UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
for the quarterly period ended February 28, 2014

OR

¨   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ___________ to _____________

Commission file number : 000-25335

OCCIDENTAL DEVELOPMENT GROUP, INC.
(Exact name of registrant as specified in its charter)

Nevada
(State or other jurisdiction of incorporation or organization)

88-0409024
(I.R.S. Employer Identification Number)

256 S. Robertson Blvd

Beverly Hills CA 90211
(Address including zip code of principal executive offices)

Issuer’s telephone number: 310-358-3323

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes þ 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 þ   No ¨


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  


Large accelerated filer

¨

 

Accelerated filer

¨

Non-accelerated filer

¨

(Do not check if a smaller reporting company)

Smaller reporting company

x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No þ


As of April 17, 2014, the registrant had outstanding 75,886,165 shares of its $0.001 par value Common Stock.


Transitional Small Business Disclosure Format: Yes ¨  No þ




OCCIDENTAL DEVELOPMENT GROUP, INC.

(Formerly Intelligent Living Corp.)

FORM 10Q

For the Quarterly Period February 28, 2014


TABLE OF CONTENTS



Page




PART  I.  FINANCIAL  INFORMATION

3

ITEM 1.     FINANCIAL STATEMENTS

3

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF CONTINUING AND FUTURE PLAN OF OPERATION

18

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

25

ITEM 4T.   CONTROLS AND PROCEDURES

26

PART II. OTHER INFORMATION

27

ITEM 1.     LEGAL PROCEEDINGS

27

ITEM 1A.  RISK FACTORS

27

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

27

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

27

ITEM 4.     MINE SAFETY DISCLOSURES.

27

ITEM 5.     OTHER INFORMATION

27

ITEM 6.     EXHIBITS

28

SIGNATURES

29





2





PART  I.  FINANCIAL  INFORMATION

ITEM 1 - FINANCIAL STATEMENTS


OCCIDENTAL DEVELOPMENT GROUP, INC.

(A development stage company)

FORMERLY INTELLIGENT LIVING CORP.

CONSOLIDATED BALANCE SHEETS

 

 

February 28,

 

May 31,

 

 

2014

 

2013

 

 

(unaudited)

 

 

CURRENT ASSETS

 

 

 

 

  Cash and cash equivalents

$

1,815

$

19,469

  GST/PST tax refundable

 

78

 

381

  Assets held for sale

 

-

 

11,246

  TOTAL CURRENT ASSETS

 

1,893

 

31,096

 

 

 

 

 

PROPERTY AND EQUIPMENT, NET

 

-

 

-

 

 

 

 

 

TOTAL ASSETS

$

1,893

$

31,096

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

  Accounts payable

$

66,831

$

65,806

  Accrued liabilities

 

161,841

 

187,889

  Accrued liabilities related party

 

-

 

138,997

  Accrued interest

 

250,682

 

322,876

  Accrued interest related party

 

3,530

 

1,507

  Short term notes

 

27,529

 

27,876

  Short term notes convertible, net

 

542,221

 

335,961

  Short term loans - related party

 

17,677

 

-

  Liabilities associated with assets held for sale

 

-

 

391,041

  TOTAL CURRENT LIABILITIES

 

1,070,311

 

1,471,953

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

  Debentures

 

-

 

619,753

  TOTAL LONG TERM LIABILITIES

 

-

 

619,753

  TOTAL LIABILITIES

 

1,070,311

 

2,091,706

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

-

 

-

 

 

 

 

 

STOCKHOLDERS' (DEFICIT)

 

 

 

 

  Preferred stock, 5,000,000 shares authorized, $0.001 par value,

    0 issued and outstanding

 

-

 

-

  Common stock, 800,000,000 shares authorized, $0.001 par value;

    75,886,165 and 4,324,110 issued and outstanding respectively

 

75,886

 

4,324

  Stock payable

 

56,000

 

-

  Additional paid in capital

 

15,094,181

 

13,893,363

  Accumulated deficit

 

(16,173,133)

 

(15,872,094)

  Accumulated deficit since entering the development stage

 

(37,239)

 

-

  Accumulated other comprehensive (loss)

 

(84,113)

 

(86,203)

  TOTAL STOCKHOLDERS' (DEFICIT)

 

(1,068,418)

 

(2,060,610)

  TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)

$

1,893

$

31,096


See accompanying condensed notes to the interim consolidated financial statements.




3






OCCIDENTAL DEVELOPMENT GROUP, INC.

(A development stage company)

FORMERLY INTELLIGENT LIVING CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From inception of

 

 

 

 

 

 

 

 

 

 

Development Stage

 

 

 

 

 

 

 

 

 

 

(September 1, 2013) to

 

 

For the 3 month period ended February 28,

 

For the 9 month period ended February 28,

 

February 28,

 

 

2014

 

2013

 

2014

 

2013

 

2014

REVENUES

$

-

$

-

$

-

$

-

$

-

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUES

 

-

 

-

 

-

 

-

 

-

GROSS PROFIT

 

-

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

  Compensation

 

-

 

-

 

200,000

 

-

 

-

  Office and Administrative

 

707

 

98,983

 

85,507

 

105,322

 

1,854

  TOTAL OPERATING EXPENSES

 

707

 

98,983

 

285,507

 

105,322

 

1,854

 

 

 

 

 

 

 

 

 

 

 

(LOSS) FROM OPERATIONS

 

(707)

 

(98,983)

 

(285,507)

 

(105,322)

 

(1,854)

 

 

 

 

 

 

 

 

 

 

 

OTHER (EXPENSE)

 

 

 

 

 

 

 

 

 

 

  Beneficial conversion and fee discount expense

 

(2,115)

 

(20,747)

 

(29,739)

 

(33,497)

 

(13,259)

  Interest expense

 

(9,635)

 

(13,712)

 

(57,624)

 

(40,398)

 

(22,126)

  TOTAL OTHER  (EXPENSE)

 

(11,750)

 

(34,459)

 

(87,363)

 

(73,895)

 

(35,385)

 

 

 

 

 

 

 

 

 

 

 

(LOSS) FROM CONTINUING OPERATIONS

 

(12,457)

 

(133,442)

 

(372,870)

 

(179,217)

 

(37,239)

 

 

 

 

 

 

 

 

 

 

 

GAIN (LOSS) FROM DISCONTINUED OPERATIONS

 

-

 

15,733

 

34,592

 

7,169

 

-

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED NET (LOSS) BEFORE INCOME TAX

 

(12,457)

 

(117,709)

 

(338,278)

 

(172,048)

 

(37,239)

  Income Tax Expense

 

-

 

-

 

-

 

-

 

-

  NET (LOSS)

$

(12,457)

$

(117,709)

$

(338,278)

$

(172,048)

$

(37,239)

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE BASIC AND DILUTED

 

 

 

 

 

 

 

 

 

 

  (Loss) income per share from continuing operations

$

(0.00)

$

(0.10)

$

(0.01)

$

(0.14)

$

(0.00)

  (Loss) per share from discontinued operations

 

-

 

0.01

 

0.00

 

(0.01)

 

-

  Net (Loss) per share

$

(0.00)

$

(0.09)

$

(0.01)

$

(0.13)

$

(0.00)

Weighted average number of common stock shares outstanding, basic and diluted

 

59,423,225

 

1,278,515

 

37,637,643

 

1,278,515

 

59,423,225

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE GAIN (LOSS)

 

 

 

 

 

 

 

 

 

 

  Foreign currency translation gain (loss)

 

84

 

13,727

 

2,090

 

(976)

 

6,127

  COMPREHENSIVE (LOSS)

$

(12,373)

$

(103,982)

$

(336,188)

$

(173,024)

 

(31,112)


See accompanying condensed notes to the interim consolidated financial statements .



