Notes to Condensed Consolidated Financial Statements
March 31, 2014
(unaudited)
NOTE 1 – Summary of Significant Accounting Policies
Nature of Business
Confederate Motors, Inc. (the “Company”) is a manufacturer of American handcrafted street motorcycles. The Company currently offers one production model (the X132 Hellcat) and two preproduction models (the Hellcat Roadster and the Pierre Tereblanche P51 Fighter). The X132 Hellcat model started production in January 2012. The Confederate Brand was founded in 1991. The Company has been operational since 2003 and is headquartered in Birmingham, Alabama.
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.
The unaudited interim financial statements should be read in conjunction with the Company’s 2013 Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the years ended December 31, 2013 and 2012. The interim results for the period ended March 31, 2014 are not necessarily indicative of results for the full fiscal year.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management believes that the estimates utilized in preparing the Company’s financial statements are reasonable and prudent; however, actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include Confederate Motors, Inc., Confederate Acquisitions Corp.(inactive), and Confederate Garage, LLC. (collectively, the “Company”). All intercompany accounts have been eliminated in consolidation
.
Risks and Uncertainties
The Company operates in an industry that is subject to intense competition and rapid technological change and is in a state of fluctuation as a result of the recent economic downturn in the United States and around the world. The Company's operations are subject to significant risk and uncertainties including financial, operational, technological, and regulatory risks including the potential risk of business failure.
See Note 6 for a full discussion of commitments, contingencies and other uncertainties.
Cash and Cash Equivalents
The Company considers all liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash depository accounts which at times, may exceed federally insured limits. The risk is managed by maintaining all deposits in high quality financial institutions. These amounts represent actual account balances held by the financial institution at the end of the period, and unlike the balance reported in the financial statements, the account balances do not reflect timing delays inherent in reconciling items such as outstanding checks and deposits in transit.
Inventory
Inventory is valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventory consists of parts inventory, work in process (WIP), finished goods inventory, apparel inventory and manufacturing overhead associated with WIP and finished goods.
|
|
3/31/2014
|
|
|
12/31/2013
|
|
Parts
|
|
$
|
242,756
|
|
|
$
|
188,867
|
|
Work in process
|
|
|
60,193
|
|
|
|
82,515
|
|
Motorcycle finished goods
|
|
|
90,878
|
|
|
|
99,510
|
|
Trade In Models
|
|
|
30,000
|
|
|
|
-
|
|
Apparel inventory
|
|
|
13,150
|
|
|
|
3,639
|
|
Total Inventory
|
|
$
|
436,977
|
|
|
$
|
374,531
|
|
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and includes expenditures that substantially increase the useful lives of existing property and equipment. Maintenance, repairs, and minor renovations are expensed as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the results of operations. The Company provides for depreciation of property and equipment using the straight-line method over the estimated useful lives or the term of the lease, as appropriate. The estimated useful lives are as follows: vehicles, 5 years; furniture and fixtures, 3 to 5 years; equipment, 3 to 5 years.
Revenue Recognition
Revenues from the sale of motorcycles and equipment are recognized when products are delivered or shipped. Advance payments from customers are typically required to secure the order and are shown as deferred revenue in the accompanying balance sheets and are non-refundable. The Company recognizes revenue from repair services in the same month the service is provided. Cash payments received from customers prior to delivery of the motorcycle are recorded as deferred revenue on the balance sheet. Deferred revenue was $827,638 at March 31, 2014 and $792,208 at December 31, 2013.
Earnings per Share
In accordance with accounting guidance now codified as FASB ASC Topic 260,
“Earnings per Share,”
basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
The Company did not have any potential common stock equivalents at March 31, 2014 except $180,000 payable to officer which will be satisfied with 1,440,000 shares of stock.
Income Taxes
The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC Topic 740, “
Income Taxes
,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.
