Occidental Development Group, Inc. (ODG, the Company, we, us) was incorporated in the State of Nevada in 1998. Through its subsidiary MCM Integrated Technologies, Ltd. (MCM) the Company operates in the green building sector and has historically offered automation technology for single and multi unit new construction and existing buildings. The Company specialized in designing, supplying, installing, upgrading and servicing control and automation solutions including: energy use monitoring and conservation systems, security and access control systems, lighting control systems, HVAC and environmental controls, and distributed audio/video systems. Incorporated in 1994, MCM has supplied home automation and energy management solutions since 2003. The Company maintains its corporate office in Beverly Hills California and has project offices in Vancouver, British Columbia and Phoenix, Arizona. Income is derived from both equipment sales and the provision of installation, repair and maintenance services. Customers include residential home owners, developers and builders of single family and multi-unit developments and commercial businesses.
The Company previously engaged in the import and distribution of home décor products for the North American market. This activity was pursued through its wholly owned subsidiary Cardinal Points Trading Corp. In December 2006 the Company discontinued its activity in the home décor sector and began a process to dispose of assets and obligations and evaluate ways and means to recover costs related to the home décor import and distribution business. This process concluded during the current year and future impact on operations is expected to be de minimis as of May 31, 2013.
Results from ongoing operations reported for the year ending May 31, 2013 and 2012 relate to sales of home automation and energy efficiency products and services including system design, equipment supply, installation and support. Results from discontinued operations relate to the Companys phase out activities in the home décor sector and include the cost of third party legal and professional time related to eliminating and reducing liabilities, and pursuing legal recourse against the Companys home décor supplier.
This summary of significant accounting policies of Occidental Development Group, Inc. is presented to assist in understanding the Companys financial statements. The financial statements and notes are representations of the Companys management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
The Companys financial statements are prepared using the accrual method of accounting.
The Company carries its accounts receivable at net realizable value. Because of the small customer base, direct contact with customers and relatively small number of transactions, the Company uses the direct write off method to account for doubtful accounts. The Company estimates bad debt based on managements ongoing review and assessment of accounts and creation of reserves for the full amount of doubtful accounts. At May 31, 2013 and 2012, there were accounts receivable allowances of NIL.
Advertising expenses consist primarily of costs incurred in the design, development, and printing of Company literature and marketing materials. The Company expenses all advertising expenditures as incurred. The Company incurred advertising and marketing expenses of $826 and $3,853 for the years ending May 31, 2013 and 2012 respectively.
For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. At May 31, 2013 and 2012, the Company did not have cash equivalents.
We record estimated commitments for future obligations and estimate contingencies when information is available that indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount can be reasonably estimated. When no accrual is made for a loss contingency because one or both of these conditions are not met, or if an exposure to loss exists in excess of the amount accrued, we disclose such contingencies when there is at least a reasonable possibility that a loss or an additional loss may have been incurred. Determining the likelihood of incurring a liability and estimating the amount of the liability involves significant judgment. If the outcome of the liability is more adverse to us than management currently expects, then we may have to record additional charges in the future. See Note 6 for details on commitments and contingencies.
The Company accounts for Comprehensive Income in accordance with ASC Topic 220. ASC Topic 220 establishes standards for reporting and displaying comprehensive income, its components and accumulated balances. For the year ending May 31, 2013 the Company reported a comprehensive gain of $1,372 resulting from the conversion of Canadian dollar subsidiaries into US dollars. For the year ending May 31, 2013 the accumulated comprehensive loss due to the conversion of Canadian dollar subsidiaries into US dollars was $86,203.
The Company accounts for exit or disposal activities in accordance with ASC Topic 220, Accounting for Costs Associated with Exit or Disposal Activities ASC 220 establishes standards for the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities. There has been no impact on the Companys financial position or results of operations from adopting ASC 220.
The Company has adopted ASC 260 Earnings Per Share. Basic loss per share is computed using the weighted average number of common shares outstanding. Diluted net loss per share is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.
The following potential common shares have been excluded from the computation of diluted net income per share for the years ended May 31, 2013 and 2012 because their inclusion would have been antidilutive:
On July 1, 2008, the Company adopted Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (Topic 820). Topic 820 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.
The following table represents our assets and liabilities by level measured at fair value on a recurring basis at May 31, 2013
The adoption of this standard did not have a material effect on the Companys financial position, results of operations or cash flows.