4






OCCIDENTAL DEVELOPMENT GROUP, INC.

(A development stage company)

FORMERLY INTELLIGENT LIVING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

From inception of

 

 

For the 9 month period ended

 

Development Stage

(September 1, 2013) to

 

 

February 28 ,

 

February 28 ,

 

February 28 ,

CASH FLOWS FROM OPERATING ACTIVITIES:

 

2014

 

2013

 

2014

  Net loss

$

(338,278)

$

(172,048)

$

(37,239)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

  Amortization of debt discount

 

29,739

 

33,497

 

13,259

  Services paid by issuance of common stock

 

200,000

 

-

 

-

  Depreciation

 

-

 

3,849

 

-

  Gain on disposal

 

(3,776)

 

-

 

-

  Services paid by issuance of debt

 

75,000

 

-

 

-

Decrease (increase), net of acquisition, in:

 

 

 

 

 

 

  Accounts receivable

 

(23,256)

 

6,937

 

-

  Accounts receivable related party

 

-

 

(15,448)

 

-

  Prepaid expenses

 

-

 

3,145

 

-

Increase (decrease), net of acquisition, in:

 

 

 

 

 

 

  Accrued liabilities and interest

 

22,208

 

14,392

 

15,870

  Accrued liabilities and interest related party

 

2,032

 

-

 

799

  Employee advance receivable

 

-

 

(70)

 

-

  Accounts payable

 

(2,773)

 

80,667

 

66

  GST tax refundable

 

392

 

(722)

 

627

  Net cash used in operating activities

 

(38,712)

 

(45,801)

 

(6,618)

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

  Purchase of fixed assets

 

(9,645)

 

-

 

-

  Proceeds from sale of fixed assets

 

18,507

 

-

 

-

  Net cash used in investing activities

 

8,862

 

-

 

-

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

  Bank Line of Credit

 

7,824

 

3,359

 

-

  Proceeds of loans

 

-

 

75,000

 

-

  Repayment of loans

 

(10,140)

 

-

 

-

  Proceeds of loans, related party

 

39,636

 

123,634

 

7,186

  Repayment of loans, related party

 

(13,797)

 

(150,962)

 

-

  Net cash provided by financing activities

 

23,523

 

51,031

 

7,186

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

(6,827)

 

5,230

 

568

 

 

 

 

 

 

 

  Effect of foreign exchange on cash

 

(14,899)

 

1,107

 

(5,025)

 

 

 

 

 

 

 

  Cash, beginning of period

 

23,041

 

2,685

 

6,272

  Cash, end of period

$

1,815

$

9,022

$

1,815

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

  Cash paid for interest and income taxes:

 

 

 

 

 

 

  Interest

$

8,728

$

19,824

$

-

  Income taxes

$

-

$

-

$

-

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

  Common stock issued for related party debt and interest

$

400,000

$

105,421

$

-

  Accounts payable converted to third party debt

$

-

$

85,000

$

-

  Common stock issued for third party debt and interest

$

385,500

$

97,250

$

382,600

  Accrued liabilities converted to related party debt

$

169,500

$

122,000

$

-

  Beneficial conversion feature on third party debt

$

-

$

62,976

$

-

  Note payable converted to accrued liabilities

$

14,026

$

-

$

-

  Disposal of subsidiary

$

342,880

$

-

$

342,880

See accompanying condensed notes to the interim consolidated financial statements.



5



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)




NOTE 1 – BASIS OF PRESENTATION AND GOING CONCERN


Occidental Development Group, Inc. (“ODG”, the “Company”, “we”, “us”) was incorporated in the State of Nevada in 1998. Historically, the Company operated in the green building sector offering 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.


The market opportunities for the Company’s control and automation services and products have steadily declined over the past several years due in part to the slowdown in new and construction and renovation activity plus the advent of plug and play automation technology which has eroded the Company's intellectual property, reduced the need for specialized technical support and reduced project margins.


Over several quarters the Company actively evaluated and pursued opportunities to expand its business activities vertically within the Company’s historical green building, home automation and energy conservation sectors and horizontally within the construction and renovation sectors. During FY 2012 the Company began planning the shift and expansion of its activities to development and design build services targeting energy efficient housing and multi-strata property renovation and development. Early in the planning process it became clear that significant restructuring would be required in order for the Company to attract the working capital financing required to support expansion. The Company began implementation of its diversification strategy in FY 2012 and expects to complete in FY 2014.


Initial stages of restructuring were completed during FY 2012. On October 31, 2011 the Company’s board of directors approved a Consent Resolution amending the Company’s Articles of Incorporation to affect a one for one hundred and fifty reverse split of the Company’s common stock, and adjustment of the Company’s authorized capital to eight hundred million common shares and five million preferred shares. The proposed amendments were approved by a majority of shareholders on November 1, 2011. The Company filed a preliminary Schedule 14C Information Statement outlining proposed amendments to the Company’s Articles of Incorporation on November 9, 2011 and a definitive Schedule 14C Information Statement on November 25, 2011. The Company set November 25, 2011 as the record date for notification to shareholders. The Company filed the amended Articles of Incorporation with the Nevada Secretary of State on December 12, 2011, with an effective posting date of December 22, 2012. The reverse split was approved for trading purposes by the Financial Industry Regulatory Authority [FINRA] on January 18, 2012.


Through FY 2013 the Company actively pursued design build and renovation opportunities within the British Columbia and Greater Vancouver markets and solicited project financing from commercial lenders and private equity. The Company structured a joint venture proposal with a prominent First Nations forestry company targeting housing needs within First Nations communities and undertook an extensive evaluation of renovation opportunities within the Greater Vancouver condominium market. The Company also responded to an invitation to provide engineering project management services, in concert with First Nations communities, to the early stage LNG development underway in British Columbia. During this period, the Company scaled back its project and marketing efforts within the Company’s traditional home automation sector in favor of pursuing property development opportunities.




6



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)




Through this process it became apparent that the Company’s financial resources were not sufficient to support available diversification opportunities and that further balance sheet and equity restructuring would be required in order to attract and qualify for project financing support and equity funding sufficient to grow the business. Management reached this conclusion concurrent with the close of FY 2013.


Beginning in June 2013 the Company aggressively undertook further restructuring and 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 director. Mr. Gilbey had previously been a consultant to the Company providing re-structuring and merger acquisition support. In June the Company moved its head office to Beverly Hills California to better focus on the US market. On July 17, 2013, the Board of Directors authorized a merger with the Company’s 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 Company’s 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 changes of the Company’s 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 and the change in the Company’s trading symbol to OXDG, were approved by FINRA and became effective for trading purposes on August 19, 2013, with the symbol change taking place 20 trading days post the effective date.


During the quarter ended August 31, 2013 the Company continued to plan for the complete phase out of its activities in the home automation sector and negotiations were initiated for the acquisition of Ball Park Investments LLC ("BallPark"), a Florida real estate development company. The Company's board of directors considered the acquisition of Ballpark a key step in establishing strategic relationships with debt and equity providers.


