UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended: June 30, 2013

 

or

 

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

 

For the transition period from __________ to __________

 

Commission File Number: 00-24723

 

STAKOOL, INC.

(Exact Name of registrant as specified in its charter)

 

Nevada   88-0393257
(State or other Jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)

 

1111 Alderman Drive, Suite 210

Alpharetta, Georgia 30005

(Address of Principal Executive Offices)

 

(770) 521-9826

(Registrant’s telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

 

[  ] Large Accelerated Filer [  ] Accelerated Filer
       
[  ] Non-Accelerated Filer [X] Smaller Reporting Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of August 12, 2013 there were 3,643,055,556 common shares outstanding of the registrant’s common stock.

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
Part I. Financial Information    
   
Item 1. Consolidated Financial Statements   F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   3
Item 3. Quantitative and Qualitative Disclosures About Market Risk   6
Item 4. Controls and Procedures   6
     
Part II. Other Information    
     
Item 1. Legal Proceedings   7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   7
Item 3. Defaults Upon Senior Securities   7
Item 4. Mine Safety Disclosure   7
Item 5. Other Information   7
Item 6. Exhibits   8
   
Signatures   9

 

2
 

  

PART I. FINANCIAL STATEMENTS
 
ITEM 1. FINANCIAL STATEMENTS
             
STAKOOL, INC.
Consolidated Balance Sheet
(Unaudited)
             
      June 30, 2013       December 31, 2012  
Assets                
Current Assets                
Cash   $ 3,739     $ 338  
Due from related parties     2,816          
Current Assets     6,555       338  
                 
Property and equipment, net     628       828  
Office deposit           1,700  
Total Assets   $ 7,183     $ 2,866  
                 
Liabilities and Stockholder’s Deficit                
Liabilities                
Current liabilities                
Account payable   $ 233,563     $ 259,395  
Other liabilities     31,678       144  
Accrued interest     4,863       2,451  
Convertible notes payable     171,406       102,013  
Convertible notes derivative liability     57,203          
Loan due related parties     6,000       6,000  
Stock payable     226,018       295,318  
Total Current Liabilities     730,731       665,321  
                 
Stockholder’s Deficit                
Common stock - par value $0.00001 4,000,000,000 shares authorized, 29,039,066 shares outstanding.     290       330  
Preferred stock - par value $0.00001 10,000,000 shares authorized, 308,180 shares outstanding.     3       3  
Treasury stock     347       208  
Deferred compensation           (22,500 )
Paid in capital     6,487,796       6,328,926  
Accumulated deficit     (7,211,984 )     (6,969,422 )
Total Stockholder’s Deficit     (723,548 )     (662,455 )
Total Liabilities and Stockholder’s Deficit   $ 7,183     $ 2,866  

 

See accompanying notes to consolidated financial statements.

 

F- 1
 

 

STAKOOL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
                         
    Three Months Ended     Six Months Ended  
    June 30     June 30  
    2013     2012     2013     2012  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                         
Revenues   $       $ 6,935     $ 64     $ 15,137  
Cost of Goods Sold     1,834       12,586       2,515       15,522  
Gross Margin     (1,834 )     (5,651 )     (2,451 )     (385 )
                                 
Operating Expenses                                
Professional fees     58,819       57,635       83,333       114,401  
Office expense     185       10,234       9,417       17,038  
Investor and public relations     2,321               8,999       10,519  
Communication     400               1,781          
Bank services     30       311       666       691  
Travel and entertainment     2,634               3,168       15,637  
Payroll and related expense                     125          
License and permits     159               159          
Stock based compensation                     45,000       761,063  
Insurance             624               785  
Total Operating Expenses     64,548       68,804       152,648       920,134  
                                 
Loss from operations     (66,382 )     (74,455 )     (155,099 )     (920,519 )
                                 
Other Expenses                                
Change in value of derivative liability (decline)     (66,467 )             (80,249 )        
Loss on stock issuance     11,700               29,700          
Interest expense     108,313       2,644       137,807       2,644  
Depreciation     100       200       200       200  
Total Other Expenses, net     53,646       2,844       87,458       2,844  
                                 
Loss before provision for income tax     (120,028 )     (77,299 )     (242,557 )     (923,363 )
                                 
Provision for income tax                                
                                 
Net Loss   $ (120,028 )   $ (77,299 )   $ (242,557 )   $ (923,363 )
                                 
Net Loss per share: Basic and Diluted     (0.00 )     (0.10 )     (0.01 )     (1.43 )
                                 
Weighted Average Number of Shares Outstanding: Basic and Diluted     31,322,242       755,988       31,885,864       644,127  

 

See accompanying notes to consolidated financial statements.

