expenses | ||||||||||
| General and administrative | 4,353,771 |
13,690 |
4,718,983 |
222,192 |
5,345,274 |
|||||
| Research and development | - |
- |
- |
- |
45,000 |
|||||
| (Loss) from operations | (4,353,771) | (13,690) | (4,718,983) | (222,192) | (5,390,274) | |||||
| Other income (expense) | ||||||||||
| Loss on foreign currency transactions | - | - | - | - | (5,014) | |||||
| Interest income (expense) | - | (4,061) | (2,923) | (10,749) | (28,320) | |||||
| Amortization of debt discount | - | (24,040) | (34,034) | (50,047) | (155,537) | |||||
| Total other income (expense) | - |
(28,101) |
(36,957) |
(60,796) |
(188,871) |
|||||
| Total costs and expenses | (4,353,771) | (41,791) | (4,755,940) | (282,988) | (5,579,145) | |||||
| Net loss before income taxes | (4,353,771) | (41,791) | (4,755,940) | (282,988) | (5,579,145) | |||||
| Income tax | - |
- |
- |
- |
- |
|||||
| Net loss | $ |
(4,353,771) |
$ |
(41,791) |
$ |
(4,755,940) |
$ |
(282,988) |
$ |
(5,579,145) |
| Basic and diluted per share amounts: | ||||||||||
| Basic and diluted net loss | $ |
(0.07) |
$ |
(0.00) |
$ |
(0.10) |
$ | (0.02) |
||
| Weighted average shares outstanding | ||||||||||
| (basic and diluted) | 59,156,164 |
21,641,450 |
$ |
45,502,721 |
$ | 18,084,527 |
||||
| See notes to unaudited interim financial statements. | ||||||||||
Dynamic Applications Corp. |
||||||
(A Development Stage Company) |
||||||
For the Nine-Month Periods Ended September 30, 2014 and 2013 and From Inception (March 7, 2008) to September 30, 2014 |
||||||
(Unaudited) |
||||||
For the Nine |
For the Nine |
For the period from | ||||
Months ended |
Months ended |
Inception (March 7, 2008) | ||||
September 30, 2014 |
September 30, 2013 |
to September 30, 2014 | ||||
Cash flows from operating activities: |
||||||
| Net loss | $ |
(4,755,940) |
$ |
(282,988) |
$ |
(5,579,145) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Contributed capital | (6,766) | 50,047 | (6,766) | |||
| Amortization of debt discount | 34,034 | 50,047 | 155,537 | |||
| Depreciation | 788 | 50,047 | 788 | |||
| Common stock issued for services | 513,000 | 28,000 | 556,000 | |||
| Fair value of warrants issued for services | 3,857,135 | 107,074 | 3,964,209 | |||
| Changes in net assets and liabilities: | ||||||
| (Increase) decrease in current assets | (21,966) | 28,000 | (21,966) | |||
| Increase (decrease) in accounts payable | 12,158 | 28,000 | 12,158 | |||
| Increase (decrease) in accrued expenses | 38,920 |
15,210 |
68,779 |
|||
| Cash used in operating activities | (328,637) |
(82,657) |
(850,406) |
|||
| Cash flow from investing activities: | ||||||
| Purchase of equipment | (26,463) | - | (26,463) | |||
| Cash used in investing activities | (26,463) |
- |
(26,646) |
|||
| Cash flow from financing activities: | ||||||
| Proceeds from issuance of common stock | 1,741,999 | 55 | 2,081,887 | |||
| Proceeds of debt borrowings | 14,500 | 82,614 | 170,414 | |||
| Principal payments | (14,500) | - | 13,936 | |||
| Cash provided by financing activities | 1,741,999 |
82,669 |
2,266,237 |
|||
| Change in cash | 1,386,899 |
12 |
1,389,368 |
|||
| Cash - beginning of period | 2,469 |
8,101 |
- |
|||
| Cash - end of period | $ |
1,389,368 |
$ |
8,113 |
$ |
1,389,368 |
| See notes to unaudited interim financial statements. | ||||||
| Supplement cash flow information: | ||||||
| Debt discount arising from beneficial conversion feature | $ | - | $ | 82,614 | $ | 155,914 |
| Debt and accrued interest converted to equity | $ | 132,642 | $ | 51,620 | $ | 182,469 |
DYNAMIC APPLICATIONS CORP. 1. The Company and Significant Accounting Policies Organizational Background: Dynamic Applications Corp. ("Dynamic
Applications" or the "Company") a development stage company incorporated
under the laws of the State of Delaware on March 7, 2008. The business of
the Company includes: (i) continuing to work with GUMI Tel-Aviv, a major,
privately-held Israeli technology company ("GUMI"), in the manufacture and
marketing of commercial model(s) of the Company's Patented Percussion
Device, the Company's core business since 2013; and (ii) developing the
business of One World Cannabis Ltd ("OWC"). The Company's newly-organized,
wholly-owned Israeli subsidiary, which will be engaged in medical research
and clinical trials, working with established Israeli hospitals and
universities, on the efficacy of non-psychoactive medical cannabis on the
treatment of, among other illnesses/medical conditions, PTSD, diabetes,
Parkinson's disease, children's epilepsy, prostate cancer, psoriasis and
topical treatment of burns. Basis of Presentation: The accompanying financial statements have
been prepared in conformity with accounting principles generally accepted in
the United States of America, which contemplate continuation of the Company
as a going concern. The Company has not established any source of revenue to
cover its operating costs, and as such, has incurred an operating loss since
inception. These and other factors raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern. Development Stage The Company complies with Statement of Financial Accounting Standard ASC
915-15 and the Securities and Exchange Commission Exchange Act 7 for its
characterization of the Company as development stage. Principles of Consolidation The 2014 financial statements include the accounts of Dynamic
Applications Corp. and its wholly owned subsidiary One World Cannabis, Inc.
(OWC). All significant inter-company balances and transactions have been
eliminated. Significant Accounting Policies Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statement and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from the estimates.
