U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1 to Form 10-Q)

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

 

For the quarterly period ended September 30, 2014

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number:  000-7475

____________________________

 

SWORDFISH FINANCIAL, INC.

 (Exact name of registrant as specified in its charter)

          

 

                                 Minnesota                                                                        41-0831186

(State or other jurisdiction of incorporation or organization)              (I.R.S. Employer Identification No.)

6125 Airport Freeway; Suite 211 Haltom City, TX 76119

(Address of principal executive offices)


(817) 845-6244

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. þ Yes o 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o No o

 

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

 

Large accelerated filer [ ]  Accelerated Filer [ ]     Non-Accelerated Filer [ ]    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 [ X]  No

 

The number of shares of issuer’s common stock, par value $0.0001 per share, outstanding as of September 30, 2014 was 2,890,755,069.   

 

 

EXPLANATORY NOTE: The Company has included the XBRL Interactive Data Table 101 Exhibits with this amended filing.

 

 


-1-


SWORDFISH FINANCIAL, INC.

UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS INDEX


Page

PART I

FINANCIAL INFORMATION


Item 1:

Financial Statements

 

Consolidated Balance Sheets – September 30, 2014 (Unaudited) and December 31, 2013

4

 

Consolidated Statements of Operations – Three Months Ended September 30, 2013 and 2014

And Nine Months Ended September 30, 2013 (Unaudited) and 2014

5

 

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2014

And 2013 (Unaudited)

6

 

Notes to Consolidated Financial Statements

7

 

Item 2:

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

15

Item 3:

Quantitative and Qualitative Disclosures About Market Risks

16

Item 4:

Controls and Procedures

16

 

PART II - OTHER INFORMATION

 

Item 1:

Legal Proceedings

17

Item 1A:

 Risk Factors

17

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

17

Item 3:

Defaults Upon Senior Securities

17

Item 4:

Mine Safety Disclosures

17

 

Item 5:

Other Information

17

 

Item 6:

Exhibits

17

 

Signatures

18



2


SWORDFISH FINANCIAL, INC.

Haltom City, Texas


FINANCIAL REPORTS

AT

SEPTEMBER 30, 2014







3

 




PART I – FINANCIAL INFORMATION

Item 1:  Financial Statements

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

CONSOLIDATED BALANCE SHEETS

   
 

(Unaudited)

 
 

September 30,

 

December 31,

 

2014

 

2013

    

ASSETS

   

Cash and Cash Equivalents

 $              61

 

 

$               —

 

Total Assets

 $              61

 

 

$               —

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

Liabilities

Term Notes Payable

 $       441,421

 $        441,421

Notes Payable - Affiliates

        1,100,611

        1,250,000

Judgments Payable

        1,093,571

        1,066,755

Convertible Notes Payable, net of discounts of $57,833 and $99,646

          108,007

           70,554

Derivative Liability

          276,515

          189,871

Deferred Retirement Benefits

          438,782

          438,782

Accounts Payable

          822,182

          822,182

Advances from Shareholders

          149,185

          149,185

Accrued Expenses

        2,444,953

 

        2,261,743

 

Total Liabilities

        6,875,227

 

        6,690,493

 

Stockholders' Deficit

Common Stock - $.0001 Par; 5,000,000,000 Shares Authorized,  

                   2,890,755,069 and 843,399,545 Issued and Outstanding, Respectively

          289,075

       84,339

Preferred Stock: $0.0001 Par; 50,000,000 Shares Authorized, 25,000,000 and

                    -0-, Issued and Outstanding, Respectively

2,500

                  —

Stock Subscriptions Payable

            10,000

                  —

Additional Paid-In-Capital

       5,424,444

       4,607,541

Accumulated Deficit

     (12,601,185)

 

     (11,382,373)

 

Total Stockholders' Deficit

      (6,875,166)

 

      (6,690,493)

 

Total Liabilities and Stockholders' Deficit

 $               61

 

 $                —



The accompanying notes are an integral part of these financial statements

 

 

 

4


SWORDFISH FINANCIAL, INC.