Effective September 1, 2013, the Company disposed of its subsidiary MCM Technologies Inc. ("MCM") by sale to a previous related party, Murat Erbatur, the Company's former COO, for $1.00. The transaction was accounted for by rolling up assets and liabilities into a one-time adjustment of ($342,880) to additional paid in capital. Early in the second quarter management completed the acquisition of BallPark. The acquisition of BallPark was done without consideration and did not contribute any assets or result in any liabilities. As a direct result of the Ballpark acquisition and subsequent negotiations for funding, the Company was introduced to and approached by Integrity Aviation and Leasing LLC ("Integrity"), a Texas based company active in the domestic airline industry and specializing in leasing jet aero engines and aircraft parts. In preliminary negotiations, Integrity disclosed that it had 5 engines under lease, one lease pending, assets in excess of $5 million and long-term lease revenues. On November 22, 2013 the management of Occidental and Integrity executed a binding Letter of Intent outlining terms for the acquisition of Integrity by Occidental. On January 14, 2014 the Company's Board of Directors approved the binding Letter of Intent for the acquisition of Integrity Aviation and Leasing LLC and initiated a due diligence process which, among other things, will verify and quantify the assets, liabilities and obligations of Integrity. On January 16, 2014 the Company's Board of Directors approved a consent motion for shareholder approval to increase the Company's authorized common share capital from 80,000,000 shares to 800,000,000 and on the same day received approval from a majority of shareholders.




7



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)



The acquisition in process of Integrity and shift in focus capitalizes on the Company’s in-house engineering and project management capabilities and gives the Company a solid asset and revenue backed foundation on which to build. The timing of this strategic initiative dovetails to the upswing in the global airline market and industry shift to off balance sheet financing of operations and flight critical capital equipment. The Company’s board of directors believe this initiative will overcome limitations the Company has historically faced raising funds and achieving growth and positive earnings.


The Company maintains its corporate office in Beverly Hills California. Income for the period ended February 28, 2014 was derived from the Company's historical activities. The Company’s year-end is May 31.


The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended May 31, 2013. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.


The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions that could have a material effect on the reported amounts of the Company's financial position and results of operations.


The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has suffered material recurring losses from operations since inception. At February 28, 2014, the Company had a working capital deficit of $1,068,418, an accumulated deficit of $16,173,133 and historically has reported negative cash flows from consolidated operations. These factors raise substantial doubt about the Company's ability to continue as a going concern.


Continuation of the Company is dependent on achieving sufficiently profitable operations and obtaining additional financing. Management has and is continuing to raise additional capital from various sources. There can be no assurances that the Company will be continue to be successful in raising additional capital. The financial statements do not include any adjustment relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


This summary of significant accounting policies of Occidental Development Group, Inc. is presented to assist in understanding the Company’s financial statements.  The financial statements and notes are representations of the Company’s 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.



8



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)




Earnings per Share

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.


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

 

February 28,

2014

 

May 31,

2013

Computer hardware and software

$

719,958

$

740,615

Furniture, fixtures, vehicles, leaseholds

 

183,433

 

192,787

Book value of property and equipment

 

903,391

 

933,402

Less accumulated depreciation

 

(903,391)

 

(933,402)

Property and equipment - net

$

0

$

0


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.


The Company has fully depreciated the cost of property and equipment, accordingly, for the period ended February 28, 2014 the net book value of the Company’s property and equipment is 0.


Fair Value of Financial Instruments

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.



9



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)




The following table represents our assets and liabilities by level measured at fair value on a recurring basis at February 28, 2014


 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

Realized

Description

Level 1

 

 

Level 2

 

Level 3

 

 

Loss

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

Totals

$

-

 

 

$

-

 

 

$

-

 

 

$

-


The following table represents our assets and liabilities by level measured at fair value on a recurring basis at May 31, 2013:


 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

Realized

Description

Level 1

 

 

Level 2

 

Level 3

 

 

Loss

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

Totals

$

-

 

 

$

-

 

 

$

-

 

 

$

-


The adoption of this standard did not have a material effect on the Company’s financial position, results of operations or cash flows.


Beneficial Conversion Feature of Debentures and Convertible Notes Payable

In accordance with FASB ASC 470-20, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, we recognize the advantageous value of conversion rights attached to such types of convertible debt. Such rights give the debt holder the ability to convert their debt into common stock at a price per share that is less than the trading price to the public on the day the loan is made to us. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of the debentures and related accruing interest, and is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the straight line method.


Recent Accounting Pronouncements

The following accounting standards updates were recently issued and have not yet been adopted by us. These standards are currently under review to determine their impact on our consolidated financial position, results of operations, or cash flows.


On January 31, 2013, the FASB issued Accounting Standards Update [ASU] 2013-01, entitled Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The guidance in ASU 2013-01 amends the requirements in the FASB Accounting Standards Codification [FASB ASC] Topic 210, entitled Balance Sheet. The ASU 2013-01 amendments to FASB ASC 210 clarify that ordinary trade receivables and receivables in general are not within the scope of ASU 2011-11, entitled Disclosure about Offsetting Assets and Liabilities, where that ASU amended the guidance in FASB ASC 210. As those disclosures now are modified with the ASU 2013-01 amendments, the FASB ASC 210 balance sheet offsetting disclosures now clearly are applicable only where reporting entities are involved with bifurcated embedded derivatives, repurchase agreements, reverse repurchase agreements, and securities borrowing and lending transactions that either are offset using the FASB ASC 210 or 815 requirements, or that are subject to enforceable master netting arrangements or similar agreements. ASU 2013-01 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption of this ASU is not expected to have a material impact on our financial statements.



10



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)




On February 28, 2013, the FASB issued Accounting Standards Update [ASU] 2013-04, entitled Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date. The ASU 2013-04 amendments add to the guidance in FASB Accounting Standards Codification [FASB ASC] Topic 405, entitled Liabilities and require reporting entities to measure obligations resulting from certain joint and several liability arrangements where the total amount of the obligation is fixed as of the reporting date, as the sum of the following:


·

The amount the reporting entity agreed to pay on the basis of its arrangement among co-obligors.

·

Any additional amounts the reporting entity expects to pay on behalf of its co-obligors.


While early adoption of the amended guidance is permitted, for public companies, the guidance is required to be implemented in fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments need to be implemented retrospectively to all prior periods presented for obligations resulting from joint and several liability arrangements that exist at the beginning of the year of adoption. The adoption of ASU 2013-04 is not expected to have a material effect on the Company’s operating results or financial position.


On April 22, 2013, the FASB issued Accounting Standards Update [ASU] 2013-07, entitled Liquidation Basis of Accounting. With ASU 2013-07, the FASB amends the guidance in the FASB Accounting Standards Codification [FASB ASC] Topic 205, entitled Presentation of Financial Statements. The amendments serve to clarify when and how reporting entities should apply the liquidation basis of accounting. The guidance is applicable to all reporting entities, whether they are public or private companies or not-for-profit entities. The guidance also provides principles for the recognition of assets and liabilities and disclosures, as well as related financial statement presentation requirements. The requirements in ASU 2013-07 are effective for annual reporting periods beginning after December 15, 2013, and interim reporting periods within those annual periods. Reporting entities are required to apply the requirements in ASU 2013-07 prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The adoption of ASU 2013-07 is not expected to have a material effect on the Company’s operating results or financial position.