Fair Value Measurements at September 30, 2014 Quoted Prices in Active Significant Other Significant Markets for Identical Assets Observable Inputs Unobservable Inputs Total (Level 1) (Level 2) (Level 3) $ - $ $ - $ - $ - $ $ - $ - Fair Value Measurements at December 31, 2013 Quoted Prices
in Active Significant
Other Significant Markets for
Identical Assets Observable
Inputs Unobservable
Inputs Total (Level 1) (Level 2) (Level 3) $ - $ $ - $ - $ - $ $ - $ - When the Company changes its valuation inputs for measuring financial
assets and liabilities at fair value, either due to changes in current
market conditions or other factors, it may need to transfer those assets or
liabilities to another level in the hierarchy based on the new inputs used.
The Company recognizes these transfers at the end of the reporting period
that the transfers occur. For the fiscal periods ended September 30, 2014
and December 31, 2013, there were no significant transfers of financial
assets or financial liabilities between the hierarchy levels. Income Taxes: We have adopted ASC 740, Accounting for Income
Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits
for net operating losses carried forward. The potential benefits of net
operating losses have not been recognized in these financial statements
because the Company cannot be assured it is more likely than not it will
utilize the net operating losses carried forward in future years. Deferred tax assets and liabilities are determined based on the
differences between financial reporting and the tax basis of assets and
liabilities using the tax rates and laws in effect when the differences are
expected to reverse. ASC 740 provides for the recognition of deferred tax
assets if realization of such assets is more likely than not to occur.
Realization of our net deferred tax assets is dependent upon our generating
sufficient taxable income in future years in appropriate tax jurisdictions
to realize benefit from the reversal of temporary differences and from net
operating loss, or NOL, carryforwards. We have determined it more likely
than not that these timing differences will not materialize and have
provided a valuation allowance against substantially all of our net deferred
tax asset. Management will continue to evaluate the realizability of the deferred
tax asset and its related valuation allowance. If our assessment of the
deferred tax assets or the corresponding valuation allowance were to change,
we would record the related adjustment to income during the period in which
we make the determination. Our tax rate may also vary based on our results
and the mix of income or loss in domestic and foreign tax jurisdictions in
which we operate. In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
liabilities for anticipated tax audit issues in the U.S. and other tax
jurisdictions based on our estimate of whether, and to the extent to which,
additional taxes will be due. If we ultimately determine that payment of
these amounts is unnecessary, we will reverse the liability and recognize a
tax benefit during the period in which we determine that the liability is no
longer necessary. We will record an additional charge in our provision for
taxes in the period in which we determine that the recorded tax liability is
less than we expect the ultimate assessment to be. ASC 740 which requires recognition of estimated income taxes payable or
refundable on income tax returns for the current year and for the estimated
future tax effect attributable to temporary differences and carry-forwards.
Measurement of deferred income tax is based on enacted tax laws including
tax rates, with the measurement of deferred income tax assets being reduced
by available tax benefits not expected to be realized. Uncertain Tax Positions: When tax returns are filed, it is highly
certain that some positions taken would be sustained upon examination by the
taxing authorities, while others are subject to uncertainty about the merits
of the position taken or the amount of the position that would be ultimately
sustained. In accordance with the guidance of FASB ASC 740-10, Accounting
for Uncertain Income Tax Positions, the benefit of a tax position is
recognized in the financial statements in the period during which, based on
all available evidence, management believes it is more likely than not that
the position will be sustained upon examination, including the resolution of
appeals or litigation processes, if any. Tax positions taken are not offset
or aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest
amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the
benefits associated with tax positions taken that exceeds the amount
measured as described above should be reflected as a liability for
unrecognized tax benefits in the accompanying consolidated balance sheets
along with any associated interest and penalties that would be payable to
the taxing authorities upon examination. Our federal and state income tax returns are open for fiscal years ending
on or after December 31, 2010. We are not under examination by any
jurisdiction for any tax year. At December 31, 2013 we had no material
unrecognized tax benefits and no adjustments to liabilities or operations
were required under FASB ASC 740-10. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial
Statements - Going Concern . The new standard requires management of public
and private companies to evaluate whether there is substantial doubt about
the entity's ability to continue as a going concern and, if so, disclose
that fact. Management will also be required to evaluate and disclose whether
its plans alleviate that doubt. The standard requires management to
evaluate, for each reporting period, whether there are conditions or events
that raise substantial doubt about a company's ability to continue as a
going concern within one year from the date the financial statements are
issued. The new standard is effective for annual periods ending after
December 15, 2016, and interim periods within annual periods beginning after
December 15, 2016. Early adoption is permitted. We do not expect the
adoption of the ASU to have a significant impact on our consolidated
financial statements. In February 2013, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2013002, Comprehensive Income (Topic
220): Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income, to improve the transparency of reporting these
reclassifications. Other comprehensive income includes gains and losses that
are initially excluded from net income for an accounting period. Those gains
and losses are later reclassified out of accumulated other comprehensive
income into net income. The amendments in the ASU do not change the current
requirements for reporting net income or other comprehensive income in
financial statements. All of the information that this ASU requires already
is required to be disclosed elsewhere in the financial statements under U.S.