Software development costs include direct costs incurred for internally developed products classified under Other Assets. We account for software development costs in accordance with ASC 350-40. All capitalized software costs are amortized on a straight line basis over an estimated useful life and are reviewed for impairment annually. As of May 31, 2013, all software costs were fully amortized.
MCM Integrated Technologies, Ltd. and Cardinal Points Trading, Corp. both use the Canadian Dollar as their functional currency. Transactions denominated in currencies other than the entitys functional currency are translated into the entitys functional currency at the exchange rate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate ruling on the balance sheet date. Currency translation differences are recognized in the statement of income for the period.
On consolidation, the results of operations and cash flows whose functional currency is other than the US dollar are translated into US dollars at the average exchange rate for the period and their assets and liabilities are translated into US dollars at the exchange rate ruling on the balance sheet date. Currency translation differences are recognized within other comprehensive income as a separate component of shareholders equity. In the event that such an operation is sold, the cumulative currency translation differences that are attributable to the operation are reclassified to income.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
As shown in the accompanying financial statements, at May 31, 2013 the Company has an accumulated deficit of $15,872,094, and current liabilities in excess of current assets by $1,446,096. These circumstances raise substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Commencing in July 2006 and continuing through the year ended May 31, 2012 management has systematically continued to phase out of the home décor sector. Commencing in Q3 2007 the Company began reporting all home décor activity under the category of discontinued operations. This transition was completed as of May 31, 2012. In December 2006 the Company moved into the home automation sector with the acquisition of MCM Integrated Technologies. The transition has substantially reduced the Companys financial obligations with respect to overheads, cost of inventory, cost of sales and need for support services. The Company recorded positive operating income for the year ended May 31, 2007 and loss on operations for the years ended May 31, 2008 through 2013.
Goodwill is calculated as the excess of the fair value of consideration paid over the fair value of tangible and intangible assets acquired and liabilities assumed. Goodwill is tested for impairment annually according to ASC 350-20. An impairment test would also be performed in any period in which events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment would be recognized at that time, to the extent that the carrying amount exceeds the undiscounted future net cash flows expected from its use. For the year ended May 31, 2012 the Company recorded goodwill in the amount of $243,199 related to the acquisition of MCM Integrated Technologies, Ltd. Management reviewed Goodwill and found that there was impairment for the year ended May 31, 2012 and an expense for the full value of goodwill was recognized.
We have adopted ASC 350 for the assessment of impairment of goodwill and indefinite life intangibles on an annual basis. The potential impairment of finite life intangibles is assessed whenever events or a change in circumstances indicate the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:
significant underperformance relative to historical or expected projected future operating results;
significant changes in the manner of our use of the acquired assets or the strategy for our overall business;
When we determine that the carrying value of goodwill and indefinite life intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any potential impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model.
Inventory
The Company has adopted ASC 330: Inventory at May 31, 2013 and 2012 consisted of a variety of home automation equipment. Inventories are recorded using the specific identification method and valued at the lower of recorded cost or market value. The recorded cost of inventory was $53,701 at May 31, 2013, and $53,701 at May 31, 2012. Reserves of $51,749 at May 31, 2013 and $51,749 at May 31, 2012 were recorded for home automation inventory.
|
|
|
Inventory
|
May 31
2013
|
May 31
2012
|
|
Recorded Cost
|
Home automation equipment
|
$53,321
|
$53,701
|
Total Recorded Cost
|
$53,321
|
$53,701
|
|
Reserve
|
Home automation equipment
|
$51,382
|
$51,749
|
|
Net of Reserve
|
Total Inventory net of reserve
|
$1,939
|
$1,952
|
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. References herein to the Company include the Company and its subsidiaries, unless the context otherwise requires.
29
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years (see note 3). Property and Equipment held by MCM are pledged as security for the Companys line of credit.
Provision for Taxes
We account for income taxes in accordance with accounting guidance now codified as FASB ASC Topic 740,
Income Taxes
, which requires that we recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.
Accounting guidance now codified as FASB ASC Topic 740-20, Income Taxes Intra-period Tax Allocation, clarifies the accounting for uncertainties in income taxes recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a particular jurisdiction. FASB ASC Topic 740-20 requires that any liability created for unrecognized tax benefits is disclosed. The application of FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets. We would recognize interest and penalties related to unrecognized tax benefits in income tax expense.