 

F- 2
 

 

STAKOOL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY (DEFICIT)
(unaudited)
AS OF JUNE 30, 2013

 

    Common Stock   Preferred Stock   Treasury     Additional                 Total  
    Number           Number           Stock     Paid in     Deferred     Accumulated     Stockholders’  
    of Shares     Amount     of Shares     Amount     Amount     Capital     Compensation     Deficit     Equity  
Balance at December 31, 2012     31,043,194     $ 349       341,180     $ 3     $ 208   $ 6,328,907     $ (22,500 )   $ (6,969,422 )   $ (662,455 )
                                                                         
Stock issued for services     1,556,981       16                               15,554                       15,570  
Stock issued for services     700,000       7                               13,993                       14,000  
Cancellation of stock issued to management     (5,000,000 )     (50 )                             50                       0  
Cancellation of stock issued to management     (4,000,000 )     (40 )                             40                       0  
Stock issued for debt conversion     1,366,667       14                               8,325                       8,339  
Loss on stock issued under financing agreement     3,000,000       30                               59,970                       60,000  
Adjustment for reverse stock split     2,915,001       29                               (29 )                     0  
Issued for cash                     2,000                       5,000                       5,000  
Cancellation of service contracts                     (35,000 )                     (22,500 )     22,500               0  
Correction of clerical error     (15,000 )     0                               0                       0  
Stock issued for debt conversion     1,016,667       10                               6,090                       6,100  
Stock issued for debt conversion     1,016,667       10                               6,090                       6,100  
Stock issued for debt conversion     1,488,889       15                               13,385                       13,400  
Cancellation of stock issued to management     (11,000,000 )     (110 )                             110                       0  
Stock issued under financing agreement     2,600,000       26                               38,974                       39,000  
Stock issued for debt conversion     2,350,000       24                               14,076                       14,100  
Adjust equity accounts     205,704       2                       139       (239 )             (5 )     1  
Adjust stock for reverse stock split     (205,704 )     (42 )                                                     (42 )
Net loss                                                             (242,557 )     (242,557 )
Balance at  June 30, 2013     29,039,066   $ 290     308,180     $ 3     $ 347     $ 6,487,796     $ -     $ (7,211,984 )   $ (723,548 )

 

See accompanying notes to consolidated financial statements.

 

F- 3
 

 

STAKOOL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
             
    Six Months ended
    June 30,  
    2013     2012  
      (Unaudited)       (Unaudited)  
OPERATING ACTIVITIES                
Net loss for the period   $ (242,557 )   $ (923,363 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock-based compensation     29,570       761,063  
Depreciation & Amortization     200       200  
Loss on stock issuance     29,700       -  
Adjustments to prior periods     (826 )     -  
Amortization of debt discount     83,293       -  
Change in value of derivative liability     (80,249 )     -  
Derivative expense     33,402       -  
Penalty on convertible note     16,250       -  
Changes in working capital items                
(Increase) in accounts receivable     (2,816 )     (153 )
(Increase) in other liabilities     31,534       -  
Decrease in rental deposit     1,700       -  
Decrease in prepaid expenses     -       313,263  
Increase in accounts payable     3,738       16,522  
Accrued interest     3,712       (10,299 )
Increase in accrued interest - related parties     -       2,083  
Net cash used in operating activities     (93,349 )     159,316  
                 
FINANCING ACTIVITIES                
                 
Proceeds from notes payable - related party     -       100  
Proceeds from notes payable     91,750       50,000  
Payment due for acquisition     -       (220,000 )
Repayment of notes payable     -       (9,200 )
Proceeds from sale of preferred stock     5,000       40,593  
Cancellation of treasury stock     -       (35,879 )
Net cash provided by financing activities     96,750       (174,386 )
                 
Net change in cash     3,401       (15,070 )
Beginning cash     338       15,560  
Ending cash   $ 3,739     $ 490  
                 
Non-cash Investing and Financing Activities:                
Record derivative liability on notes   $ 115,286       -  
Conversion of note to common stock   $ 46,600       -  
Issuance of promissory note for accrued expenses   $ 45,000       -  
Stock issued under financing agreement   $ 69,300       -  

 

See accompanying notes to consolidated financial statements.