GAAP. The new amendments will require an organization to: - Present (either on the face of the statement where net income is
presented or in the notes) the effects on the line items of net income of
significant amounts reclassified out of accumulated other comprehensive
income - but only if the item reclassified is required under U.S. GAAP to be
reclassified to net income in its entirety in the same reporting period; and The amendments apply to all public and private companies that report
items of other comprehensive income. Public companies are required to comply
with these amendments for all reporting periods (interim and annual). The
amendments are effective for reporting periods beginning after December 15,
2012, for public companies. Early adoption is permitted. The adoption of ASU
No. 2013002 is not expected to have a material impact on our financial
position or results of operations. Management does not anticipate that the adoption of these standards will
have a material impact on the financial statements. The Financial Statements presented herein have been prepared by us in
accordance with the accounting policies described in our December 31, 2013
Annual Report and should be read in conjunction with the Notes to Financial
Statements which appear in that report. 2. Stockholders' Equity Common Stock Recent Issuances of Common Stock-for the Period Ended September 30,
2014: The fair value of the options was estimated at the date of grant using
the Black-Sholes-Merton pricing model. The Black-Sholes-Merton pricing model
assumptions used are as follows: expected dividend yield of 0%; risk-free
interest rate of 0.47% to 0.49%; expected volatility of 241%, and warrant
term of two years. Stock Issued upon conversion of debt- On July 1, 2014 we issued 179,300
shares of our common stock in settlement of $1,500 in convertible note
payable plus associated accrued interest of $293. The conversion occurred
within the terms of the promissory note and no gain or loss resulted. On
February 28, 2014 we issued 13,084,000 shares of our common stock in
settlement of $114,414 in convertible note payable plus associated accrued
interest of $16,435. The conversion occurred within the terms of the
promissory note and no gain or loss resulted. Options Issued for services: During the interim period ended
September 30, 2014 we issued 14,350,000 common stock options. 350,000 of
those options valued at $82,640 were granted to former related parties while
14,000,000 options valued at $3,774,496 were granted for services provided
by unrelated parties. The fair value of the options was estimated at the date of grant using
the Black-Sholes-Merton pricing model. The Black-Sholes-Merton pricing model
assumptions used are as follows: expected dividend yield of 0%; risk-free
interest rate of 0.47% to 0.49%; expected volatility of 241%, and warrant
term of two years. Warrants As part of the June 2014 unit offering the Company issued a total of
12,936,662 warrants to purchase up to 12,936,662 shares of common stock at
$0.16 per share. 3. Related Party Transactions not Disclosed Elsewhere Due Related Parties: Amounts due related parties consist of
corporate reinstatement and regulatory compliance expenses paid directly by
a director of the company and unpaid compensation. Such items totaled
$28,436 at September 30, 2014 and December 31, 2013, respectively. The
advances are not formalized by a written agreement and do not carry a
specific date of payment and are non-interest bearing. 4. Notes Payable Current Reporting Period - for the Interim Period Ended September 30,
2014: Unsecured Notes Payable (no conversion rights): During 2014 the
Company signed a series of three new unsecured promissory notes with
unrelated parties for an aggregate of $14,500. The notes bear interest at 1%
per annum and are due one year from the date of issuance. The notes were
paid in full during the quarter ended September 30, 2014. Historical Activity Prior to 2014: In August, 2011 we issued a $40,000 convertible promissory note. The
note, which has a maturity date of December 31, 2013, bears interest at 15%
per annum until paid or converted. The note is convertible at the option of
the holder at any time and from time to time, on or after June 30, 2013,
into our common stock at a fixed conversion price of $0.01 per share. The convertible debt security was issued with a non-detachable conversion
feature. We evaluate and account for such securities in accordance with ASC
470020, "Debt - Debt with Conversion and Other Options". The note was
considered to have an embedded beneficial conversion feature because the
effective conversion price was less than the quoted market price at the time
of the issuance. This resulted in a discount to the carrying amount of the
note equal to: - the difference between the effective conversion rate and the market
price of our common stock on the date of issuance; multiplied by The value of the beneficial conversion feature was recorded as a discount
to the note which was amortized over the term of the note using the
effective interest method. Amortization of $12,055 of the discount arising
from the beneficial conversion feature of was included in interest expense
during the fiscal period ended December 31, 2011 and $27,945 in 2012. During 2012 the Company signed a series of seven promissory notes with
unrelated parties for an aggregate of $29,800. The notes bear interest at
15% per annum and are due approximately one year from the date of issuance.
The notes have conversion rights that allow the holder of the note to
convert the principal balance into the Company's common stock at any time
after June 30, 2013 at the lender's sole discretion at $0.01 per share. During 2013 the Company signed a series of thirteen new unsecured
promissory notes with unrelated parties for an aggregate of $86,114. The
notes bear interest at 12%-15% per annum and are due approximately one year
from the date of issuance. The maturity dates range from February 6, 2014 to
December 6, 2014 with all amounts recorded as current liabilities. The notes
have conversion rights that allow the holder of the note to convert the
principal balance into the Company's common stock at the lender's sole
discretion at $0.01 per share. One note for $20,000 was accompanied by
550,000 detachable warrants (the L&L warrants). The warrants were valued
using the Black-Scholes option pricing model. The inputs for the valuation
analysis of the warrants include the market value of the Company's common
stock on the date of grant, the estimated volatility of the Company's common
stock (194%), the exercise price of $0.00001 and the risk free interest rate
of 0.11%. In accordance with ASC 470, the Company has analyzed the beneficial
nature of the conversion terms and determined that a beneficial conversion
feature (BCF) exists. The Company calculated the value of the BCF using the
intrinsic method as stipulated in ASC 470. The BCF has been recorded as a
discount to the notes payable and to Additional Paid-in Capital. As of
December 31, 2013, the aggregate balance of convertible notes payable was
$81,880 net of unamortized discounts of $34,034. As of September 30, 2014, the Company is not in default on any of its
debt covenants with respect to the three non-convertible notes receivable. 5. Future Commitment and Issuance of Warrants On March 5, 2013, the Company and GUMI Tel Aviv Ltd, a major,
privately-held Israeli technology company ("GUMI"), entered into
development/manufacturing/marketing agreement ("GUMI Agreement"). GUMI is
engaged in the manufacture, import/export, marketing and install industrial
equipment and designing technical solutions. Pursuant to the GUMI Agreement, GUMI agreed to: (i) complete the
development of the Prototype of the Patented Device; (ii) manufacture the
commercial model(s) of the Patented device; and (iii) market the commercial
model(s) of the Patented Device. In consideration for developing the Prototype and manufacturing and
marketing/distributing commercial models of the Patented Device as well as
incurring all related costs and expenses in connection therewith, the
Company shall compensate GUMI as follows: (i) upon the execution of the GUMI
Agreement, the Company granted GUMI warrants (the "Warrants") exercisable to
purchase 200,000 shares of the Company's common stock ("Warrant Shares") at
an exercise price of USD$0.05 per share (the "Exercise Price"); (ii) upon
completion of the Prototype, granting GUMI additional Warrants to purchase
200,000 additional Warrant Shares at the Exercise Price; and (iii) upon
completion of a Commercial Device ready for manufacture and sale, granting
GUMI additional Warrants to purchase 200,000 additional Warrant Shares at
the Exercise Price. The Warrants shall expire 3 years from the date of each
grant and shall be subject to adjustment in the event of any
recapitalization of the Company's capital stock. In addition to the consideration represented by the grant of Warrants,
the Agreement further provides that following commencement of sale of the
Commercial Device and until such time that GUMI has recouped all costs and
expenses that it has incurred and paid in connection with the completion of
development of the Prototype and the manufacture of the Commercial Device
("Date of Recoupment"), one hundred (100%) percent of the net sales revenues
shall be paid and distributed to GUMI. On and after the Date of Recoupment,
net sales revenues shall be paid sixty-five (65%) percent to GUMI and
thirty-five (35%) percent to the Company. The Company recorded $107,074 in fiscal year 2013 in expenses related to
600,000 vested warrants previously granted to GUMI Tel Aviv Ltd. The
warrants were valued using the Black-Scholes option pricing model. The
inputs for the valuation analysis of the warrants include the market value
of the Company's common stock were as follows: the estimated volatility of
the Company's common stock used in the Black-Scholes option pricing model
was 318%, the exercise price and the risk free interest rate used were $0.05
and 0.36%, respectively. All warrants are fully vested. 6. Development Stage Activities and Going Concern The Company has been in the development stage since inception. The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. The
Company has not established any source of revenue to cover its operating
costs, and as such, has incurred an operating loss since inception. Further,
as of September 30, 2014, the cash resources of the Company were
insufficient to meet its current business plan. These and other factors
raise substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of asset or the amounts and classification of liabilities
that may result from the possible inability of the Company to continue as a
going concern. 7. Subsequent Events There were no subsequent events following the period ended September 30,
2014 and throughout the date of the filing of Form 10-Q. ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION Back to Table of Contents The following discussion contains forward-looking statements.