At May 31, 2013, the Company had net deferred tax asset calculated at an expected rate of 34% of approximately $4,257,000 principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at May 31, 2013. The significant components of the deferred tax asset at May 31, 2013 and May 31, 2012 were as follows:
|
|
|
|
|
|
|
|
May 31,
2013
|
|
|
May 31,
2012
|
Net operating loss carryforward
|
$
|
13,076,828
|
|
$
|
12,522,234
|
Deferred tax asset - NOL
|
$
|
4,446,162
|
|
$
|
4,257,600
|
Deferred tax asset valuation allowance
|
$
|
(4,446,828)
|
|
$
|
(4,257,600)
|
Net deferred tax asset
|
$
|
-
|
|
$
|
-
|
At May 31, 2013, the Company had net operating loss carryforwards of approximately $13,017,074 which expire in the years 2020 through 2031. The change in the allowance account from May 31, 2012 to May 31, 2013 was $168,246.
The components of current income tax expense as of May 31, 2013 and 2012 respectively are as follows:
|
|
|
|
|
|
As of May 31,
|
|
2013
|
|
2012
|
Current federal tax expense
|
$
|
-
|
$
|
-
|
Current state tax expense
|
$
|
-
|
$
|
-
|
Change in NOL benefits
|
$
|
188,562
|
$
|
98,048
|
Change in valuation allowance
|
$
|
(188,562)
|
$
|
(98,048)
|
Income tax expense
|
$
|
-
|
$
|
-
|
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
For the period ended May 31, 2013, other than a reserve of $170,000 for potential federal tax penalties associated with late filing of foreign subsidiary disclosures, the Company did not record any liabilities for uncertain tax positions.
Revenue Recognition
The Company generates revenues designing and installing, integrating and servicing automation solutions and energy use monitoring and conservation systems for commercial and residential new construction and renovation projects. The Company generates revenues in three primary ways: first, the Company offers a complete turnkey solution with products and services to contractors and end users; second, the Company sells only products to its contractors and end users; and third, the Company sells only services to its contractors and end users. Revenue on product sales, service agreements and turnkey contracts is recognized using the completed contract method in accordance with ASC Topic 605 Revenue Recognition in Financial Statements.
Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. The useful lives of property and equipment for purposes of computing depreciation are three to seven years. The following is a summary of property, equipment, and accumulated depreciation:
|
|
|
|
|
Property and Equipment
|
|
May 31,
2013
|
|
May 31,
2012
|
Computer hardware and software
|
$
|
811,741
|
$
|
815,287
|
Furniture, fixtures, vehicles, leaseholds
|
|
342,754
|
|
345,199
|
Book value of property and equipment
|
|
1,154,495
|
|
1,160,486
|
Less accumulated depreciation
|
|
(1,149,256)
|
|
(1,150,223)
|
Property and equipment - net
|
$
|
5,239
|
$
|
10,263
|
For the years ended May 31, 2013 and 2012 depreciation expenses were $5,098 and $8,324. The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized. The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.
NOTE 4 COMMON STOCK
During the year ended May 31, 2012 the Company issued 1,180,100 shares of common stock for conversion of debt valued at $360,030.
31
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
During the year ended May 31, 2013 the Company issued 3,073,101 shares of common stock for conversion of debt valued at $239,471.
All stock issued was within terms of the underlying agreements.
NOTE 5 RELATED PARTIES (NOTES PAYABLE RELATED PARTY)
During the year ended May 31, 2012 $180,000 of accrued liabilities, $115,388 of short term note payable and $2,612 of accrued interest due the Companys CEO was consolidated into a debenture bearing interest at a rate of 6% convertible into shares of the Companys common stock at a conversion price not less than the greater of $0.0005 per share or the lowest closing price of the Companys Common Stock for any trading day on which a Notice of Conversion is received, or for any of the 20 consecutive days on which shares of the Company traded immediately preceding the date of receipt of each Notice of Conversion. The Company determined that there was no derivative liability or beneficial conversion associated with the note. The debenture and $5,780 of accrued interest were converted into 992,600 shares of common stock of the Company at an average price of $0.30 per share. The conversion was made in accordance with the underlying debt agreement.