 

F- 4
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

 

Stakool, Inc. f/k/a Mod Hospitality, Inc. ( “the Company” or “Stakool” ) was incorporated in the State of Delaware in 1993. In 1997, the Company changed its Corporate Charter to the State of Nevada. On July 22, 2011, Stakool entered into an agreement of Purchase and Sale with Anthus Life Corp. (“Anthus”) where Anthus acquired 74,834,313 of the issued and outstanding shares of Stakool. Anthus operates as a wholly owned subsidiary of Stakool.

 

Anthus Life Corp. was incorporated in Nevada on June 4, 2009. Anthus is a developer and manufacturer of natural and organic food products packaged for consumer consumption. The Company has one product line in the natural food category currently, and will deploy several additional product lines fostering rapid growth in retail accounts, consumer exposure and revenue.

 

On August 6, 2013, the Company filed a preliminary information statement on Schedule 14C regarding a 1 for 100 reverse stock split (the “Reverse Split”), which would reduce the number of issued and outstanding common shares from 3,463,055,556 to approximately 34,630,556.  The Reverse Split has been approved by the Company’s Board of Directors and a majority of its shareholders.  Fractional shares produced as a result of the Reverse Split will be rounded up to the next whole share. It is anticipated that the Reverse Split will become effective on or about September 6, 2013.  The consolidated financial statements have been retroactively adjusted to assume the effectiveness of the Reverse Split.

 

Accounting Basis

 

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.

 

Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the year ended December 31, 2012. In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

 

Principles of Consolidation

 

The consolidated financial statements include the financial statements of the Stakool, Inc. and its wholly-owned subsidiary Anthus Life Corp. All significant inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.

 

Reclassifications

 

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.

 

F- 5
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Cash and Cash Equivalents

 

Stakool considers all highly liquid investments with maturities of three months or less to be cash equivalents. At June 301, 2013 and December 31, 2012, the Company had $3,739 and $338 of cash, respectively.

 

Inventories

 

Inventories previously consisted of natural and organic food products, wrappers and boxes, and were stated at the lower of cost or market. Cost was determined on the average cost method. Inventories are reviewed and reconciled periodically. Currently, the company maintains no inventory.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments consist of cash and cash equivalents, accounts payable, other liabilities, accrued interest, notes payable, and an amount due to a related party. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Income Taxes

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Accounts Receivable

 

The Company’s receivables consist of one temporary cash advance to a related party for services provided. The advance was made during the second quarter of 2013. The Company charges off receivables if they determine that the amount is no longer collectible. The Company has not recorded any allowance for bad debts due to the limited sale of our products.

 

Property and Equipment

 

The capital assets are being depreciated over their estimated useful lives, three to seven years using the straight-line method of depreciation for book purposes.

 

F- 6
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Revenue Recognition

 

The Company recognizes revenue when there is persuasive evidence of that an arrangement exists, the revenue is fixed or determinable, the products are fully delivered or services have been provided and collection is reasonably assured.

 

Concentration of Credit Risks

 

The Company maintains its cash and cash equivalents in bank deposit accounts, which could, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties.

 

Basic Income (Loss) Per Share

 

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At June 30, 2013 the Company had a convertible note outstanding that could be converted into 6,272,727 common shares. These are not presented in the statement of operations since the company incurred a loss and the effect of these shares is anti-dilutive.

 

Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. The Company did not issue any shares of common stock to management during the period ended March 31, 2012. There was $761,063 of stock-based compensation in the six months ended June 30, 2012. The Company issued 2,256,981 common shares to a service provider during the six months ended June 30, 2013 which had a fair market value of $52,925. The company issued this stock to retire a past due payable recorded at $29,570. In addition the Company cancelled 35,879 shares of its Preferred C shares in conjunction with the termination of consulting contracts. The Company also cancelled 2,000,000,000 common shares returned to the Company by its former CEO. To date, the Company has not adopted a stock option plan and has not granted any stock options.

 

Recent Accounting Pronouncements

 

Stakool does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

Derivative Instruments

 

The Company enters into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or a loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.