Forward-looking statements give our current expectations or forecasts of future events.
You can identify these statements by the fact that they do not relate strictly to
historical or current facts. They use of words such as "anticipate",
"estimate", "expect", "project", "intend",
"plan", "believe", and other words and terms of similar meaning in
connection with any discussion of future operating or financial performance. From time to
time, we also may provide forward-looking statements in other materials we release to the
public. Plan of Operation We are a development stage company engaged in two
distinct business operations: (i) continuing to work with GUMI Tel-Aviv, a
major, privately-held Israeli technology company ("GUMI"), in the
manufacture and marketing of commercial model(s) of the Company's Patented
Electromagnetic Percussion Device, the Company's core business since 2013;
and (ii) developing the operations of the Company's newly-organized,
wholly-owned subsidiary, One World Cannabis Ltd, organized under the laws of
the State of Israel on July 6, 2014 ("OWC"), which will be engaged in the
business working with established Israeli hospitals and universities in
medical research and clinical trials on the efficacy of non-psychoactive
medical cannabis on the treatment of, among other illnesses/medical
conditions, post-traumatic stress disorder (PTSD) diabetes, Parkinson's
disease, children's epilepsy, prostate cancer, psoriasis and topical
treatment of burns. In 2008, we acquired the patent for our Electromagnetic
Percussion Device (the "Device") and from 2008 until 2011, we devoted
minimal resources and efforts to development of our Device because of lack
of necessary resources. During late 2011 and into 2012, we renewed our
interest in pursuing development of our Device and, subsequent to our
year-ended December 31, 2012, we entered into an agreement with GUMI to
develop the Device prototype, which was successfully completed. GUMI has
also completed the manufacture of several commercial models of the Device
that GUMI is presently devoting resources to market under the terms of our
agreement. We continue to be dependent upon the ability of GUMI to
successfully market our Device, which process has started. However, we have
not yet derived any revenues from GUMI's on-going marketing efforts, which
commenced in late 2013 and are continuing in 2014. Our auditors have issued an opinion on our financial
statements which includes a statement describing concern about our ability
to continue as a going concern. Our plan during 2013 contemplated that if and when we
began to generate revenues from our Device, together with our belief in our
ability to raise debt and/or equity funding from both affiliated persons and
from unaffiliated third parties, neither of which could be assured, we
planned to hopefully generate revenues by entering into joint ventures or
other business arrangements with third parties engaged in technology
development. During the first quarter of 2014, we were introduced by
shareholders to unaffiliated third-parties who were conducting research on
non-psychoactive cannabinoids for potential use in the treatment of a
variety of medical illnesses, with the view of commencing clinical trials.
Following these introductions, our management determined to organize One
World Cannabis (OWC) in Israel on July 6, 2014. The Company intends that OWC
be at the forefront of conducting research and clinical trials of medical
cannabis in full compliance with all applicable international regulatory
protocols necessary to develop and improve strains of cannabinoids
specifically designed for medical treatment. While the Company has relied and will continue to rely
upon GUMI's personnel and financial resources for the development,
manufacture and marketing of the Company's Device, the Company has utilized
and will continue to utilize the capital it has raised and will continue to
raise to fund OWC's business including the assembly of a professional team
of highly-qualified medical/scientific experts together with experienced
management and marketing executives to develop and grow OWC's business. OWC's medical/scientific team is comprised of the
following: (i) Dr. Alan Shackelford, a resident of Colorado and OWC's
newly-appointed Chief Science Officer, who is a leading U.S. physician
specializing in the field of the study and use of non-psychoactive
cannabinoids in the treatment of a wide variety of illnesses and health
conditions; (ii) Dr. Yehuda Baruch, the former director and leader of
Israel's medical cannabis program under the Ministry of Health and current
CEO of Abarbanel Hospital, located in Bat Yam/Tel-Aviv, Israel; and (iii)
OWC's newly-appointed Chief Operating Officer, responsible for coordinating
OWC's agreements with leading hospitals and medical institutions and retired
Lt. Colonel who commanded emergency medical facilities for the IDF. The medical/scientific management team will work in
conjunction with: (i) Mr. Ziv Turner, OWC's Chief Executive Officer, with
over 20 years of experience in the telecommunication industry including
business development and marketing for both the private and public sectors;
and (ii) Mr. Uri Glazer, an Israeli entrepreneur and media expert involved
in, among other projects, Accessibility Law and Medican Cannabis regulations
in Israel. OWC's business plan is to: (i) establish regulated
medical cannabinoid systems for medical institutions based upon the
regulated Israeli model; (ii) promote the establishment of local and
international research facilities for the study and commercial application
of medical cannabis; (iii) establish a medical cannabis research institute
in Israel in compliance with existing Israeli laws and regulations with
international branches; (iv) raise grants for medical cannabis research; (v)
develop new use and means of administration of medical cannabis. During the
period from March through September 30, 2014, we successfully raised a total
of $1,741,999 in proceeds from the issuance of shares to investors for the
principal purpose of funding OWC's operations including the planned clinical
trials to be conducted in conjunction with several major Israeli hospitals,
which trials are expected to commence during the fourth quarter of 2014. Results of Operations during the three months ended
September 30, 2014 as compared to the three months ended September 30, 2013 We have not generated any revenues since inception. We have operating expenses related
to general and administrative expenses being a public company and interest expenses.