During the year ended May 31, 2012 new loans and accounts payable due to the Companys officers totaled $52,175. The Company had short-term loans and accounts payable outstanding to corporate officers at May 31, 2012 in the amount of $350,232. They are unsecured, due on demand and bear interest at an average rate of 9.7%. Accrued interest on May 31, 2012 was $785. The total outstanding related party debt [principal plus accrued interest] for the period ended May 31, 2012 was $351,017.
During the year ended May 31, 2013, the Company converted $122,000 of accrued liabilities, into a new related party debenture in the same amount and re-classified and converted a $30,267 short term non-interest bearing note into a new related party debenture. The debentures bear interest at 6% and mature on June 1, 2014. The debentures are convertible into shares of common stock at a conversion price equal to the lowest closing price per share of the Companys common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion or at a price of $0.0005 per share whichever is greater. The Company determined that there was no derivative liability or beneficial conversion associated with the new debentures.
During the year ended May 31, 2013 the Company converted $103,267 of related party debenture principal and $2,154 of related party debenture interest into 1,405,600 shares of common stock at a share price of $0.10 per share. All conversions were made in accordance with the underlying debt agreement.
During the year ended May 31, 2013, the balance sheet liability associated with related party loans, debentures and accrued liabilities decreased by $30,196. Related party loans outstanding as of May 31, 2013 totaled $320,036 are uncollateralized and due on demand. The Company paid the Companys officers $245,848 of loan principal and $27,413 of interest in cash and accrued related party interest of $722. Total outstanding related party debt [principal plus accrued interest] for the periods ended May 31, 2013 and May 31, 2012 was respectively $321,543 and $351,017.
32
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
The Company shares office space and administrative costs in Vancouver with ScanTech Imaging Corp. (ScanTech), a company controlled by Murat Erbatur the Companys former COO. The Company provides technical consulting services to ScanTech and Scan Techs clients on an as needed basis.
The following table summarizes the position of notes, and amounts due to related parties at May 31, 2013 and May 31, 2012:
|
|
|
|
|
|
Related Parties
|
|
Principal
Outstanding
on May 31,
2013
|
Interest
Accrued to
May 31,
2013
|
Principal
Outstanding
on May 31,
2012
|
Interest
Accrued to
May 31,
2012
|
Short term notes
|
$
|
320,036
|
1,507
|
350,232
|
785
|
Total
|
$
|
320,036
|
1,507
|
350,232
|
785
|
NOTE 6 COMMITMENTS AND CONTINGENCIES
Lease Commitments
For the year ending May 31, 2013 the Company did not have any lease or other long term commitments and management was not aware of any contingencies not already provided for. The Company rents office, warehouse, and storage space on a month-to-month basis. This arrangement is expected to continue for the foreseeable future.
NOTE 7 CONCENTRATION OF CREDIT RISK
Cash
The Company maintains cash balances at two banks. Accounts at each institution are insured by the Canadian Depository Insurance up to $60,000 in Canadian funds. At May 31, 2013 and 2012, no account exceeded this limit.
NOTE 8 THIRD PARTY NOTES AND DEBENTURES PAYABLE
During the 12 months ended May 31, 2012 the Company reclassified $80,000 of accrued liability into a non interest bearing convertible note maturing on June 1, 2012. The accrued liability resulted from professional fees payable under a consulting contract dated July 2010. Pursuant to terms of the consulting contract, the note formalizes the Companys option to settle the outstanding liability through issuance of common stock and the effective date of the note tacks back to December 2010 reflecting the period in which the Company realized the benefit of the services. The note is convertible into shares of the Companys common stock at a conversion price not less than the greater of $0.0005 per share or the lowest closing price of the Companys Common Stock for any trading day on which a Notice of Conversion is received, or for any of the 20 consecutive days on which shares of the Company traded immediately preceding the date of receipt of each Notice of Conversion. The Company determined that there was no derivative liability or beneficial conversion associated with the note.
33
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
During the quarter ended November 30, 2012 the Company negotiated an 8% convertible debenture, principal amount of $42,500, (First Asher Note) with Asher Enterprises, Inc. The debenture, due in June 2013, is convertible into shares of the Companys common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Companys stock during the ten days prior to conversion or $0.00009 per share whichever is greater.