 

We estimate fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered consistent with the objective measuring fair values. In selecting the appropriate technique, we consider, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as freestanding warrants, we generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk fee rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimates and assumption changes. Under the terms of the new accounting standard, increases in the trading price of the company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.

 

F- 7
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

  

NOTE 2 – PROPERTY AND EQUIPMENT

 

Property and equipment is recorded at cost. The Company depreciates the equipment using the straight-line method over the useful lives of the equipment. The useful lives are estimated to be between 3 and 7 years.

 

Property and equipment consisted of the following at June 30, 2013 and December 31, 2012:

 

    June 30, 2013     December 31, 2012  
Furniture and fixtures   $ 1,841     $ 1,334  
Equipment   $       $ 507  
Total property and equipment   $ 1,841     $ 1,841  
Less: Accumulated depreciation   $ (1,213 )   $ (1,013 )
Property and equipment, net   $ 628     $ 828  

 

NOTE 3 – NOTE PAYABLE

 

The Company issued six promissory notes during the six month period ended June 30, 2013. These notes totaled $136,750 and are generally convertible into common stock of the Company 180 days after the date of the note at discounts of 30 % to 60% of the lowest average trading prices for the stock during periods ten to ninety days prior to the conversion date. The note bears interest at 8%, are unsecured, and matures within one year of the date issued. One of the notes for $45,000, issued for legal services, is due on demand and bears no interest.

 

F- 8
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

 

NOTE 3 – NOTE PAYABLE (CONTINUED)

 

    Balance Due  
    at June 30, 2013  
On May 15, 2013 the Company executed a promissory note for $16,250. The note bears interest at 8 % and is secured by common stock of the Company. The loan matured July 10, 2013. The note represented an obligation due as a result of a penalty clause in a note issued in 2012. On June 14, 2013 the note was converted into 235,000,000 shares of common stock representing which represented $14,100 of the amount due.   $ 16,250  
         
On October 5, 2012 the Company executed a promissory note for $32,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures July 10, 2013. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the lowest trading price for the 90 day period prior to the conversion date. The discount rate is 60 %. On June 14, 2013 a portion of the note was converted into 2,350,000 shares representing $14,100 of the note.   $ 18,400  
         
On January 16,, 2012 the Company executed a promissory note for $50,000. The note bears interest at 10’% and is secured by common stock of the Company. The loan matured January 16, 2013. The note was renewed and amended allowing conversion into common stock of the Company at a discount from the market price of 50% or the lowest trading price for the 3 day period prior to the conversion date. In 2012, the note holder converted $30,000 of the note into 2,639,327 shares of common stock. The $20,000 balance on the note remains outstanding.   $ 20,000  
         
On February 6, 2013 the Company executed a promissory note for $10,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures November 11, 2013. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the lowest trading price for the 90 day period prior to the conversion date. The discount rate is 60 %.   $ 10,500  
         
On March 5, 2013 the Company executed a promissory note for $45,000. The note bears interest at 8 % and is unsecured. The loan matures March 5, 2014 If agreed to by the Company, the note may be amended to allow it to be converted into common stock of the Company at a discount rate to be determined.   $ 45,000  
         
On April 6, 2013 the Company executed a promissory note for $27,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures January 18, 2014. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the lowest trading price for the 90 day period prior to the conversion date. The discount rate is 60 %.   $ 27,500  

  

F- 9
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

 

On May 6, 2013 the Company executed a promissory note for $22,500. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures January 18, 2014. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the 3 day average lowest trading price for a 10 day period prior to the conversion date. The discount rate is 45 %.   $ 22,500  
         
On June 4, 2013 the Company executed a promissory note for $15,000. The note bears interest at 8 % and is secured by common stock of the Company. The loan matures March 10, 2014. The note can be converted into common stock 180 days after issuance. The note is convertible into common stock at a discount from the 3 day average lowest trading price for a 10 day period prior to the conversion date. The discount rate is 30 %.   $ 15,000  
         
On June 21, 2013 the Company amended a promissory note issued in 2012 with an outstanding balance of $22,800.  The note can now be converted into common stock of the company at a discount of 45 % from the average lowest trading price for a 10 day period prior to the conversion date. On July 26, 2013 the note was converted into 320,000,000 shares of common stock.   $ 22,800  
         
Unamortized discount due to derivative liabilities   $ (26,544 )
         
Total convertible notes outstanding, net   $ 171,406  

 

NOTE 4 – STOCK

 

The Company has 4,000,000,000 shares of common stock authorized with a par value of $0.00001, 100,000,000 shares of Series A Preferred stock with a par value of $0.00001, 10 shares of Series B Preferred stock with a par value of $0.00001, and 30,000,000 shares of Series C Preferred stock with a par value of $0.00001.