During the three-month period ended September 30, 2014, we had a net loss of $4,353,771
compared to a net loss of $41,791 during the same period in the prior year. Our
net loss was principally due to a non-cash compensation expense of $4,044,135
related to the issuance of shares and warrants for services. We incurred other general and administrative expenses of $309,636
during the three months ended September 30, 2014 compared to $13,690 in the same
period in the prior year. We had neither interest income nor expense during the three months
ended September 30, 2014 compared to an interest expense of $4,061 during the
three months ended September 30, 2014. We had no expense related to the
amortization of debt discount during the three months ended September 30, 2014
compared to an expense of $24,040 during the same period in the prior year. Results of Operations during the nine months ended
September 30, 2014 as compared to the nine months ended September 30, 2013 We have not generated any revenues since inception. We have operating expenses related
to general and administrative expenses being a public company and interest expenses.
During the nine-month period ended September 30, 2014, we had a net loss of $4,755,940
compared to a net loss of $282,988 during the same period in the prior year. Our
net loss was principally due to a non-cash compensation expense of $4,370,135
related to the issuance of shares and warrants for services. We incurred other general and administrative expenses of $348,848
during the three months ended September 30, 2014 compared to $87,118 in the same
period in the prior year. We had interest expense of $2,839 during the nine
months ended September 30, 2014 compared to an interest expense of $10,749
during the three months ended September 30, 2014. We recorded an expense of
$34,034 related to the amortization of debt discount during the nine months
ended September 30, 2014 compared to an expense of $50,047 during the same
period in the prior year. Liquidity and Capital Resources On September 30, 2014, we had total assets of $1,437,007 consisting of
$1,389,368 in cash, property and equipment valued at $25,675 and other assets of
$21,966 compared
to total assets consisting of $2,469 in cash as of December 31, 2013. We
had total current liabilities of $80,646 consisting of $12,158 in accounts
payable, $40,052 in accrued expenses and $28,436 in advances payable to related
parties compared to
current liabilities of $128,179 representing $4,000 in accrued expenses, $13,863 in
accrued interest, $28,436 in advances payable to related parties and $81,880 in
convertible notes payable net of discount as of December 31, 2013. Our accumulated
deficits as of September 30, 2014 and December 31, 2013 were $5,579,145 and $823,205,
respectively. We used $328,637 in our operating activities during the nine months ended
September
30,
2014, which was mainly due to a net loss of $4,755,940, an increase in current
assets of $21,966 and contributed capital of $6,766 offset by non-cash compensation expense of $4,370,135
related to the issuance of shares and warrants for services, an increase in amortization
of debt discount of $34,034, depreciation expense of $788 and an
increase in accounts payable and accrued expenses of $51,083. We used $82,657 in our
operating activities during the nine months ended September 30, 2013, which was
principally due to
a net loss of $282,988 offset by increases in amortization of debt discount of $50,047,
non-cash compensation expenses valued at
$135,074 related to the issuance of shares and warrants for services and an increase in accounts payable and accrued
liabilities of $15,210. We used cash to purchase property and equipment valued at $26,463 during the nine months ended September 30, 2014
compared to no investing activities during the same period in the prior
year. We financed our negative cash flow from operations during the nine months ended
September 30, 2014 through proceeds from issuance of common stock of $1,741,999
and proceeds of debt borrowings of $14,500 reduced by $14,500 in debt payments. We financed our negative cash flow from operations during the
nine months ended
September 30, 2013 through proceeds from the issuance of common stock of $55 and convertible notes of $82,614. During the nine months ended September 30, 2014, the Company issued three unsecured
promissory notes to unrelated parties for an aggregate of $14,500. We believe that, at present, we have sufficient capital resources to fully implement our
business plan. While we believe that we should be able to generate positive cash flow from
operations during the year 2015, there can be no assurance that this will prove to be
correct or that revenues, if any, will be sufficient to fund our ongoing operating
expenses. Accordingly, we may have to raise additional funds through a private offering of our
equity securities or through issuance of convertible debt instruments. There can be no
assurance that additional capital will be available to us. We currently have no
agreements, arrangements or understandings with any person to obtain funds through bank
loans, lines of credit or any other sources. Our auditors have issued an opinion on our financial statements which includes a
statement describing our going concern status. This means that there is substantial doubt
that we can continue as an on-going business for the next twelve months unless we obtain
additional capital to pay our bills and meet our other financial obligations. This is
because we have not generated any revenues and no revenues are anticipated until we begin
marketing the product. Accordingly, we must raise capital from sources other than the
actual sale of the product. We must raise capital to implement our project and stay in
business. Even if we raise the maximum amount of money in this offering, we do not know
how long the money will last, however, we do believe it will last at least twelve months. ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Notes to Unaudited Interim
Financial Statements
Back to
Table of Contents
Cash and Cash Equivalents: For financial statement presentation
purposes, the Company considers those short-term, highly liquid investments
with original maturities of three months or less to be cash or cash
equivalents. There were no cash equivalents at September 30, 2014 or
December 31, 2013.
Property and Equipment: New property and
equipment are recorded at cost. Property and equipment included in the
bankruptcy proceedings and transferred to the Trustee had been valued at
liquidation value. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets, generally 5 years.
Expenditures for renewals and betterments are capitalized. Expenditures for
minor items, repairs and maintenance are charged to operations as incurred.
Gain or loss upon sale or retirement due to obsolescence is reflected in the
operating results in the period the event takes place.
Development
Stage Enterprise: The Company has been in the development stage since
inception.
Valuation of Long-Lived Assets: We review the
recoverability of our long-lived assets including equipment, goodwill and
other intangible assets, when events or changes in circumstances occur that
indicate that the carrying value of the asset may not be recoverable. The
assessment of possible impairment is based on our ability to recover the
carrying value of the asset from the expected future pre-tax cash flows
(undiscounted and without interest charges) of the related operations. If
these cash flows are less than the carrying value of such asset, an
impairment loss is recognized for the difference between estimated fair
value and carrying value. Our primary measure of fair value is based on
discounted cash flows. The measurement of impairment requires management to
make estimates of these cash flows related to long-lived assets, as well as
other fair value determinations.