Haltom City, Texas

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


 

For the Three Months Ended

 

For the Nine Months Ended

 
 

September 30,

 

September 30,

 

 

2014

 

2013

 

2014

 

2013

 

         

Sales

 $                   492

 $            —

 $          492

 $      —

 

Cost of Sales

 

 

 

 

 

Gross Profit

492

 

                —

 

492

 

 

 

Expenses

General and Administrative

                180,604

         80,886

                345,782

                157,570

Interest Expense

                148,153

       125,792

                493,495

                332,435

Other Income

          (9,601)

                        —

                 (16,139)

(Gain) Loss on Derivative

                  86,996

                  99,966

Loss on Conversion

                  16,250

 

 

                280,061

 

 

 

Total Expenses

                432,003

 

       197,077

 

             1,219,304

 

                473,866

 

 

Loss from Operations Before

  Provision for Taxes

               (431,511)

      (197,077)

            (1,218,812)

               (473,866)

 

Provision for Taxes

                        —

 

                —

 

                        —

 

                        —

 

 

Net Loss for the Period

 $            (431,511)

 

 $    (197,077)

 

 $          (1,218,812)

 

 $       (473,866)

 

 

Weighted Average Number of Common Shares Outstanding

  Basic and Diluted

       2,379,806,755

 783,662,300

       1,525,605,333

          783,662,300

 

Net Loss Per Common Share -

  Basic and Diluted

 $                (0.00)

 

 $         (0.00)

 

 $                (0.00)

 

 $           (0.00)

 

 

The accompanying notes are an integral part of these financial statements.





5




SWORDFISH FINANCIAL, INC.

Haltom City, Texas

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Nine Months Ended September 30,

 

2014

 

2013

     

Cash Flows from Operating Activities

    
     

Net Loss for the Period

 

 $     (1,218,812)

 $   (473,866)

  

Non-Cash Adjustments:

 

Amortization of Debt Discount

 

            278,322

        35,665

(Gain) Loss on Derivative

 

              99,966

       (16,954)

Interest on CNP paid with Stock

 

               1,540

Non Cash Interest Expense

 

        40,785

Common Stock Issued in Exchange for Services Rendered

 

            133,845

Loss on Conversion

 

            280,061

Changes in Assets and Liabilities:

 

Judgments Payable

 

              26,816

        26,807

Accrued Expenses

 

            218,212

 

       289,373

  

Net Cash Flows Used In Operating Activities

 

           (180,050)

 

       (98,190)

  

Cash Flows from Financing Activities

 

Cash Receipts from Equity Purchase Agreement

 

              10,000

Cash Proceeds from Notes Payable Affiliates

 

               5,611

Proceeds from Convertible Notes Payable

 

            164,500

 

       108,000

  

Net Cash Flows Used In Financing Activities

 

            180,111

 

       108,000

  

Net Change in Cash and Cash Equivalents

 

                    61

          9,810

  

Cash and Cash Equivalents - Beginning of Period

 

 

  

Cash and Cash Equivalents - End of Period

 

 $                61

 

 $       9,810

  
  

Cash Paid During the Period for:

 

Interest

 

 $      —

 $     —

Income Taxes

 

 $      —

 

 $     —

  

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Issuance of Preferred Stock

 

 $             2,500

 $     —

Common Stock Exchanged for Debt

 

 $         152,501

 $     —

Assignment of Notes Payable Affiliates

 

 $         155,000

 

 $     —


The accompanying notes are an integral part of these financial statements.


 

6


SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE A – Basis of Presentation



 

The condensed consolidated financial statements of Swordfish Financial, Inc. (the “Company”) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the annual audited financial statements and the notes thereto included in the Company’s Form 10-K, and other reports filed with the SEC.

 

The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.  The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole.  Certain information that is not required for interim financial reporting purposes has been omitted.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Swordfish Financial, Inc., and its wholly owned subsidiaries; Nature Vision, Inc. (the “Company”).  All significant inter-company balances have been eliminated in consolidation.

 

NOTE B – Summary of Significant Accounting Policies



 

All significant accounting policies can be viewed on the Company’s annual report filed with the Securities and Exchange Commissio

NOTE C – Recently Issued Accounting Standards

   In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carryforwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.       

   

-continued-





7




SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE C – Recently Issued Accounting Standards – continued

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

- Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income

- But only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs.

  

  

-continued-  

    





8



SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE C – Recently Issued Accounting Standards – continued

Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of ope

In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations. 