On July 18, 2013, the FASB issued ASU 2013-11, which provides guidance on financial statement presentation of an unrecognized tax benefit 2 when a net operating loss (NOL) carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current U.S. GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. Under the ASU, an entity must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward except when:


·

An NOL carryforward, a similar tax loss, or a tax credit carryforward is not available as of the reporting date under the governing tax law to settle taxes that would result from the disallowance of the tax position.

·

The entity does not intend to use the deferred tax asset for this purpose (provided that the tax law permits a choice).


If either of these conditions exists, an entity should present an unrecognized tax benefit in the financial statements as a liability and should not net the unrecognized tax benefit with a deferred tax asset.  ASU 2013-11 is effective for public entities for fiscal years beginning after December 15, 2013, and interim periods within those years. The adoption of ASU 2013-11 is not expected to have a material effect on the Company’s operating results or financial position.




11



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)



There were various other updates recently issued which represented technical corrections to the accounting literature or application to specific industries. None of the other updates are expected to a have a material impact on our consolidated financial position, results of operations or cash flows. 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 3 - COMMON STOCK


During the nine months ended February 28, 2014 the Company issued 1,264,762 shares of its unregistered common stock for conversion of $14,900 of third party debt principal at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Company’s stock during the ten days prior to conversion.


During the nine months ended February 28, 2014 the Company recognized conversion notices for the conversion of $370,600 of third party note and debenture principal and accrued interest into 23,909,678 shares of its unregistered common stock. As of February 28, 2014 the Company issued  20,296,775 shares and recorded the balance of 3,612,903 shares as stock payable. The conversions were at a conversion price equal to the lowest closing price per share of the Company’s common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion.


During the nine months ended February 28, 2014 the Company issued 33,333,334 shares of its unregistered common stock for conversions of $400,000 of related party debt principal. The conversions were at a conversion price equal to the lowest closing price per share of the Company’s common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion.


During the nine months ended February 28, 2014 the Company issued 16,666,667 shares of its unregistered common stock in fulfillment of a $200,000 related party stock based compensation agreement at a share price equal to $0.01, fair market value as of August 15, 2013, the effective date of the compensation agreement.


All stock issued, and notices of conversion were in accordance with the terms of the underlying agreements.


NOTE 4 – RELATED PARTIES


The Company had short-term loans outstanding to corporate officers at May 31, 2013 in the amount of $320,036. The loans are unsecured, due on demand and bear interest at an average rate of 8.2%. Accrued interest to May 31, 2013 was $785.


During the nine months ended February 28, 2014, the Company converted $150,000 of accrued liabilities and $50,000 of short term debt into a new $200,000 related party debenture. The debenture bears interest at 6% and matures on June 1, 2014. The debenture is convertible into shares of common stock at a conversion price equal to the lowest closing price per share of the Company’s 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 debenture.




12



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)



During the nine months ended February 28, 2014, the Company issued a new related party $75,000 convertible note for professional time expenses. The note is non interest bearing and matures on December 31, 2013. The note is convertible into shares of common stock at a conversion price equal to the lowest closing price per share of the Company’s 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 note.


During the nine months ended February 28, 2014 the Company recorded related party stock based compensation in the amount $200,000 and in full payment issued 16,666,667 shares of restricted common stock of the Company at a share price equal to $0.01, fair market value as of August 15, 2013, the effective date of the compensation agreement. During this same period the Company received conversion notices for $200,000 of related party debentures and $200,000 of related party convertible notes and issued an aggregate of 33,333,334 restricted shares of the Company’s common stock at a conversion price of $0.012 per share.


All stock issued, and notices of conversion were in accordance with the terms of the underlying agreements.


During the quarter ended November 30, 2013 the Company re-classified $316,750 of related party debt and $14,026 of related party accounts payable to third party.


During the quarter ended November 30, 2013 the Company disposed of its subsidiary MCM Technologies Inc. ("MCM") by sale to a previous related party, Murat Erbatur, the Company's former COO, for $1.00. The transaction was accounted for by rolling up assets and liabilities into a one-time adjustment of ($342,880) to additional paid in capital.


During the nine months ended February 28, 2014 the balance sheet liability associated with related party loans, accounts payable, debentures, accrued interest and accrued liabilities decreased by $450,346. The remaining loans totaling $17,677 are uncollateralized and due on demand. The Company paid the Company’s officers $13,797 of loan principal in cash, and accrued related party interest of $2,013. Total outstanding related party debt [principal plus accrued interest] for the period ended February 28, 2014 and May 31, 2013 was respectively $21,207 and $321,543.


The following table summarizes the amounts due to related parties at February 28, 2014:


Related Parties

 

Principal

Outstanding on

February 28, 2014

 

Interest

Accrued to

February 28, 2014

Short term notes

$

17,677

$

3,530

Total

$

17,677

$

3,530


The following table summarizes the amounts due to related parties at May 31, 2013:


Related Parties

 

Principal

Outstanding on

May 31, 2013

 

Interest

Accrued to

May 31, 2013

Short term notes

$

-

$

1,507

Total

$

-

$

1,507




13



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)



NOTE 5 – THIRD PARTY NOTES AND DEBENTURES PAYABLE


During the 12 months ended May 31, 2013 the Company negotiated a series of three 8% convertible debentures with Asher Enterprises, Inc.


The First Asher Note, principal amount $42,500, due in June 2013, is convertible into shares of the Company’s 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 Company’s 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.


The Second Asher Note, due in September 2013, is convertible into shares of the Company’s 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 Company’s 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.


The Third Asher Note, due in December 2013, is convertible into shares of the Company’s 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 Company’s stock during the ten days prior to conversion or $0.00009 per share whichever is greater.


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 Company’s 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.




14



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)



During the year ended May 31, 2013, the Company converted third party accounts payable of $85,000 and $125,000 to short term non-interest bearing convertible notes due June 2013 and December 31, 2013 respectively. The principal is convertible into shares of common stock at a conversion price equal to the lowest closing price per share of the Company’s 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 convertible notes and determined that the shares issuable pursuant to the conversion options were determinate due to the Fixed Floor Conversion Price and, as such, do 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 associated with the $85,000 note, 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. The $125,000 note was evaluated and it was determined that there was no associated beneficial conversion feature discount.


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 Company’s common stock and $36,800 of the First Asher Note principal into 580,834 shares of the Company’s common stock. All stock was issued 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.


During the nine months ended February 28, 2014 the Company re-classified $316,750 of related party debt and $14,026 of related party accounts payable to third party and retired the obligations through the sale of the operation. During this period the Company paid $8,728 of interest associated with these notes in cash.


During the nine months ended February 28, 2014 the Company converted $14,900 of Asher debenture principal into 1,264,762 shares of the Company’s common stock. The conversion was within the terms of the underlying agreement. During this period the Company exercised its option to repay in cash the balances due on the First and Second Asher Notes. The Company repaid $2,800 of principal, $1,981 of accrued interest and $3,719 of accelerated interest on the First Asher Note and $32,500 of principal, $1,627 of accrued interest and $17,873 of accelerated interest on the Second Asher Note.


During the nine months ended February 28, 2014 the Company recognized the conversion of a total of $370,600 of third party debenture principal, debenture accrued interest and note principal into 23,909,678 shares of its unregistered common stock. As of February 28, 2014 the Company issued  20,296,775 shares and recorded the balance of 3,612,903 shares as stock payable. The conversions were at a conversion price equal to the lowest closing price per share of the Company’s common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion. The conversions were within the terms of the underlying agreements.