Stock Based Compensation:
Stock-based awards are accounted for using the fair value method in
accordance with ASC 718, Share-Based Payments. Our primary type of
share-based compensation consists of stock options. We use the Black-Scholes
option pricing model in valuing options. The inputs for the valuation
analysis of the options include the market value of the Company's common
stock, the estimated volatility of the Company's common stock, the exercise
price of the warrants and the risk free interest rate.
Accounting For
Obligations And Instruments Potentially To Be Settled In The Company's Own
Stock: We account for obligations and instruments potentially to be settled
in the Company's stock in accordance with FASB ASC 815, Accounting for
Derivative Financial Instruments. This issue addresses the initial balance
sheet classification and measurement of contracts that are indexed to, and
potentially settled in, the Company's own stock.
Fair Value of
Financial Instruments: FASB ASC 825, "Financial Instruments," requires
entities to disclose the fair value of financial instruments, both assets
and liabilities recognized and not recognized on the balance sheet, for
which it is practicable to estimate fair value. FASB ASC 825 defines fair
value of a financial instrument as the amount at which the instrument could
be exchanged in a current transaction between willing parties. At September
30, 2014 and December 31, 2013, the carrying value of certain financial
instruments (cash and cash equivalents, accounts payable and accrued
expenses.) approximates fair value due to the short-term nature of the
instruments or interest rates, which are comparable with current rates.
Fair Value Measurements: The Company measures fair value under a
framework that utilizes a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements). The three levels of inputs which
prioritize the inputs used in measuring fair value are:
Level 1:
Inputs to the valuation methodology are unadjusted quoted prices for
identical assets or liabilities in active markets that the Company has the
ability to access.
Level 2: Inputs to the valuation methodology
include:
- Quoted prices for similar assets or liabilities in active
markets;
- Quoted prices for identical or similar assets or liabilities
in inactive markets;
- Inputs other than quoted prices that are
observable for the asset or liability;
- Inputs that are derived
principally from or corroborated by observable market data by correlation or
other means.
If the asset or liability has a specified (contractual)
term, the level 2 input must be observable for substantially the full term
of the asset or liability.
Level 3: Inputs to the valuation
methodology are unobservable and significant to the fair value measurement.
The assets or liability's fair value measurement level within the fair
value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement. Valuation techniques used need to
maximize the use of observable inputs and minimize the use of unobservable
inputs. The following table presents assets that were measured and recognize
at fair value on September 30, 2014 and December 31, 2013 and the year then
ended on a recurring basis:
None
-
Total
assets at fair value
-
None
-
Total
assets at fair value
-
Earnings per Common Share: We compute net income (loss) per share in
accordance with ASC 260, Earning 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. All per share disclosures
retroactively reflect shares outstanding or issuable as though the reverse
split had occurred January 1, 2010.
We
must make certain estimates and judgments in determining income tax expense
for financial statement purposes. These estimates and judgments occur in the
calculation of certain tax assets and liabilities, which arise from
differences in the timing of recognition of revenue and expense for tax and
financial statement purposes.
Recent Accounting
Pronouncements
In July 2013, FASB issued ASU No. 2013-11,
"Presentation of an Unrecognized Tax Benefit When a Net Operating Loss
Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The
provisions of ASU No. 2013-11 require an entity to present an unrecognized
tax benefit, or portion thereof, in the statement of financial position as a
reduction to a deferred tax asset for a net operating loss carryforward or a
tax credit carryforward, with certain exceptions related to availability.
ASU No. 2013-11 is effective for interim and annual reporting periods
beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not
expected to have a material impact on the Company's Consolidated Financial
Statements.
- Cross-reference to other disclosures currently required under U.S. GAAP
for other reclassification items (that are not required under U.S. GAAP) to
be reclassified directly to net income in their entirety in the same
reporting period. This would be the case when a portion of the amount
reclassified out of accumulated other comprehensive income is initially
transferred to a balance sheet account (e.g., inventory for pension-related
amounts) instead of directly to income or expense.
The preparation of these
financial statements in conformity with accounting principles generally
accepted in the United States requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including those related
intangible assets, income taxes, insurance obligations and contingencies and
litigation. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other resources. Actual results may differ from these
estimates under different assumptions or conditions.
In the opinion
of management, the information furnished in these interim financial
statements reflects all adjustments necessary for a fair statement of the
financial position and results of operations and cash flows as of and for
the three and nine-month periods ended September 30, 2014 and 2013. All such
adjustments are of a normal recurring nature. The Financial Statements do
not include some information and notes necessary to conform to annual
reporting requirements.
Stock Issued upon conversion of debt: On July 1,
2014 we issued 179,300 shares of our common stock in settlement of $1,500 in
convertible note payable plus associated accrued interest of $293. The
conversion occurred within the terms of the promissory note and no gain or
loss resulted. On February 28, 2014 we issued 13,084,000 shares of our
common stock in settlement of $114,414 in convertible note payable plus
associated accrued interest of $16,435. The conversion occurred within the
terms of the promissory note and no gain or loss resulted.
Stock
Issued for services: During the interim period ended September 30, 2014
we issued 300,000 shares of our common stock to an unrelated party as
payment for services. We also issued 400,000 shares to two former officers
and directors of the company as part of a severance agreement. The shares
were valued at the closing price as of the date of the agreements ($0.25 and
$0.28, respectively) and resulted in full recognition of $187,000 in
consulting services expense. .During the interim periods ended on or before
June 30, 2014 we issued 9,208,600 shares of our common stock to seven
unrelated parties as payment for services. The shares were valued at the
closing price as of the date of the agreement ($0.05) and resulted in full
recognition of $481,430 in consulting services expense. In June we cancelled
3,108,600 of these shares valued at $155,430 resulting in $305,000 in
consulting expense through September 30, 2014.
Options Issued for
services: During the interim period ended September 30, 2014 we issued
14,350,000 common stock options. 350,000 of those options valued at $82,640
were granted to former related parties while 14,000,000 options valued at
$3,774,496 were granted for services provided by unrelated parties.