Accounting guidance now codified as FASB ASC Topic 740-20,
“Income Taxes – Intraperiod Tax Allocation,”
clarifies the accounting for uncertainties in income taxes recognized in accordance with FASB ASC Topic 740-20 by prescribing guidance for the recognition, de-recognition and measurement in financial statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax returns, including a decision whether to file or not to file in a particular jurisdiction. FASB ASC Topic 740-20 requires that any liability created for unrecognized tax benefits is disclosed. The application of FASB ASC Topic 740-20 may also affect the tax bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets. The Company would recognize interest and penalties related to unrecognized tax benefits in income tax expense. At March 31, 2014, the Company did not record any liabilities for uncertain tax positions.
Advertising Costs
Advertising costs relate to the Company’s efforts to promote its products and brands. Advertising is expensed as incurred. For the quarters ended March 31, 2014 and 2013, advertising expense was $2,319 and $10,342 respectively.
Research and Development Costs
Expenditures for research activities relating to product development and improvement are charged against income as incurred and included within operating expenses in the accompanying statements of operations. Research and development (R&D) costs totaled $50,068 and $23,163 for the quarters ended March 31, 2014 and 2013, respectively.
Shipping and Handling Costs
The Company records shipping and handling costs billed to the customer and shipping and handling expenses in cost of sales.
Fair Value Measurements
We have categorized our assets and liabilities recorded at fair value based upon the fair value hierarchy specified by GAAP.
The levels of fair value hierarchy are as follows:
|
·
|
Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access;
|
|
·
|
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; and
|
|
·
|
Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.
|
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, we categorize 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 liability.
Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category. As a result, the unrealized gains and losses for assets within the Level 3 category may include changes in fair value that were attributable to both observable and unobservable inputs.
There are no fair value measurements as of March 31, 2014.
Reclassification
Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. The results of these reclassifications did not materially affect financial position, results of operations or cash flows.
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
2013
|
|
Vehicles
|
|
$
|
36,628
|
|
|
$
|
36,628
|
|
Furniture and fixtures
|
|
|
11,734
|
|
|
|
11,734
|
|
Equipment
|
|
|
80,434
|
|
|
|
80,434
|
|
Leasehold improvements
|
|
|
36,492
|
|
|
|
25,273
|
|
|
|
|
165,288
|
|
|
|
154,069
|
|
Less accumulated depreciation
|
|
|
(126,963
|
)
|
|
|
(126,619
|
)
|
|
|
$
|
38,325
|
|
|
$
|
27,450
|
|
NOTE 3 – CAPITAL LEASES
The capitalized cost and accumulated depreciation of the computers and equipment under capital lease totaled $80,434 and $78,600 (net) respectively, at March 31, 2014.
At March 31, 2014, future minimum payments due under the capital lease agreements are as follows:
Future minimum lease payments
|
|
$
|
-
|
|
Less amount representing interest
|
|
|
-
|
|
Present value of minimum lease payments
|
|
|
-
|
|
Less current portion
|
|
|
-
|
|
Long-term capital leases
|
|
$
|
-
|
|
NOTE 4 – STOCKHOLDERS’ EQUITY
Sale of Common Stock
In July 2012, the Company raised $41,000 through the sale of 100,000 shares of common stock to accredited investors.
In December 2012, the Company raised $50,000 through the sale of 116,279 shares of common stock to an accredited investor
In January 2013, the Company converted a payable of $50,000 to 116,279 shares of common stock to an accredited investor.
On May 31, 2013, the Company completed a prior nonpublic offering of its common stock commenced on or about February 22, 2013. The Company received subscriptions from three investors, including H. Matthew Chambers, our Chief Executive Officer and a director, for $810,000 representing a total of 3,240,000 shares issuable at the original offering price of $0.25 per share. On July 25, 2013, the Board retroactively reduced the purchase price in this offering to $0.125 per share for a total of 6,480,000 shares. As of the date of this report, the Company had received subscription payments of $486,762, with a balance of $113,238 remaining unpaid. The balance of the subscription amounts is currently due and payable. The Company has paid $180,000 towards Mr. Chambers’ stock option, to clear a portion of his unpaid wages. As of the date of this report the entire $210,000 has been paid and will be reflected on the next report. Mr. Chambers’ funds are held in the Payable to be settled in stock – Officer account.