The Company evaluated the First Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Floor Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.03, below the market price on September 6, 2012 of $0.038, resulted in a discount of $42,500 of which $42,294 was amortized during the 12 months ended May 31, 2013.
During the quarter ended February 28, 2013 the Company negotiated a second 8% convertible debenture, principal amount of $32,500 (Second Asher Note), with Asher Enterprises, Inc. The debenture, due in September 2013, is convertible into shares of the Companys common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Companys stock during the ten days prior to conversion or $0.00009 per share whichever is greater.
The Company evaluated the Second Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Floor Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.007 below the market price on December 5, 2012 of $0.020 resulted in a discount of $16,226 of which $10,406 was amortized during the 12 months ended May 31, 2013.
During the quarter ended February 28, 2013, the Company converted a third party accounts payable of $85,000 to a short term non-interest bearing convertible note due June 2013. The principal is convertible into shares of common stock at a conversion price equal to the lowest closing price per share of the Companys common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion or at a price of $0.0005 per share whichever is greater.
The Company evaluated the $85,000 convertible note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Floor Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.001 below the market price on December 31, 2012 of $0.021 resulted in a discount of $4,250 of which $4,222 was amortized during the 5 months ended May 31, 2013.
During the quarter ended May 31, 2013 the Company negotiated an 8% convertible debenture, principal amount of $42,500, (Third Asher Note) with Asher Enterprises, Inc. The debenture, due in December 2013, is convertible into shares of the Companys common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Companys stock during the ten days prior to conversion or $0.00009 per share whichever is greater.
34
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
The Company evaluated the Third Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Floor Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.004, below the market price on September 6, 2012 of $0.007, resulted in a discount of $27,765 of which $4,080 was amortized during the 12 months ended May 31, 2013.
Pursuant to the terms of the Asher debentures, and by agreement with Asher, the Company has instructed its stock transfer agent to reserve an agreed upon number of shares of the Companys common stock to be issued if the debenture is converted. As of May 31, 2013, 3,000,000 shares have been reserved, but are not considered as issued and outstanding.
All outstanding notes and debentures were evaluated for embedded derivatives in accordance with ASC 815 and were found to not include any embedded derivatives.
During the 12 months ended May 31, 2013 the Company converted $9,000 of short term note principal into 30,000 shares of the Companys common stock and $36,800 of First Asher Note principal into 580,834 shares of the Companys common stock. All conversions were within the terms of the underlying agreements.
During the 12 month period ended May 31, 2013 the Company recorded expenses of $50,201 for accrued interest and $61,002 related to amortization of debenture discounts.
Third party short term principal outstanding on May 31, 2013 was $393,576, consisting of note principal $237,876 and debenture principal $155,700. Total third party long term principal outstanding on May 31, 2013 consisted of debenture principal of $619,753. Total outstanding third party principal outstanding on May 31, 2013 was $1,013,329.
The following tables summarize the outstanding principal and discounts associated with debentures and notes outstanding at May 31, 2012 and May 31, 2013.
|
|
|
|
|
May 31, 2012
|
Long and Short Term Debentures
|
Notes
|
Total
|
Principal at end
of period
|
Remaining
Discounts
|
Balance Sheet
Amount net of
discounts
|
Principal at end
of period
|
End of Period
Balance Sheet
Amount
|
$730,753
|
$ -
|
$730,753
|
$88,739
|
$819,492
|
|
|
|
|
|
|
|
May 31, 2013
|
Long and Short Term Debentures
|
Notes
|
Total
|
Principal at end
of period
|
Remaining
Discounts
|
Balance Sheet
Amount net of
discounts
|
Principal at end
of period
|
Remaining
Discounts
|
Balance Sheet
Amount net of
discounts
|
End of Period
Balance Sheet
Amount
|
$775,453
|
$29,711
|
$745,742
|
$237,876
|
$28
|
$237,848
|
$983,590
|
35
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
The principal and accrued interest on notes and debentures as of May 31, 2012 and May 31, 2013 are summarized in the following tables:
|
|
|
|
|
|
Notes and Debentures
|
|
Principal
Amount at
May 31, 2012
|
Weighted
Average
Interest Rate
|
|
Accrued Interest
May 31, 2012
|
Third Party Notes
|
$
|
88,739
|
NIL
|
$
|
NIL
|
Third Party Debentures
|
|
730,753
|
6.5%
|
|
272,672
|
Total
|
$
|
819,492
|
5.8%
|
$
|
272,672
|
Notes and Debentures
|
|
Principal
Amount at
May 31, 2013
|
Weighted
Average
Interest Rate
|
|
Accrued Interest
May 31, 2013
|
Third Party Notes
|
$
|
237,876
|
-
|
$
|
-
|
Third Party Debentures
|
|
775,453
|
6.7%
|
|
322,876
|
Total
|
$
|
1,013,329
|
5.1%
|
$
|
322,876
|
Principal payments on loans and debentures payable in the years ending May 31, 2013 through 2017 are as follows:
|
|
Fiscal
Year
|
Principal
|
2013
|
$102,876
|
2014
|
$523,180
|
2015
|
$387,273
|
2016
|
-
|
2017
|
-
|
Total
|
$1,013,329
|
NOTE 9 DISCONTINUED OPERATIONS
At May 31, 2012, the Company had disposed of all discontinued inventory and fully depreciated all plant and equipment assets. At May 31, 2013, assets from discontinued operations were de minimis.