 

During the six month period ended June 30, 2013, the Company issued 17,995,872 shares of common stock. This included 2,256,982 shares to service providers valued at $29,570, 8,500,000 due under our financing agreement with IronRidge Global valued at $98,300, and 7,238,890 in conjunction with the conversion of notes payable valued at $46,600. The company also cancelled 20,000,000 shares of common stock returned to the Company by the former CEO and made an adjustment to its records, reducing common shares outstanding by 15,000 shares, correcting an error. Before the recent change in management, the Company had limited staff and did not retain a full time financial manager. No attempt was made by the company to reconcile its internal record of stock issued to the records of the transfer agent. As a result the Company ledger of stock was incorrect, prompting the reduction. The Company terminated two consulting agreements and cancelled 35,000 shares of Series C Preferred stock. The Company also sold 2,000 shares of Series C Preferred stock at $2.50 per share to an investor.

 

F- 10
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

On September 29, 2010, the Company signed a lease for office space in Jacksonville, Florida. The lease commenced on November 1, 2010 and is for a term of three years and one month. The monthly rent is $1,073.33 with annual increases. The lease required a security deposit of $1,700. Total rent expense was $8,545 which included common area maintenance during the period ended June 30, 2013. The landlord has cancelled this lease due to non-failure to timely pay rent.

 

NOTE 6 – GOING CONCERN

 

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. However, the Company had limited revenues as of June 30, 2013. The Company currently has a working capital deficit, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time.

 

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund operating expenses The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

 

NOTE 7 – INCOME TAXES

 

As of June 30, 2013, the Company had net operating loss carry forwards of approximately $7,175,000 that may be available to reduce our tax liability in future years. We estimate the benefits of this loss carry forward at $2,482,000 if the Company produces sufficient taxable income. No adjustments to the financial statements have been recorded for this potential tax benefit.

 

NOTE 8 – FAIR VALUE MEASUREMENT

 

The Company has adopted new guidance under ASC Topic 820, effective January 1, 2009. New authoritative accounting guidance (ASC Topic 820-10-15) under ASC Topic 820, Fair Value Measurement and Disclosures, delayed the effective date of ASC Topic 820-10 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until 2009.

 

ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Further new authoritative accounting guidance (ASU No. 2009-05) under ASC Topic 820, provides clarification that in circumstances in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.

 

The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

 

Level 1 – Quoted prices in active markets for identical assets and liabilities.

 

Level 2 – Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liabilities.

 

F- 11
 

 

STAKOOL, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

 

NOTE 8 – FAIR VALUE MEASUREMENT (CONTINUED)

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair value of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes model.

 

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair value as their fair value were determined by using the Black-Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

The following table sets forth the liabilities at June 30, 2013, which is recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:

 

Fair Value Measurements at Reporting Date Using
Quoted Prices in Significant Other Significant
Active Markets for Observable Unobservable
Identical Assets Inputs Inputs
Description 6/30/13 (Level 1) (Level 2) (Level 3)
Convertible promissory note with embedded conversion option   $ 57,203     -0-     -0-     $ 57,203  
Total   $ 57,203     -0-     -0-     $ 57,203  

 

The following table sets forth a summary of change in fair value of our derivative liabilities for the six months ended June 30, 2013:

 

Beginning balance     -0-  
Change in fair value of embedded conversion feature of convertible promissory notes included in earnings   $ 57,203  
Ending balance   $ 57,203  

 

NOTE 9 – SUBSEQUENT EVENTS

 

On April 16, 2013 the Company issued a convertible note for $27,500. The note bears interest at 8% and matures within a year.

 

On April 17, 2013 the Company issued 101,666,667 shares of common stock for partial conversion of a note payable.

 

On April 19, 2013 the Company issued 101,666,667 shares of common stock for partial conversion of a note payable.

 

On May 6, 2013 the Company issued a convertible note for $22,500. The note bears interest at 8% and matures within a year.

 

On May 8, 2013 the Company issued 148,888,889 shares of common stock for partial conversion of a note payable.