15



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)



Total third party principal outstanding on February 28, 2014 was $569,750, consisting of note principal $27,529 and debenture principal $542,221. For the period ended February 28, 2014 all third party debt was short term.


The following tables summarize the outstanding principal and discounts associated with debentures and notes outstanding at May 31, 2013 and February 28, 2014.


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



February 28, 2014

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

$542,221

$Nil

$542,221

$27,529

-

$27,529

$569,750


The principal and accrued interest on notes and debentures as of May 31, 2013 and February 28, 2014 are summarized in the following tables:


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

6.5%

 

322,876

Total

$

1,013,329

5.8%

$

322,876

Notes and Debentures

 

Principal

Amount at

Feb 28, 2014

Weighted

Average

Interest Rate

 

Accrued Interest

February 28, 2014

Third Party Notes

$

27,529

-

$

-

Third Party Debentures

 

542,221

6.8%

 

250,682

Total

$

569,750

6.5%

$

250,682


Principal payments on loans and debentures payable in the years ending May 31, 2014 through 2018 are as follows:

Fiscal

Year

Principal

2014

$365,509

2015

$204,241

2016

-

2017

-

2018

-

Total

$569,750




16



OCCIDENTAL DEVELOPMENT GROUP, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2014

(Unaudited)



NOTE 6 - 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.


NOTE 7 - DISPOSAL OF SUBSIDIARY


Effective September 1, 2013, the Company disposed of its subsidiary MCM Technologies Inc. ("MCM") by sale to a previous related party, Murat Erbatur, the Company's former COO, for $1.00. Mr Erbatur resigned as the Company's COO and Director on June 25, 2013. The transaction was accounted for by rolling up assets and liabilities into a one-time adjustment of ($342,880) to additional paid in capital.

Item

Balance

Cash

$4,036

Accounts Receivable

$23,255

Prepaid Expenses

$287

Employee Expense Advances

$68

Inventory, Net

$1,893

Total Assets Available for Sale

$29,539

Bank Line of Credit

($46,381)

Accounts Payable

($28,824)

Accrued Liabilities

$602

Loans Payable

($301,854)

Liabilities associated with Assets Available for Sale

($376,457)

Accumulated other Comprehensive Income/Loss

$4,038

Additional  Paid In Capital

($342,880)


NOTE 8 - DISCONTINUED OPERATIONS


The Company recorded revenues of $49,454 from discontinued operations and a pre-tax net gain of $34,592 for the nine month period ended February 28, 2014. In the comparable period in the prior year the Company recorded revenue of $69,650 and a pre-tax net gain of $7,169. The assets and liabilities of MCM are segregated in the balance sheet and labeled as held for sale.


NOTE 9 - DEVELOPMENT STAGE


The Company is currently considered a development stage company. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from the point in which the Company re-entered the development stage to the current balance sheet date. An entity remains in the development stage until such time as, among other factors, revenues have been realized.


NOTE 10- SUBSEQUENT EVENTS


On March 13, 2014 the Company's Board of Directors approved a Memorandum of Understanding with Arrivair LLC, a Florida based aircraft trading and leasing company, and approved the appointment of Leonard Simkovits to the Company's Advisory Board. Mr. Simkovits is president of Arrivair LLC and Airline Capital Leasing Inc.





17





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONTINUING AND FUTURE PLAN OF OPERATION


Cautionary Statement Regarding Forward-Looking Statements. This annual report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. Some discussions in this report may contain forward-looking statements that involve risk and uncertainty. A number of important factors could cause our actual results to differ materially from those expressed in any forward-looking statements made by us in this report. Forward-looking statements are often identified by words like: "believe", "expect", "estimate", "anticipate", "intend", "project" and similar expressions or words which, by their nature, refer to future events.


In some cases, you can also identify forward-looking statements by terminology such as "may", "will", "should", "plans", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.


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


OVERVIEW


Occidental Development Group, Inc. (“ODG”, the “Company”, “we”, “us”) was incorporated in the State of Nevada in 1998. Historically, the Company operated in the green building sector offering 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.


The market opportunities for the Company’s control and automation services and products have steadily declined over the past several years due in part to the slowdown in new and construction and renovation activity plus the advent of plug and play automation technology which has eroded the Company's intellectual property, reduced the need for specialized technical support and reduced project margins.


Over several quarters the Company actively evaluated and pursued opportunities to expand its business activities vertically within the Company’s historical green building, home automation and energy conservation sectors and horizontally within the construction and renovation sectors. During FY 2012 the Company began planning the shift and expansion of its activities to development and design build services targeting energy efficient housing and multi-strata property renovation and development. Early in the planning process it became clear that significant restructuring would be required in order for the Company to attract the working capital financing required to support expansion. The Company began implementation of its diversification strategy in FY 2012 and expects to complete in FY 2014.


Initial stages of restructuring were completed during FY 2012. On October 31, 2011 the Company’s board of directors approved a Consent Resolution amending the Company’s Articles of Incorporation to affect a one for one hundred and fifty reverse split of the Company’s common stock, and adjustment of the Company’s authorized capital to eight hundred million common shares and five million preferred shares. The proposed amendments were approved by a majority of shareholders on November 1, 2011. The Company filed a preliminary Schedule 14C Information Statement outlining proposed amendments to the Company’s Articles of Incorporation on November 9, 2011 and a definitive Schedule 14C Information Statement on November 25, 2011. The Company set November 25, 2011 as the record date for notification to shareholders. The Company



18





filed the amended Articles of Incorporation with the Nevada Secretary of State on December 12, 2011, with an effective posting date of December 22, 2012. The reverse split was approved for trading purposes by the Financial Industry Regulatory Authority [FINRA] on January 18, 2012.


Through FY 2013 the Company actively pursued design build and renovation opportunities within the British Columbia and Greater Vancouver markets and solicited project financing from commercial lenders and private equity. The Company structured a joint venture proposal with a prominent First Nations forestry company targeting housing needs within First Nations communities and undertook an extensive evaluation of renovation opportunities within the Greater Vancouver condominium market. The Company also responded to an invitation to provide engineering project management services, in concert with First Nations communities, to the early stage LNG development underway in British Columbia. During this period, the Company scaled back its project and marketing efforts within the Company’s traditional home automation sector in favor of pursuing property development opportunities.


Through this process it became apparent that the Company’s financial resources were not sufficient to support available diversification opportunities and that further balance sheet and equity restructuring would be required in order to attract and qualify for project financing support and equity funding sufficient to grow the business. Management reached this conclusion concurrent with the close of FY 2013.


Beginning in June 2013 the Company aggressively undertook further restructuring and 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 director. Mr. Gilbey had previously been a consultant to the Company providing re-structuring and merger acquisition support. In June the Company moved its head office to Beverly Hills California to better focus on the US market. On July 17, 2013, the Board of Directors authorized a merger with the Company’s 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 Company’s 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 changes of the Company’s 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 and the change in the Company’s trading symbol to OXDG, were approved by FINRA and became effective for trading purposes on August 19, 2013, with the symbol change taking place 20 trading days post the effective date.