Stock Issued for cash: In connection with a
private placement of 10,000,000 shares of common stock in March and April of
2014 we sold 4,700,000 shares to six investors for the offering price of
$0.005 per share that resulted in total proceeds of $23,500. During 2014 we
received $1,164,300 through a placement of common stock units. Those units
were sold at $0.09 per unit. Each unit consisted of one share of common
stock and one warrant to purchase common stock. We issued 12,936,662 shares
through September 30th to 22 investors of this offering. The warrants are
exercisable at $0.16 and expire in June, 2015. During 2014 we received
$554,200 through a placement of common stock units. Those units were sold at
$0.15 per unit. Each unit consisted of one share of common stock and one
warrant to purchase common stock. We issued 3,694,666 shares through
September 30th to 4 investors of this offering. The warrants are exercisable
at $0.16 and expire in June, 2015.
Stock Issued for
services: During the interim period ended September 30, 2014 we issued
300,000 shares of our common stock to an unrelated party as payment for
services. We also issued 400,000 shares to two former officers and directors
of the company as part of a severance agreement. The shares were valued at
the closing price as of the date of the agreements ($0.25 and $0.28,
respectively) and resulted in full recognition of $187,000 in consulting
services expense. .During the interim periods ended on or before June 30,
2014 we issued 9,208,600 shares of our common stock to seven unrelated
parties as payment for services. The shares were valued at the closing price
as of the date of the agreement ($0.05) and resulted in full recognition of
$481,430 in consulting services expense. In June we cancelled 3,108,600 of
these shares valued at $155,430 resulting in $305,000 in consulting expense
through September 30, 2014.
Stock Issued for cash: In connection with a
private placement of 10,000,000 shares of common stock in March and April of
2014 we sold 4,700,000 shares to six investors for the offering price of
$0.005 per share that resulted in total proceeds of $23,500. During 2014 we
received $1,164,300 through a placement of common stock units. Those units
were sold at $0.09 per unit. Each unit consisted of one share of common
stock and one warrant to purchase common stock. We issued 12,936,662 shares
through September 30th to 22 investors of this offering. The warrants are
exercisable at $0.16 and expire in June, 2015. During 2014 we received
$554,200 through a placement of common stock units. Those units were sold at
$0.15 per unit. Each unit consisted of one share of common stock and one
warrant to purchase common stock. We issued 3,694,666 shares through
September 30th to 4 investors of this offering. The warrants are exercisable
at $0.16 and expire in June, 2015.
Historical Activity Prior to
2014:
On October 19, 2012, we filed a
Certificate of Amendment to our Certificate of Incorporation with the State
of Delaware to change the authorized capital stock to 520,000,000 shares
consisting of 500,000,000 shares of common stock, par value $0.00001 and
20,000,000 shares of preferred stock, par value $0.00001. The certificate of
amendment also authorized a reverse split of common stock at the ration of
1:100. The accompanying financial statements and related notes thereto have
been adjusted accordingly to reflect this forward stock split and the
reverse split in 2012. All per share disclosures retroactively reflect
shares outstanding or issuable as though the reverse split had occurred at
inception.
On March 17, 2008, the Company issued 9,000,000 (90,000
post most recent 1 for 100 reverse stock split) shares of its common stock
to two individuals who are Directors and officers for proceeds of $300.
The Company has completed a capital formation activity in accordance with a
Registration Statement on Form S-1 submitted to the SEC to register and sell
in a self-directed offering 6,000,000 (60,000 post most recent 1 for 100
reverse stock split) shares of newly issued common stock at an offering
price of $0.04 per share ($4.00 adjusted for most recent 1 for 100 reverse
stock split) for proceeds of $80,000. The Registration Statement on Form S-1
was filed with the SEC on May 6, 2008 and declared effective on May 15,
2008. The Company had incurred $20,000 of deferred offering costs related to
this capital formation activity.
As of December 10, 2008 the Company
raised $200,000 and issued 60,000,000 (600,000 post most recent 1 for 100
reverse stock split) shares of its common stock pursuant to a private
placement offering of 84,000,000 (840,000 post most recent 1 for 100 reverse
stock split) shares, at a purchase price of $0.01 per share ($1.00 adjusted
for most recent 1 for 100 reverse stock split). The Company received
proceeds of $200,000. The Company incurred $20,000 of deferred offering
costs related to this capital formation activity.
On January 28, 2009
the Company raised $37,150 and issued 111,450 shares of its common stock
pursuant to a private placement offering.
On September 16, 2009, the
Company raised $15,000 and issued 3,000 shares of its common stock pursuant
to a private placement offering, at a purchase price of $5.00 per share.
On October 13, 2009 Dynamic Applications Corp. entered into an amendment
to the Executive Employment Agreement between the Company and Mr. Asher
Zwebner, the Company's chief financial officer. Under the Amendment, Mr.
Zwebner's term of employment was extended until October 31, 2010 and in lieu
of the existing employment compensation set forth in the employment
agreement, Mr. Zwebner received 5,000 shares of common stock in the Company.
The shares were valued at the trading price on the day that the shares were
issued less 40% discount for restricted trading.
On August 23, 2011,
the Company raised $3,487 and issued 1,100,000 shares of its common stock
pursuant to a private placement offering, at a purchase price of $0.00317
per share.
On September 8, 2011, the Company amended its Certificate
of Incorporation to increase the authorized share and to change the par
value to $0.00001.
On September 27, 2011, the Company raised $26,844
and issued 8,480,000 shares of its common stock pursuant to a private
placement offering, at a purchase price of $0.00317 per share .
On
December 21, 2011, the Company raised $15,850 (of which $10,801 was
receivable at December 31, 2011) and issued 5,000,000 shares of its common
stock pursuant to a private placement offering, at a purchase price of
$0.00317 per share.
On January 9, 2012, the Company raised $1,366 and
issued 380,000 shares of its common stock pursuant to a private placement
offering, at a purchase price of $0.00317 per share .
On October 19,
2012, we filed a Certificate of Amendment to our Certificate of
Incorporation with the State of Delaware to change the authorized capital
stock to 520,000,000 shares consisting of 500,000,000 shares of common
stock, par value $0.00001 and 20,000,000 shares of preferred stock, par
value $0.00001. The certificate of amendment also authorized a reverse split
of common stock at the ration of 1:100. All per share disclosures
retroactively reflect shares outstanding or issuable as though the reverse
split had occurred January 1, 2008.