At May 31, 2013, the Company had no liabilities from discontinued operations. The following table summarizes the liabilities from discontinued operations at May 31, 2013 and May 31, 2012:
|
|
|
|
|
Description
|
|
May 31,
2013
|
May 31,
2012
|
Note Payable
|
$
|
-
|
$
|
61,250
|
Total liabilities related to discontinued operations
|
$
|
-
|
$
|
61,250
|
The Company did not record a loss from discontinued operations for the 12 months ended May 31, 2013. The loss from discontinued operations ($1,938), recorded for the 12 months ended May 31, 2012, was a result of miscellaneous charges related pursuing legal recourse against the Companys home décor supplier.
36
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
NOTE 10 - NEW ACCOUNTING PRONOUNCEMENTS
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02,
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
-
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 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. 2013-02 is not expected to have a material impact on our financial position or results of operations.
In January 2013, the FASB issued ASU No. 2013-01,
Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.
In October 2012, the FASB issued Accounting Standards Update ASU 2012-04, Technical Corrections and Improvements in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.
37
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
In August 2012, the FASB issued ASU 2012-03, Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update) in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.
In July 2012, the FASB issued ASU 2012-02, Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08,
Intangibles Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment
and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30,
Intangibles - Goodwill and Other - General Intangibles Other than Goodwill
. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entitys financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 has not had a material impact on our financial position or results of operations.
In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. This update defers the requirement to present items that are reclassified from accumulated other comprehensive income to net income in both the statement of income where net income is presented and the statement where other comprehensive income is presented. The adoption of ASU 2011-12 has not had a material impact on our financial position or results of operations.
In December 2011, the FASB issued ASU No. 2011-11 Balance Sheet: Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS. The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company is currently evaluating the impact, if any, that the adoption of this pronouncement may have on its results of operations or financial position.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations, or cash flows.
NOTE 11 CHANGES IN PRESENTATION OF COMPARATIVE STATEMENTS
The presentation of certain amounts for previous periods has been reclassified to conform to the presentation adopted for the current period.
38
OCCIDENTAL DEVELOPMENT GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2013
NOTE 12 SUBSEQUENT EVENTS
On June 25, 2013 Murat Erbatur resigned as director and COO and on June 26, 2013 the Board of Directors appointed Mr. Ian Gilbey as a director. On July 17, 2013, the Board of Directors authorized the merger with the Companys wholly-owned subsidiary, Occidental Development Group Inc., and in the merger the name of the company was changed to Occidental Development Group Inc. (the changes to take effect upon approval for trading purposes by FINRA). On July 17, 2013, the Board also approved the filing with the Secretary of State of Nevada a Certificate of Change that effected a 1:10 reverse split in our outstanding common stock and a reduction of our authorized common stock in the same 1:10 ratio, from 800,000,000 shares to 80,000,000 shares. Both of these corporate actions were permitted to be taken by the Companys Board of Directors without stockholder approval under Nevada NRS 92A.180 (for the merger with the subsidiary and name change) and NRS 78.207 (for the change in authorized and outstanding stock).
The change of the Companys name to Occidental Development Group, Inc. and the 1:10 reverse split with the concurrent reduction of our authorized common stock in the same ratio were approved by FINRA and became effective for trading purposes on August 19, 2013.
39