 

On July 23, 2013 the Company issued a convertible note for $15,500. The note bears interest at 8% and matures within a year

 

As reported in our April 22, 2013 8K filing, the Company appointed Kevin P. Quirk President and Chief Executive Officer of the Company. He was also appointed as a member of the Board of Directors.

 

On August 6, 2013 the Company filed a Schedule 14C Information statement with the United States Securities and Exchange Commission reporting that it intends to effect a 1 for 100 reverse stock split of the Company’s common stock to be effective on or about September 6, 2013.

 

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to June 30, 2013 through the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.

 

F- 12
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

This quarterly report on Form 10-Q and other reports filed by StaKool, Inc. (“we,” “us,” “our,” or the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Plan of Operations

 

Anthus Life maintains its Natural plus Energy product line, and maintains its relationship with its contract manufacturer. During 2012, the Company completed a complete redesign of its packaging related to wrappers and display boxes to be more in-line with consumer demand and expectations.

 

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Under the direction of Kevin Quirk, the Company’s recently appointed Chief Executive Officer, the Company anticipates leveraging management’s experience and knowledge of the natural food and beverage industry. The vertical integration of this knowledge of the natural food and beverage industry will allow for the better redeployment of the Natural plus Energy product line, and will allow for a more comprehensive understanding of the distribution channels and retail positioning. In addition, the natural food and beverage market continues to grow at a relatively substantial pace, and allows for the introduction of many functional food and beverage products.

 

Our management team will explore all aspects of the all-natural functional food and beverage industry, and effectively integrate and develop products tailored to those markets. The management team feels confident that its understanding of the market will allow for the addition of several functional food and beverage products within the next 24-36 months that effectively capitalize on our knowledge and experience, and are capable of developing velocity throughout the all-natural retail market space. The Company has access to a talented packaging and design team that will assist in the future development of well-conceived products and the appropriate consumer packaging that will allow for rapid consumer interest, appeal and adoption.

 

Results of Operations

 

For the Six Months Ended JUNE 30, 2013 Compared to the Six Months Ended JUNE 30, 2012

 

    For the Six Months Ended June 30,  
    2013     2012  
Net sales   $ 64     $ 15,137  
Gross margin   $ (2,451 )   $ (385 )
Operating expenses   $ 152,648     $ 920,134  
Loss from operations   $ (155,099 )   $ (920,519 )
Other income (expense)   $ (42,453 )   $ (2,844 )
Net loss   $ (197,552 )   $ (923,363 )
Loss per common share – basic and diluted   $ (0.00 )   $ (0.04 )

 

Revenue

 

Total revenue for the six months ended June 30, 2013 was $64. Total revenues were from the sale of health food products.

 

Gross Margin

 

Gross margin for the six months ended June 30, 2013 was a loss of $2,451 due to a lack of revenue. Revenue declined from $15,137 to $64 for the six month period ending June 30, 2012 and 2013 respectively.

 

Operating Expenses

 

For the six month periods ending June 30, operating expenses declined from $920,134 in 2012, to $152,648 in 2013. Of this decrease, $716,063 was produced by a reduction in stock based compensation. In 2012 the Company had issued common stock to compensate various consultants and service providers, due to a lack of revenue, which resulted in a shortage of cash-flow. This expense represented 83 % of Total Operating Expenses for the six months ended June 30, 2012. For the same period in 2013, this expense decreased to 29%. We also had a decrease in Professional Fees. This expense declined $31,068, from $114,401 in 2012, to $83,333 in 2013, due to a reduction in the number of consultants employed.

 

Loss from Operations

 

Loss from operations for the six months ended June 30, 2013 was $155,099. The loss was primarily attributable to a lack of revenue. However, operating expenses decreased significantly, as discussed above.

 

4
 

 

Other Income (Expense)

 

For the six month periods ended June 30, Other Expenses increased $84,614, from $2,844 in 2012 to $87,458 in 2013. In 2013 Other Expense included $29,700 representing a loss on stock issued in conjunction with our settlement with IronRidge Capital, as previously reported. Stock issued under this court ordered agreement is issued at a discount from the current market price, which results in a non-cash expense. Other Expense also included interest expense of $137,807 comprised of the amortization of discount on derivative liabilities of $83,293, a penalty of $16,250 incurred under the terms of a convertible note previously issued by the Company, placement commission expense of $1,150 for assistance in selling convertible notes, and interest of $3,712 accrued on convertible notes. The increases in Other Expense discussed above were offset, in part, by non-cash income of $80,249 which resulted from the temporary decline in the derivative value of convertible notes the Company has issued to finance operations.