During the quarter ended August 31, 2013 the Company continued to plan for the complete phase out of its activities in the home automation sector and negotiations were initiated for the acquisition of Ball Park Investments LLC ("BallPark"), a Florida real estate development company. The Company's board of directors considered the acquisition of Ballpark a key step in establishing strategic relationships with debt and equity providers.


Early in the second quarter management completed the phase out and disposal of its home automation division and completed the acquisition of BallPark. As a direct result of the Ballpark acquisition and subsequent negotiations for funding, the Company was introduced to and approached by Integrity Aviation and Leasing LLC ("Integrity"), a Texas based company active in the domestic airline industry and specializing in leasing jet aero engines and aircraft parts to the airline industry. On November 22, 2013 the management of Occidental and Integrity executed a binding Letter of Intent outlining terms for the acquisition of Integrity by Occidental. In preliminary negotiations, Integrity disclosed that it had 5 engines under lease, one lease pending, assets in excess of $5 million and long-term lease revenues. On January 14, 2014 the Company's Board of Directors approved the binding Letter of Intent for the acquisition of Integrity Aviation and Leasing LLC and initiated a due diligence process which, among other things, will verify and quantify the assets, liabilities and obligations of Integrity. On January 16, 2014 the Company's Board of Directors approved a consent motion for shareholder



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approval to increase the Company's authorized common share capital from 80,000,000 shares to 800,000,000 and on the same day received approval from a majority of shareholders. The Integrity due diligence and filing of a preliminary Schedule 14C Information Statement outlining shareholder approval to increase the Company's authorized share capital are expected to be completed for the Company's yearend on May 31, 2014.


The acquisition in process of Integrity and shift in focus capitalizes on the Company’s in-house engineering and project management capabilities and gives the Company a solid asset and revenue backed foundation on which to build. The timing of this strategic initiative dovetails to the upswing in the global airline market and industry shift to off balance sheet financing of operations and flight critical capital equipment. The Company’s board of directors believe this initiative will overcome limitations the Company has historically faced raising funds and achieving growth and positive earnings.


The Company maintains its corporate office in Beverly Hills California. Income for the period ended February 28, 2014 was derived from the Company's historical activities. The Company’s year-end is May 31.


Foreign currency translation

Cardinal Points Trading, Corp. use the Canadian Dollar as their functional currency. Transactions denominated in currencies other than the entity’s functional currency are translated into the entity’s functional currency at the exchange rate ruling on the date of the transaction. Currency translation differences are recognized in the statement of income for the period.


On consolidation, the results of 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.


During the nine month period June 1, 2013 through February 28, 2014, the US dollar to Canadian Dollar exchange rate has varied from a low of 0.8945 on January 31, 2014 to a high of 0.9835 on June 18, 2013. The closing exchange rate was 0.8981 and the average exchange rate over the nine month period ended February 28, 2014 was 0.9489 resulting in a foreign currency translation gain $2,090 for the nine month period ended February 28, 2014.


Transactions with related parties

Our By-Laws include a provision regarding related party transactions which requires that each participant to such transaction identify all direct and indirect interests to be derived as a result of the Company's entering into the related transaction. A majority of the disinterested members of the board of directors must approve any related party transaction.


Except for the transactions described below, none of our directors, senior officers or principal shareholders, nor any associate or affiliate of the foregoing have any interest, direct or indirect, in any transaction, since the beginning of the fiscal year ended May 31, 2013, or in any proposed transactions, in which such person had or is to have a direct or indirect material interest.


During the year ended May 31, 2013 the Company’s CEO loaned the Company $38,631, the Company repaid the CEO $109,010 in cash, the Company’s former COO loaned the Company $77,174, the Company repaid the former COO $73,478 in cash and a related party, Tom Simons loaned the Company $30,267. During the year ended May 31, 2013, The Company paid $27,413 in interest to its former COO in cash and accrued $722 in interest due the Company’s CEO.


During the year ended May 31, 2013 $122,000 of accrued liabilities due the Company’s CEO was converted into a debenture bearing interest at a rate of 6% per annum and a $30,267 short term related party note was converted into a debenture bearing interest at a rate of 6% per annum. During the year ended May 31, 2013 the $122,000 debenture due the Company’s CEO was retired as follows: $13,000 cash principal payment, $36,000



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principal transferred to short term note, $73,000 principal plus $1,700 accrued interest converted to 996,000 shares of common stock of the Company at $0.05 per share. During the same period the Company converted $30,267 of related party debenture principal and $454 of accrued interest into 409,600 shares of common stock of the Company at $0.05 per share. The conversions were made in accordance with the underlying debt agreements.


During the nine month period ended February 28, 2014, the Company converted $150,000 of accrued liabilities and $50,000 of short term notes due the Company’s CEO into a 6% convertible debenture, negotiated short term loans of $88,324 with the Company’s CEO, repaid the Company’s CEO short term loan principal of $13,755 in cash and received conversion notices for the conversion of $200,000 of debenture principal due the Company’s CEO into 16,666,667 shares of restricted common stock of the Company at an average price of $0.01 per share.


During the period ended February 28, 2014 the Company re-classified $316,750 of loan principal and $14,026 of accounts payable due the Company’s former COO to third party debt. During this period the Company negotiated services agreements with the Company’s directors and a stock based compensation agreement with Steven Levenson, President of Ballpark Developments, LLC.


During the nine months ended February 28, 2014, the Company issued Mr. Ian Gilbey, one of the Company’s directors, a new related party $75,000 convertible note for professional time expenses and received conversion notices for the conversion of $200,000 of short term note principal due Mr. Gilbey convertible into 16,666,667 shares of restricted common stock of the Company at an average price of $0.01 per share. During this period, the Company recorded related party stock based compensation due Mr. Steven Levenson in the amount $200,000 convertible into 16,666,667 shares of restricted common stock of the Company at an average price of $0.01 per share, fair market value as of August 15, 2013, the effective date of the compensation agreement.


Total outstanding related party debt [principal plus accrued interest] for the period ended February 28, 2014 and May 31, 2013 was respectively $21,207 and $321,543.


RESULTS OF OPERATIONS – for the three months and nine months ended February 28, 2014


 During the quarter ended November 30, 2013 the Company disposed of its home automation business and entered into a binding letter of intent to acquire Integrity Aviation and Leasing LLC a company engaged in the purchasing and leasing of jet aero engines. As a result of the disposition of the Company's home automation business historical revenues and expenses associated with this activity were re-classified to discontinued operations and were reported as such on the Company's Consolidated Statements of Operations and Comprehensive Loss. Accordingly, for the current reporting periods the Company reported $0 current and comparative historical revenue, cost of revenue and gross profit associated with continuing operations.


Operating expenses for the nine months ending February 28, 2014 were $285,507 versus $105,322 for the same period in the prior year and $707 versus $98,983 for the three month periods ended February 28, 2014 and 2013. The year-on-year to date operating expense increase resulted from a $19,815 net decrease in administrative expenses due principally to reduced fees for related party professional time contracts and a related party stock compensation expense of $200,000. The substantially reduced operating expense for the three month period ended February 28, 2014 compared to the corresponding period in the prior year was due principally to a $98,276 reduction in administration costs associated with consulting fees related to the Company's corporate planning activities.


The Company recorded an operating loss of ($285,507) for the nine month period ended February 28, 2014 compared to an operating loss of ($105,322) for the same period in the prior year. The Company recorded an operating loss of ($707) for the three month period ended February 28, 2014 compared to an operating loss of ($98,983) for the same period in the prior year.