On June 19, 2013 we issued
5,162,000 shares of our common stock in settlement of $40,000 due to a
former related party plus associated accrued interest of $11,620. The
conversion occurred within the terms of the promissory note and no gain or
loss resulted.
On June 3, 2013 we issued 100,000 shares of our common
stock as payment for services. The share were valued at the closing price as
of the date of the agreement and resulted in recognition of $28,000 in
consulting services expense for the year ended December 31, 2013.
The relative fair value of the warrants attached to
the common stock issued was estimated at the date of grant using the
Black-Sholes-Merton pricing model. The relative fair value of the warrants
attached to the common stock component is $282,348 and the relative fair
value of the warrants is $592,592 as of the grant date. The
Black-Sholes-Merton pricing model assumptions used are as follows: expected
dividend yield of 0%; risk-free interest rate of 0.10%-.0.11%; expected
volatility of 249%, and warrant term of one year.
In 2013 the Company
recorded $107,074 in expenses related to 600,000 vested warrants previously
granted to GUMI Tel Aviv Ltd. The warrants were valued using the
Black-Scholes option pricing model. The inputs for the valuation analysis of
the warrants include the market value of the Company's common stock were as
follows: the estimated volatility of the Company's common stock used in the
Black-Scholes option pricing model was 318%, the exercise price and the risk
free interest rate used were $0.05 and 0.36%, respectively. All warrants
were fully vested at December 31, 2013.
In 2013 we issued one
promissory note for $20,000 that was accompanied by 550,000 detachable
warrants (the L&L warrants). The warrants were valued using the
Black-Scholes option pricing model. The inputs for the valuation analysis of
the warrants include the market value of the Company's common stock on the
date of grant, the estimated volatility of the Company's common stock
(194%), the exercise price of $0.00001 and the risk free interest rate of
.11%,. On May 9, 2013 all 550,000 L&L warrants were exercised for total cash
proceed of $55.
Unsecured Notes Payable (with conversion rights): On February 28, 2014
nineteen holders of convertible notes with an aggregate principal balance of
$114,414 and accrued interest of $16,435 converted their notes and accrued
interest into 13,084,000 shares of common stock. Upon conversion, $20,495 of
unamortized discount arising from the previously recorded beneficial
conversion feature was recognized as additional interest expense in the
interim period ended June 30, 2014.
For the nine months ended
September 30, 2014 the Company has recognized $2,923 in accrued interest
expense related to all notes and has amortized $34,034 of the beneficial
conversion feature. In addition to which has also been recorded as interest
expense. As of September 30, 2014 all notes and related accrued interest
have been paid through the issuance of 13,263,300 shares of common stock.
- the
number of shares into which the notes are convertible.
- The initial
beneficial conversion feature of $40,000 was recorded separately based on
the intrinsic value method.
None.
ITEM 4. CONTROLS AND PROCEDURES Back to Table of Contents
Evaluation of disclosure controls and procedures. As of September 30, 2014, the Company's chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS Back to Table of Contents
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. However, from time to time, we may become a party to certain legal proceedings in the ordinary course of business.
ITEM 1A. RISK FACTORS Back to Table of Contents
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1. Description of Business, subheading "Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2013, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K/A are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Back to Table of Contents
During the three-months ended September 30, 2014, the Company issued restricted shares of common stock in reliance upon the exemptions provided in Section 4(2) of the Securities Act of 1933, as amended (the "Act") and Regulation D and Regulation S promulgated by the United States Securities and Exchange Commission (the "SEC") under the Act.
Reference is being made to the Company's Form 8-K as filed with the SEC on September 25, 2014 with disclosure under item 3.02 "Unregistered Sales of Equity Securities".
ITEM 3. DEFAULTS UPON SENIOR SECURITIES Back to Table of Contents
None.
ITEM 4. MINE SAFETY DISCLOSURE. Back to Table of Contents
Not applicable.
ITEM 5. OTHER INFORMATION Back to Table of Contents
Not applicable.
ITEM 6. EXHIBITS Back to Table of Contents
(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.
Exhibit No. |
Description |
|---|---|
| 31.1 | Section 302 Certification of the Sarbanes-Oxley Act of 2002 of the Company's CEO, Mordechi Bignitz, filed herewith. |
| 31.2 | Section 302 Certification of the Sarbanes-Oxley Act of 2002 of the Company's CFO, Shmuel De-Saban, filed herewith. |
| 32.1 | Section 906 of the Sarbanes-Oxley Act of 2002 of Mordechi Bignitz as CEO, filed herewith |
| 32.2 | Section 906 of the Sarbanes-Oxley Act of 2002 of Shmuel De-Saban as CFO, filed herewith |
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.
DYNAMIC APPLICATIONS CORP.
By: /s/ Mordechi Bignitz
Mordechi Bignitz
Chief Executive Officer and Chairman
(Principal Executive Officer)
Date: November 14, 2014
By: /s/ Shmuel De-Saban
Shmuel De-Saban
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Date: November 14, 2014
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by
the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Mordechi Bignitz
Mordechi Bignitz
Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2014
I, Mordechi Bignitz, certify that:
1. I have reviewed this quarterly report of Dynamic Applications Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4. The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as 4efined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the issuer's most recent fiscal quarter (the issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
5. The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether r not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
Date: November 14, 2014
/s/ Mordechi Bignitz
CEO
I, Shmuel De-Saban, certify that:
1. I have reviewed this quarterly report of Dynamic Applications Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4. The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as 4efined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the issuer's most recent fiscal quarter (the issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
5. The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether r not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
Date: November 14, 2014
/s/
Shmuel De-Saban
CFO
Exhibit 32.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Dynamic Applications Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2014 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Mordechi Bignitz, CEO of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Mordechi Bignitz
Mordechi Bignitz
CEO
Dated: November 14, 2014
A signed original of this written statement required by Section 906 has been provided to Dynamic Applications Corp. and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Dynamic Applications Corp. (the “Company”) on Form 10-Q for the period ended September 30, 2014 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Shmuel De-Saban, CFO of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Shmuel De-Saban
Shmuel De-Saban
CFO
Dated: November 14, 2014
A signed original of this written statement required by Section 906 has been provided to Dynamic Applications Corp. and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.