NOTE D – Acquisition – iPoint Television

On January 15, 2014, the Company completed the acquisition of 90% of the issued and outstanding membership interest of iPoint.  Pursuant to the Securities and Exchange Agreement the Company issued Clark Ortiz, the company’s CEO and Chairman 25,000,000 shares of Swordfish’s Series A Preferred Stock, which has voting rights equal to 100 shares of the Company’s common stock and is convertible into the Company’s common stock at the rate of 10 shares of common stock for each share of Series A. Preferred Stock.  In addition to issuance of the Series A Preferred Stock the Company agreed as part of the purchase price to issue 50,000,000 shares of its common stock to Mr. Ortiz.  At the date of the transaction, the Company didn’t have any authorized and unissued shares available to issue to Mr. Ortiz, however in order to close the transaction, Mr. Ortiz agreed to close the transaction pending the Company increasing the authorized shares of common stock, which the Company did on March 25, 2014.  As a result of the transaction, the Company owns 90% of issued and outstanding membership interests in iPoint Television LLC and therefore it is a majority owned subsidiary of the Company and the Company will be able to report the results of iPoint on a consolidated basis in the Company’s financial statements.  iPoint Television, also known as iPoint TV, is a Smart media and entertainment company, which holds development licenses from Apple, Android, Google, Roku, Kindle and most every smart device.  iPoint is  a full service Internet Protocol Television (IPTV), media entertainment company which develops applications for mobile and TV smart devices.

NOTE E – Going Concern 

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations.  As a result, there is an accumulated deficit of $12,601,185 at September 30, 2014.


-continued-




9



SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE E – Going Concern  - continued

The Company’s continued existence is dependent upon its ability to raise capital or acquire a marketable company.  The consolidated financial statements do not include any adjustments that might be necessary   should the Company be unable to continue as a going concern.

NOTE F – Term Notes Payable

 The Company is in default on all of the following unsecured term notes payable.


 

September 30,

December 31,

 

2014

2013

   

Jeff Zernov (Former Chief Executive Officer)

  

Payable August 17, 2010 at 15% Interest.

$  290,000

$   290,000

   

Castaic

  

Installment note payable annually at $17,171 including interest at 8.0% from January 2009 through January 2011.

30,620

30,620

   

Installment note payable monthly at $1,175 including interest at 8.0% from February 2008 through January 2011.  

20,246

20,246

   

Innovative Outdoors

  

Installment note payable monthly at $4,632 including interest at 7.0% from August 2008 through July 2011.  

100,555

100,555

   

Total Notes Payable

$  441,421

$  441,421

   


NOTE G – Convertible Promissory Notes Payable

As of September 30, 2014, the Company has outstanding six (6) security purchase agreements with accredited investors for the sale of convertible promissory notes bearing interest at 8.0% - 12%, per annum.  Pursuant to the convertible promissory notes the investor may convert the amount paid towards the Securities Purchase Agreements into common stock of the company at a conversion price equal to 50% - 55% of the average of the 3 lowest volume weighted average trading prices during the 10 day period ending on the latest complete trading day prior to the conversion date.   Trading price means the closing bid price on the OTC Market Over-the-Counter Bulletin Board Pink Sheets.                    

 

-continued-



10


SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE G – Convertible Promissory Notes Payable - continued

The conversion rights embedded in the Notes are accounted for as a derivative financial instruments because of the down round feature of the conversion price.  The beneficial conversion feature was valued at the date of issuance using the Black-Scholes-Merton options pricing model with the following assumptions:  risk free interest rates ranging from .07% to .15%, contractual expected life of nine (9) to twelve (12) months, expected volatility of 185% to 236%, calculated using the historical closing price of the company’s common stock, and dividend yield of zero, resulting in fair market value.

 

NOTE G – Convertible Promissory Notes Payable

The Company had convertible debentures outstanding as follow:

 

September 30, 2014

 

Outstanding Balance

of

Convertible Debenture


Unamortized

Discount

Net of Principal

and

Unamortized Discount

      
 

Convertible Debentures

 

 

 

 

 

October 8, 2013 – Debenture

 

$     15,700

––

$     15,700

 

January 10, 2014 - Debenture

 

25,000

––

25,000

 

January 29, 2014 - Debenture

 

12,525

(1,833)

10,692

 

February 25, 2014 – Debenture

 

13,695

(6,111)

7,584

 

February 28, 2014 – Debenture

 

          16,500

(6,188)

10,312

 

April 2, 2014 – Debenture

 

24,000

(8,000)

16,000

 

June 18, 2014 – Settlement Agreement

 

58,420

(35,701)

22,719

   
 

