See accompanying condensed notes to the interim consolidated financial statements.
See accompanying condensed notes to the interim consolidated financial statements
.
See accompanying condensed notes to the interim consolidated financial statements.
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 Companys 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 Companys 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 Companys board of directors approved a Consent Resolution amending the Companys Articles of Incorporation to affect a one for one hundred and fifty reverse split of the Companys common stock, and adjustment of the Companys 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 Companys 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 Companys 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 Companys 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 Companys wholly-owned subsidiary, Occidental Development Group Inc., and in the merger, the name of the company was changed to Occidental Development Group Inc. (the changes to take effect upon approval for trading purposes by FINRA. On July 17, 2013, the Board also approved the filing with the Secretary of State of Nevada a Certificate of Change that effected a 1:10 reverse split in our outstanding common stock and a reduction of our authorized common stock in the same 1:10 ratio, from 800,000,000 shares to 80,000,000 shares. Both of these corporate actions were permitted to be taken by the Companys Board of Directors without stockholder approval under Nevada NRS 92A.180 (for the merger with the subsidiary and name change) and NRS 78.207 (for the change in authorized and outstanding stock).
The changes of the Companys name to Occidental Development Group, Inc. and the 1:10 reverse split, with the concurrent reduction of our authorized common stock in the same ratio and the change in the Companys 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 Companys 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 Companys 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 Companys 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 Companys financial statements. The financial statements and notes are representations of the Companys management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.
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 Companys 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 Companys 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 Companys 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 Companys 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 FASBs 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion or at a price of $0.0005 per share whichever is greater. The Company determined that there was no derivative liability or beneficial conversion associated with the new 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 Companys common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion or at a price of $0.0005 per share whichever is greater. The Company determined that there was no derivative liability or beneficial conversion associated with the new 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 Companys 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 Companys 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 Companys common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Companys stock during the ten days prior to conversion or $0.00009 per share whichever is greater.
The Company evaluated the First Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Floor Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.03, below the market price on September 6, 2012 of $0.038, resulted in a discount of $42,500 of which $42,294 was amortized during the 12 months ended May 31, 2013.
The Second Asher Note, due in September 2013, is convertible into shares of the Companys common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Companys stock during the ten days prior to conversion or $0.00009 per share whichever is greater.
The Company evaluated the Second Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Floor Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.007 below the market price on December 5, 2012 of $0.020 resulted in a discount of $16,226 of which $10,406 was amortized during the 12 months ended May 31, 2013.
The Third Asher Note, due in December 2013, is convertible into shares of the Companys common stock, at the discretion of the holder, commencing 180 days following the date of the debenture at a conversion price per share equal to a discount of 42% from the average of the lowest three closing prices for the Companys stock during the ten days prior to conversion or $0.00009 per share whichever is greater.
The Company evaluated the Third Asher Note and determined that the shares issuable pursuant to the conversion option were determinate due to the Fixed Floor Conversion Price and, as such, does not constitute a derivative liability as the Company has obtained authorization from a majority of shareholders such that should conversion occur at the Fixed Conversion Price the appropriate number of shares will be available or issuable for settlement to occur. The beneficial conversion feature discount resulting from the conversion price of $0.004, below the market price on September 6, 2012 of $0.007, resulted in a discount of $27,765 of which $4,080 was amortized during the 12 months ended May 31, 2013.
Pursuant to the terms of the Asher debentures, and by agreement with Asher, the Company has instructed its stock transfer agent to reserve an agreed upon number of shares of the Companys common stock to be issued if the debenture is converted. As of May 31, 2013, 3,000,000 shares have been reserved, but are not considered as issued and outstanding.
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 Companys common stock for the 20 days on which the Company's shares traded immediately preceding the date of conversion or at a price of $0.0005 per share whichever is greater.
The Company evaluated the 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 Companys common stock and $36,800 of the First Asher Note principal into 580,834 shares of the Companys 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 Companys 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 Companys 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