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Total other expenses for the nine month period ending February 28, 2014 were $87,363 compared to $73,895 for the comparable period in the prior year. The increase resulted from the net of an decreased beneficial conversion accretion expense associated with the Company’s third party financings and an increase in interest expense due principally to the accelerated interest payment associated with retirement of third party debentures. Total other expenses for the three month period ended February 28, 2014 were $11,750 compared to $34,460 for the comparable period in the prior year. The decrease was due to reduced third party financing accretion and interest expenses.


The Company recognized a loss from continuing operations of ($372,870) for the nine month period ended February 28, 2014 compared to a net loss of ($179,217) for the comparable period in the prior year. For the three month period ended February 28, 2014 the net loss was ($12,457) compared to a net loss of ($133,443) for the comparable period in the prior year.


The Company recorded a gain from its discontinued home automation activities of $34,592 for the nine month period ended February 28, 2014 compared to a net gain of $7,169 for the comparable period in the prior year. The Company recorded $0 associated with its discontinued home automation activities for the three month period ended February 28, 2014 compared to a gain of $15,733 for the comparative period in the prior year.


The consolidated net loss for the nine month period ending February 28, 2014 was ($338,278) compared to a net loss of ($172,048) in the comparable period in the prior year. For the three month period ended February 28, 2014 the Company recorded a consolidated net loss of ($12,457) compared to a net loss of ($117,710).

For the nine months ended February 28, 2014 the Company recorded an other comprehensive gain of $2,090 as a result of foreign currency translation and a comprehensive loss of ($336,188) for the period ending February 28, 2014. In the comparable period in the prior year, the Company recorded other comprehensive loss of ($976) as a result of foreign currency translation, and a comprehensive loss of ($173,024).


For the three months ended February 28, 2014 the Company recognized an other comprehensive gain of $84 as a result of the net of foreign currency translation compared to an other comprehensive gain of $13,727 due to foreign currency translation for the same period in the prior year. The Company recorded a comprehensive loss of ($12,373) for the three months ended February 28, 2014 compared to a comprehensive loss ($103,983) for the corresponding period in the prior year.


LIQUIDITY AND CAPITAL RESOURCES


Liquidity

As of February 28, 2014, our principal sources of liquidity included cash and cash equivalents, and shareholder and related party loans. At February 28, 2014, cash and cash equivalents totaled $1,815 compared to $19,469 at May 31, 2013.


Our business continues in transition and our liquidity must be considered in light of the risks, expenses and difficulties frequently encountered by companies in our stage of re-development. The following risk factors and other information included in this Quarterly Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected.


The Company’s transition to the aircraft, jet aero engine and parts sector is occurring at a time when the global airline industry is showing signs of a steady slow protracted recovery. However, the growth of the airline industry and the availability of debt and equity financing will impact the Company’s revenue and liquidity.




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We are affected by the risks faced by commercial aircraft operators and MROs because they are our customers and suppliers.


Commercial aircraft operators are engaged in economically sensitive, highly cyclical and competitive businesses. We are a supplier to commercial aircraft operators and a customer to MROs. As a result, we are indirectly affected by all the risks facing commercial aircraft operators and MROs, which are beyond our control. Our results of operations depend, in part, on the financial strength of our customers and suppliers and our customers’ and suppliers' ability to compete effectively in the marketplace and manage their risks. These risks include, among others:


·

general economic conditions in the countries in which our customers operate, including changes in gross domestic product;

·

demand for air travel and air cargo shipments;

·

changes in interest rates and the availability and terms of credit available to commercial aircraft operators;

·

concerns about security, terrorism, war, public health and political instability;

·

environmental compliance and other regulatory costs;

·

labor contracts, labor costs and stoppages at commercial aircraft operators;

·

aircraft fuel prices and availability;

·

technological developments;

·

maintenance costs;

·

airport access and air traffic control infrastructure constraints;

·

insurance and other operating costs incurred by commercial aircraft operators and MROs;

·

industry capacity, utilization and general market conditions; and

·

market prices for aviation equipment.


To the extent that our customers are negatively affected by these risk factors, we may experience: a decrease in demand for some engine types in our portfolio;


·

greater credit risks from our customers, and a higher incidence of lessee defaults and repossessions;

·

an inability to quickly lease engines and sell parts on commercially acceptable terms when these become available through our purchase commitments and regular lease terminations; and

·

shorter lease terms, which may increase our expenses and reduce our utilization rates.


These and other related and contingent risk factors cannot be credibly quantified by the Company at this time.


Internal and External Sources of Capital

For the nine month period ending February 28, 2014 the Company realized a loss from operations of ($372,870) and a net loss of ($338,278). As of February 28, 2014 the Company had a working capital deficit of ($1,068,418) and limited assets to sell in order to create short or long term liquidity. Therefore, we are dependent on external sources for funding until such time as the Company develops positive net cash flow to maintain liquidity. Until such time as we have positive cash flow on a sustained basis, the dependence on external capital will remain. There are no guarantees that we will be able to raise external capital in sufficient amounts or on terms acceptable to us.


Investing Activities

During the nine month period ending February 28, 2014 the Company disposed of two vehicles.  The Company realized a loss of $640 on one vehicle and a gain of $4,416 on the other vehicle for a net gain of $3,776.




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Financing Activities

Since inception, we financed operations through proceeds from the issuance of equity and debt securities and loans from shareholders and others. To date, we raised approximately $14.4 million from the sale of common stock and as at February 28, 2014 we have borrowings of approximately $587 thousand from investors and shareholders.  Funds from these sources were used as working capital to fund the development of the Company and the borrowings are interest bearing and due on demand.


In the nine month period ended February 28, 2014 the balance sheet value of the Company’s loan and debenture principal, accrued interest and related party accrued liabilities decreases by $975,921.

FUTURE PLAN OF OPERATIONS


Over several quarters the Company actively evaluated and pursued opportunities to expand and shift its business activities. Early in the planning process it became clear that significant restructuring would be required in order for the Company to attract the working capital and investment financing required to support growth. The Company began implementation of its diversification strategy in FY 2012 and expects to substantially complete in FY 2014.


Through FY 2013 the Company scaled back its project and marketing efforts within the Company’s traditional BC based home automation sector in favor of pursuing opportunities in the US market. During the quarter ended August 31, 2013 the Company continued to plan for the complete phase out of its activities in the home automation sector and establishment of activities in the re-emergent US real estate development sector. Negotiations were initiated for the acquisition of Ball Park Investments LLC ("BallPark") a Florida real estate development company with strong ties to the investment community. The Company's board of directors considered the acquisition of Ballpark a key step in establishing strategic relationships with debt and equity providers.


Early in the second quarter management completed the phase out and disposal of its home automation division and completed the acquisition of BallPark. As a direct result of the Ballpark acquisition and subsequent negotiations for funding, the Company was introduced to and approached by Integrity Aviation and Leasing LLC ("Integrity"), a Texas based company specializing in leasing jet aero engines and aircraft parts to the airline industry. Integrity is active in the domestic airline industry with 5 engines under lease, one lease pending, assets in excess of $5 million and strong revenues. On November 22, 2013 the management of Occidental and Integrity executed a Letter of Intent outlining terms for the acquisition of Integrity by Occidental.