Total Convertible Debentures

 

 $  165,840

(57,833)

                  $   108,007

   
 

 

 

             

 



11

 




December 31, 2013

 

Outstanding Balance of Convertible Debenture


Unamortized

Discount

Net of Principal and Unamortized Discount

     

Convertible Debentures

 

 

 

 

July 1, 2013 – Debenture

 

$41,500

$(13,734)

$27,766


August 6, 2013 - Debenture

 


22,500

(10,000)


 12,500


September 9, 2013 – Debenture

 

27,500

(15,278)

 12,222

October 8, 2013 - Debenture

 

26,500

(17,667)

 8,833

October 8, 2013 – Debenture

 

15,700

(10,167)

 5,533

November 11, 2013 - Debenture

 

 4,000

(3,911)

    89

December 3, 2013 - Debenture

 

32,500

(28,889)

3,611

     

Total Convertible Debentures

 

$170,200

   $ (99,646)

$70,554

     



NOTE H – Accrued Expenses

   Accrued Expenses consisted of the following at September 30, 2014 and December 31, 2013:


 

September 30,

December 31,

 

2014

2013

   

Consulting Fees

$    765,379

$    834,345

Commissions

71,033

71,033

Interest

1,314,694

1,200,473

Miscellaneous

46,272

11,589

Royalties

144,303

144,303

   

Total Accrued Expenses

$ 2,341,681

$ 2,261,743

   


-continued-



12

 

SWORDFISH FINANCIAL, INC.

Haltom City, Texas


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE I – Stockholders’ Equity

   Preferred Stock

The Company is authorized to issue up to 50,000,000 shares of preferred stock, $0.0001 par value (“Preferred Stock”). The Board of Directors is authorized to fix the designations, rights, preferences, powers and limitations of each series of Preferred Stock.  The Company’s CEO, Clark Ortiz currently holds 25,000,000 shares of the Company’s Series A preferred stock, each of which is convertible to 10 shares of common stock.

On September 26, 2014 the Board of Directors authorized an amendment to the articles of incorporation to authorize 10,000,000 shares preferred stock Class B. These shares have a $.0001 par value, have voting rights of 1,000 to 1 and are convertible to common at 1,000 to 1.

Common Stock 

On March 25, 2014 the Company amended their authorized Common Stock to 5,000,000,000 shares from 1,000,000,000 shares.

On March 21, 2014 the Company resolved to adopt the 2014 Incentive Stock Option and Restricted Stock Plan.  The purpose of this Plan is to provide a means by which eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following: (i) Incentive Stock Options, (ii) Nonqualified Stock Options, (iii) rights to acquire restricted stock, and (iv) stock appreciation rights.  Eligible Award recipients are the employees, directors and consultants of the Company and its Affiliates. The Company also seeks to retain the services of the group of persons eligible to receive Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.  450,000,000 shares of common stock are registered to this plan at an offering price of $0.001. The Plan expires on March 20, 2024. 

NOTE J – Commitments and Contingencies

Various creditors have brought legal proceedings for collections of their claims against the Company.  Judgments payable at September 30, 2014 and December 31, 2013 are $1,093,571 and $1,066,755, respectivel

NOTE K – Notes Payable – Affiliates

The Company has borrowed $1,100,611 from a former member of the Board of Directors and two (2) related parties. The related party notes total to $5,600.  Two of the notes from the former Board of Directors total to $1,045,000 and are unsecured.  The third note in the amount of $50,000 is secured by a second lien on the Company’s assets.  The notes to the former member of the Board of Directors are in default and the Company has included approximately $1,074,149 of accrued interest in accrued expenses at September 30, 2014.

-continued-



13



SWORDFISH FINANCIAL, INC.

Haltom City, Texas


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE L – Fair Value 

The Company has categorized its assets and liabilities recorded at fair value based upon the fair value hierarchy specified by GAAP.  All assets and liabilities are recorded at historical cost which approximates fair value, and therefore, no items were valued according to these inp

The levels of fair value hierarchy are as follow

-

Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to acc

-

Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals;

-

Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activ

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, the Company categorizes such financial asset or liability based on the lowest level input that is significant to the fair value measurement in its entirety.  Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liabil

Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category.  All assets and liabilities are at cost which approximates fair value and there are not items that were required to be valued on a non-recurring basis.

The following liabilities were valued at fair value as of September 30, 2014 and December 30 2013. No other items were valued at fair value on a recurring or non-recurring basis as of September 30, 2014 and December 31, 2013.