 

Net Loss

 

Net Loss for the six months ended June 30, 2013, was $197,552. The net loss was primarily attributable to a lack of revenue and the operating expenses and other expenses as described above.

 

Inflation did not have a material impact on the Company’s operations for the period. Other than the foregoing, management knows of no trends, demands, or uncertainties that are reasonably likely to have a material impact on the Company’s results of operations.

 

Liquidity & Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at June 30, 2013 and December 31, 2012.

 

    June 30, 2013     December 31, 2012  
Current Assets   $ 6,555     $ 338  
Current Liabilities   $ 757,275     $ 665,321  
Working Capital Deficit   $ 750,720     $ 664,983  

 

At June 30, 2013, we had a working capital deficit of $750,720, as compared to a working capital deficit of $664,983, at December 31, 2012, an increase in the deficit of $85,737. The increase is primarily related to an increase in convertible notes payable issued in order to fund operating activities.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.

 

The Company sustained a loss of $197,552 for the six months ended June 30, 2013. Because of the absence of positive cash flows from operations, the Company requires additional funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

We are presently unable to meet our obligations as they come due. At June 30, 2013 we had minimal assets and a working capital deficit of $750,720. Our working capital deficit is due to the results of operations.

 

Net cash used in operating activities for the six months ended June 30, 2103 was $93,349. Net cash used in operating activities includes our net loss and an increase in accounts payable. This was offset by depreciation, a reduction in prepaid expenses, and an increase in accrued interest.

 

5
 

 

Net cash provided by financing activities for the six months ended June 30, 2103 was $96,750. Net cash provided by financing activities for this period consists primarily of the issuance of a convertible note, and the sale of Preferred stock.

 

We anticipate that our future liquidity requirements will arise from the need to fund operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated raising additional funds from the private equity sources and debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. In addition, our Plan of Operation for the next twelve months is to raise capital to continue to expand our operations. We are presently engaged in capital raising activities through one or more private offering of our company’s securities. See “Note 7 – Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”

 

Off-Balance Sheet Arrangements

 

As of June 30, 2013, we do not have any 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 is material to investors.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures .

 

(a) Evaluation of Disclosure Controls and Procedures.

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our PEO and PFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

(b) Changes in Internal Control over Financial Reporting.

 

Our internal control over financial reporting were improved during the six month period ended June 30, 2013 with addition of experienced financial management staff familiar with control procedures. Excluding this addition, there was no changes in our internal controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2012, filed with the SEC on April 19, 2013.

 

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

 

During the period ended June 30, 2013, the Company issued 2,000 shares of Series C Preferred stock to a private investor. This was exempt from registration under rule 144.

 

During the period ended June 30, 2013, the Company issued 225,698,106 shares of common stock for services provided. This was exempt from the registration under rule 144.

 

During the period ended June 30, 2013, the Company issued 723,888,889 shares of common stock for conversion of notes payable. This was exempt from registration under rule 144.

 

Item 3. Defaults upon Senior Securities.

 

There were no defaults upon senior securities during the quarter ended June 30, 2013.

 

Item 4. Mine Safety Disclosure.

 

Not applicable

 

Item 5. Other Information.

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

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Item 6. Exhibits.

 

Exhibit No.   Description
31.1   Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
     
31.2   Certification by the Principal Accounting Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
     
32.1   Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
     
32.2   Certification by the Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

 

101.INS   XBRL Instance Document**
101.SCH   XBRL Taxonomy Extension Schema**
101.CAL   XBRL Taxonomy Extension Calculation Linkbase**
101.DEF   XBRL Taxonomy Extension Definition Linkbase**
101.LAB   XBRL Taxonomy Extension Label Linkbase**
101.PRE   XBRL Taxonomy Extension Presentation Linkbase**

 

*   Filed Herewith.  
**   In accordance with Regulation S-T, the XBRL-related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith and not “filed”  

 

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SIGNATURES

 

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

 

  STAKOOL, INC.
Dated: August 14, 2013  
  /s/ Kevin P. Quirk
  Kevin P. Quirk
  Principal Executive Officer

 

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