Integrity Aviation & Leasing ("Integrity") acquires refurbished and certified jet aero engines and other aviation assets for lease and sale to commercial air carriers. Integrity focuses on engines used by popular commercial jet aircraft such as the CFM56-3/7 series used on Boeing 737s, the JT8D-200 series used on McDonald Douglas MD-80s, and the CFM56-5 series used Airbus A320s. Integrity owns 6 jet engines and associated aircraft parts with an asset value in excess of $5 million. 5 engines are under lease to domestic carriers and 1 engine is in pre-lease testing.


Integrity has a close working relationship with Turbine Engine Center ("TEC"), an established FAA & EASA certified, maintenance, repair and overhaul ("MRO") facility located in Miami, FL. TEC has been in business for over 25 years and has maintained FAA and EASA certificates since 2002. TEC provides integrity with access to certified engines and parts, facilities for engine testing, post lease engine re-certification and airline industry access.


Historically, commercial aircraft operators owned rather than leased their aircraft and engines. However, as engines have become more powerful and technically sophisticated, they have also become more expensive to acquire and maintain. Increased costs for new engines, coupled with cash constraints experienced by commercial aircraft operators, has led the industry to lease more aircraft and aircraft engines as a percentage of their aircraft fleet. The global commercial aviation market is a vast and diverse market. A subset of the global market is comprised of thousands of aero engines that are currently or are forecast to be leased, representing about $10BB in assets (Source TEAMSAI 2011). Jet aero engines have a long economic life (40+ years), and



24





end-of-life values are typically greater than aircraft values over the life of the  asset. Leasing aero engines generates consistent and  predictable revenue flows and lease rates show lower volatility than aircraft rates.


The acquisition of Integrity capitalizes on the Company’s in-house engineering and project management capabilities, compliments Integrity's management and gives the Company a solid asset and revenue backed foundation on which to build. The timing of this strategic initiative dovetails to the upswing in the global airline market and industry shift to off balance sheet financing of operations and flight critical capital equipment.


The Company’s board of directors believe that the acquisition of Integrity and collaboration with Arrivair will overcome limitations the Company has historically faced raising both funds to support growth and the investment required to achieve market potential. Going forward over the coming 24 months, Occidental plans to focus on the opportunities available in the aircraft, jet aero engine and parts sector, utilize and build on existing relationships and work to substantially increase the Company's revenue.


Cash flow from ongoing activities and the availability of investment from related and third parties are estimated to be sufficient to sustain the Company’s planned activities through to the end of the 2014 fiscal year.


OFF BALANCE-SHEET ARRANGEMENTS


During year ended May 31, 2013, and the nine months ended February 28, 2014 the Company did not engage in any off-balance sheet arrangements.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Interest Rate Risk


The Company's outstanding loans and debentures are either at zero interest or at fixed interest over the term of the loan or debenture. Accordingly, the Company has no exposure to market risk for changes in interest rates.


Foreign Currency Exchange Risks


The Company has ceased operations in Canada and has only residual assets and liabilities in Canadian dollars and limited transactions using the Canadian Dollar as a functional currency.  Each financial period, all assets, and liabilities of Cardinal Points (the Company's remaining discontinued Canadian company) are translated into U.S. Dollars, our reporting currency, using the closing rate method.


There are principally two types of foreign exchange risk: transaction risks and translation risks. Transaction risks may impact the results of operations and translation risks may impact comprehensive income.  These are discussed more fully below.


Transaction risks


Transactions in currencies other than the US dollar (the Company's functional currency) are translated at either an average exchange rate used for the reporting period in which the transaction took place (to approximate to the exchange rate at the date of transactions for that period) or in some cases the rate in effect at the date of the transaction.  Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is settled or translated, are recognized in the consolidated statements of operations as foreign exchange transaction gains and losses. This exposes us to foreign currency exchange rate risk in the Statement of Operations. The change in exposure from period to period is related to the change in the balance of the bank accounts based on timing of event receipts and payments. For the nine month period ended February 28, 2014, the Company did not purchase goods valued in US dollars for sale in Canadian dollars and was not subject to transaction risk.




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Translation risks


The financial statements of Cardinal Points are translated into U.S. dollars using the current rate method.  Accordingly, assets and liabilities are translated at period-end exchange rates while revenue, expenses and cash flows are translated at reporting period weighted average exchange rates.  Adjustments resulting from these translations are accumulated and reported as the principal component of other comprehensive loss in stockholders’ equity.


Fluctuation in exchange rates resulted in a year-to-date foreign currency translation gain of $2,006 on February 28, 2014. For the comparable period in the prior year, the foreign currency translation loss was ($14,703). Future changes in the value of the U.S. dollar to Canadian dollar are unlikely to have a material impact on our financial position.


ITEM 4T. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by our management, with the participation of the Chief Executive, Principal Financial and Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of February 28, 2014. Based on that evaluation the Chief Executive, Principal Financial and Accounting Officer has concluded that, as of the end of the period covered by this report, there was a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the issuer’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness relates to the lack of monitoring or review of work performed by our management and lack of segregation of duties.  As of February 28, 2014, in the preparation of audited financial statements, footnotes and financial data, all of our financial reporting was carried out solely by our chief financial and accounting officer and we did not have an audit committee to monitor and review the work performed. The lack of segregation of duties resulted from lack of accounting staff with accounting technical expertise necessary for an effective system of internal control. Based on this evaluation the Chief Executive and Principal Financial Officer has concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.


Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this report have been prepared in accordance with generally accepted accounting principles.  Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.


Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) or 15(d)-15(f)) that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



26





Limitations on the Effectiveness of Internal Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.



PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS


We are not currently involved in any litigation, nor do we know of any threatened litigation against us that would have a material effect on our financial condition.


ITEM 1A.  RISK FACTORS


Not applicable.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


During the nine month period ended February 28, 2014 the Company converted $382,600 of third party debt principal and accrued interest and issued 24,981,107 shares of unregistered common stock at an average price of $0.01 per share. During the same period the Company converted $400,000 of related party debt principal and $200,000 of related party stock compensation into 50,000,001 shares of unregistered common stock at an average price of $0.01 per share. All conversions were made in accordance with the underlying debt agreements. As of February 28, 2014 20,296,775 shares were issued and 3,612,903 shares were recorded as stock payable pending issuance.


The Company offered and sold the securities in reliance on an exemption from federal registration under Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, or alternatively, under Regulation S promulgated under the Securities Act .


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4.  MINE SAFETY DISCLOSURES.


Not applicable.


ITEM 5.  OTHER INFORMATION


None



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ITEM 6.  EXHIBITS


NO.

DESCRIPTION

 

 

 

 

31

Certification of Michael Holloran Pursuant to Section 302 of the -Sarbanes-Oxley Act of 2002, filed herewith

32

Certification of Michael F. Holloran Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

 

 

101.INS (1)

XBRL Instance Document

101.SCH (1)

XBRL Taxonomy Extension Schema Document

101.CAL (1)

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF (1)

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB (1)

XBRL Taxonomy Extension Label Linkbase Document

101.PRE (1)

XBRL Taxonomy Extension Presentation Linkbase Document


(1)   Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.



28






SIGNATURES



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




OCCIDENTAL DEVELOPMENT GROUP, INC.


By: /s/ Michael F. Holloran

-------------------------------------

Michael F. Holloran

President, Chief Executive Officer, and

Principal Financial and Accounting Officer


Dated:  April 17, 2014




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