14


SWORDFISH FINANCIAL, INC.

Haltom City, Texas


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


September 30, 2014

 

Fair Value Measurements Using

 

Carrying

    
 

Value

Level 1

Level 2

Level 3

Total

Derivative Liabilities

$      ––

$      ––

$      ––

$      276,515

$      276,515

      

Total

 

$      ––

$      ––

$      276,515

$      276,515



December 31, 2013

 

Fair Value Measurements Using

 

Carrying

    
 

Value

Level 1

Level 2

Level 3

Total

Derivative Liabilities

$      ––

$      ––

$      ––

$      189,871

$      189,871

      

Total

 

$      ––

$      ––

$      189,871

$      189,871


NOTE M – Merger

 

 On September 23, 2014 the Company signed a merger agreement with SoOum Corp., a Delaware corporation.  Per the agreement, the outstanding shares of SoOum Corp common stock will be converted into 6,768,955 shares of the Company’s Class B preferred stock, subject to adjustment.  This transfer of stock will result in an eighty percent (80%) ownership interest of the Company. Upon completion, the Company will be the surviving corporation and SoOum will be a wholly owned subsidiary.

 

NOTE N – Subsequent Events

 

On November 10, 2014, the Company closed its merger transaction with SoOum Corp.  The Company acquired all of the outstanding common stock of SoOum Corp. through its wholly owned subsidiary SoOum Holdings, Inc., a corporation formed under the laws of the State of Nevada.  In accordance with the terms of the merger agreement, the shareholders of SoOum transferred all the outstanding shares of common stock to SoOum Holdings, Inc. in consideration for 6,786,955 shares of Class B preferred stock of the Company.

 

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations

Three Months Ended September 30, 2014 Compared With Three Months Ended September 30, 2013

Net revenue for the three months ended September 30, 2014 and 2013 was $492 and to $-0-, respectively.  Net loss for the three months ended September 30, 2014 was $431,511 compared to net loss of $197,077 for the three months ended September 30, 2013.

 

Total operating expenses were $432,003 for the three months ended September 30, 2014 compared to $197,077 for the three months ended September 30, 2013.  The primary expenses for the three months ended September 30, 2014 were general and administrative expenses of $180,604, interest expense of approximately $148,153, loss on derivative of $86,996 and loss on conversion of $ 16,250.



15


Nine Months Ended September 30, 2014 Compared With Nine Months Ended September 30, 2013

Net revenue for the nine months ended September 30, 2014 and 2013 was $492 and $-0-, respectively.  Net loss for the nine months ended September 30, 2014 was $1,218,812 compared to net loss of $473,866 for the nine months ended September 30, 2013.

 

Total operating expenses were $1,219,304 for the nine months ended September 30, 2014 compared to $473,866 for the nine months ended September 30, 2013.  The primary expenses for the nine months ended September 30, 2014 were general and administrative expenses of $345,782, interest expense of $493,495, loss on derivative of $99,966 and loss on conversion of $ 280,061.

 

Liquidity and Capital Resources

Our operations used approximately $180,050 in cash for the nine months ended September 30, 2014. Cash required during the nine months ended September 30, 2014, came principally from cash proceeds from debt of $164,500 for the nine months ended September 30, 2014.

Our operations used approximately $98,190 in cash for the nine months ended September 30, 2013. Cash required during the nine months ended September 30, 2013 came principally from cash proceeds from issuance of debt of $108,000 for the nine months ended September 30, 2013.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  We incurred net losses of $1,218,812 and $473,866 respectively, for the nine months ended September 30, 2014 and 2013 and had an accumulated deficit of $ 12,601,185 as of September 30, 2014.  We have managed our liquidity during the first, second and third quarters of 2014 through the issuance of convertible notes.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Item 3:  Quantitative and Qualitative Disclosure about Market Risk

 

Not applicable.

 

Item 4:   Controls and Procedures

(a)

Evaluation of disclosure controls and procedures.

As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, the Company’s principal executive officer and principal financial officer have evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation these officers have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and were adequate to insure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms. It is also important to point out that all internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect all material misstatements. Therefore even those systems determined to be effective can only provide reasonable assurance with respect to financial reporting reliability and financial statements preparation and presentation.

(b)

Changes in internal controls.

There have been no significant changes in our internal controls or other factors that would significantly affect such controls and procedures subsequent to the date we completed our evaluation. Therefore, no corrective actions were taken.



16


 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings .

To the best knowledge of the Company’s officers and directors, the Company is currently not a party to any material pending legal proceeding.

Item 1A. Risk Factors.

Not applicable as a smaller reporting company.

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

None.

Item 3. Defaults Upon Senior Securities .

None.

Item 4. Mine Safety Disclosures .

Not applicable.

Item 5. Other Information .

None.

Item 6. Exhibits

 

(a)

Exhibits

TR>

31.1

Amended Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

31.2

Amended Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934

32.1

Amended Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Amended Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-101.INS

XBRL Instance Document

EX-101.SCH

XBRL Taxonomy Extension Schema

EX-101.CAL

XBRL Taxonomy Extension Calculation Linkbase

EX-101.DEF

XBRL Taxonomy Extension Definition Linkbase

EX-101.LAB

XBRL Taxonomy Extension Label Linkbase

EX-101.PRE

XBRL Taxonomy Extension Presentation Linkbase

(b)

Reports of Form 8-K

None.


17


Signatures

 

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


SWORDFISH FINANCIAL, INC.

Date:   Deecember 8, 2014

By: /s/ William Westbrook                             

     William Westbrook

 

Its:  Chief Executive Officer and President


Date:  December 8, 2014

By:   /s/ Ronald Vega                                     

       Ronald Vega

 

Its:  Treasurer and Chief Financial Officer

 


 



18



Exhibit 31.1

AMENDED CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, William Westbrook, certify that:

1.

I have reviewed this Form 10-Q/A of Swordfish Financial, Inc. (the "Company");

2.

Based on my knowledge, this amended reportdoes not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this amended report;

3.

Based on my knowledge, the financial statements, and other financial information included in this amended report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods present in this amended report;

4.

The small business issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the small business issuer and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this amended reportis being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this amended reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this amended reportbased on such evaluation; and

(d)

Disclosed in this amended reportany change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual amended report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5.

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the small business issuer's ability to record, process, summarize and amended reportfinancial information; and

(b)

Any fraud, whether or not material, that involved management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Dated:  December 8 , 2014

Swordfish Financial, Inc.

By:   /s/ William Westbrook

         William Westbrook




Exhibit 31.2

AMENDED CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Ronald Vega, certify that:

1.

I have reviewed this Form 10-Q/A of Swordfish Financial, Inc. (the "Company");

2.

Based on my knowledge, this amended report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this amended report;

3.

Based on my knowledge, the financial statements, and other financial information included in this amended report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods present in this amended report;

4.

The small business issuers other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial amended reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the small business issuer and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this amended report is being prepared;

(b)

Designed such internal control over financial amended reporting, or caused such internal control over financial amended reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial amended reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this amended report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this amended report based on such evaluation; and

(d)

Disclosed in this amended report any change in the small business issuer's internal control over financial amended reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual amended report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial amended reporting; and

5.

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial amended reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial amended reporting which are reasonable likely to adversely affect the small business issuer's ability to record, process, summarize and amended report financial information; and

(b)

Any fraud, whether or not material, that involved management or other employees who have a significant role in the small business issuer's internal control over financial amended reporting.

Dated:  December 8, 2014

Swordfish Financial, Inc.

By:  /s/ Ronald Vega

         Ronald Vega



 

Exhibit 32.1

AMENDED CERTIFICATION OF

CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

 

In connection with the accompanying Amended Quarterly Report on Form 10-Q/A of Swordfish Financial, Inc. (the "Company") for the quarter ending September 30, 2014, I, William Westbrook, Chief Executive Officer of the Company hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

1.

Such Amended Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2014, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.

The information contained in such Amended Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2014, fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated:  December 8 , 2014

Swordfish Financial, Inc.

By:    /s/ William Westbrook

         William Westbrook






 

Exhibit 32.2

AMENDED CERTIFICATION OF

CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Amended Quarterly Report on Form 10-Q/A of Swordfish Financial, Inc. (the "Company") for the quarter ending September 30, 2014, I, Ronald Vega, Chief Financial Officer of the Company hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

1.

Such Amended Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2014, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.

The information contained in such Amended Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2014, fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated:   December 8 , 2014

Swordfish Financial, Inc.

 

By:  /s/ Ronald Vega    

          Ronald Vega