On July 31, 2013, the Company offered for sale 6,234,412 shares of Common Stock at $0.1604 per share. As of the date of this report, the Company has received a subscription commitment for 6,234,412 shares. In February 2014, the Company received $500,000 and issued 3,117,206 shares. The remaining 50% shall be paid to the Company on a future date mutually agreed by the investor and the Company.
Warrants
During the year ended December 31, 2009, the Company issued 105,000 stock purchase warrants to purchase the Company’s common stock at an exercise price of $1.50 with an exercise term of five years. The Company valued these warrants utilizing a Black-Scholes option pricing model utilizing the following assumptions: fair market value per share -$1.50, exercise price -$1.50, expected volatility -115%, risk free interest rate -1.73%. The fair value of $127,050 was recorded to additional paid-in capital.
The following is a summary of the Company’s warrant activity:
|
|
Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Exercisable – December 31, 2011
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – March 31, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – March 31, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – June 30, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – June 30, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – September 30, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – September 30, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – December 31, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – December 31, 2012
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – March 31, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – March 31, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – June 30, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – June 30, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – September 30, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – September 30, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding – December 31, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Exercisable – December 31, 2013
|
|
|
105,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(105,000
|
)
|
|
|
1.50
|
|
Outstanding – March 31, 2014
|
|
|
-
|
|
|
$
|
-
|
|
Exercisable – March 31, 2014
|
|
|
-
|
|
|
$
|
-
|
|
Warrants Outstanding
|
|
Warrants Exercisable
|
|
Range of
Exercise
Price
|
|
Number
Outstanding
|
|
Weighted Average
Remaining Contractual
Life (in Years)
|
|
Weighted Average
Exercise Price
|
|
Number
Exercisable
|
|
Weighted Average
Exercise Price
|
|
$
|
1.50
|
|
0
|
|
0.0 years
|
|
$
|
1.50
|
|
|
0
|
|
$
|
1.50
|
|
At March 31, 2014 and December 31, 2013, the total intrinsic value of warrants outstanding and exercisable was $0 and $0, respectively. The exercise period has expired.
Stock Options
All stock options have expired.
Registration Rights Penalty
In connection with the issuance of common stock and convertible debt, which converted into common stock in 2009, the equity holders were entitled to liquidated damages, which provide for a payment in cash equal to a maximum of 10% of the total offering price for all equity proceeds raised. The convertible note holders were entitled to liquidated damages which provide for a payment in cash equal to a maximum of 15% of the total offering price for all equity proceeds raised. The Company was required to file an S-1 registration statement 120 days after the offering closed. The closing date of the offering was February 12, 2009; therefore, the 120th day was June 12, 2009. Furthermore, the Company was required to have the S-1 registration declared effective within 150 days (July 12, 2009). The Company never filed a registration statement. In 2012, the Company entered into a settlement agreement with a shareholder for cash in exchange for shares, which reduced the equity subject to registration rights penalty. See Note 6 for disclosure of the settlement agreement.
Liquidated damages are as follows:
Equity subject to registration rights penalty
|
|
$
|
1,417,500
|
|
Maximum penalty
|
|
|
10
|
%
|
Convertible debt subject to registration rights penalty
|
|
$
|
225,000
|
|
Maximum penalty
|
|
|
15
|
%
|
Registration Rights Penalty
|
|
$
|
175,500
|
|
NOTE 5 – RELATED PARTY TRANSACTIONS
Pamela Miller (life partner of Matthew Chambers, Chairman, CEO), handles patent and trade name filings/renewals and administrative support for the Company. There is no formal contract between the Company and Pamela Miller. Her compensation was $13,000 and $3,000 for the quarters ended March 31, 2014 and 2013, respectively. Additionally, Pamela Miller is the guarantor for the majority of the loans and leases, vendor open accounts and the corporate credit card.
Confederate Motors purchased shares in the amount of $180,000 for H. Matthew Chambers. This purchase was in lieu of salary and wages owed him in 2012 and 2013. See Note 4.
The term sheet dated July 31, 2013 specifies: Confederate Motors will issue $236,250 in shares for H. Matthew Chambers for unpaid salary once the second half of the July 31, 2013 offering is complete. These are unpaid wages from 2009, 2010, and 2011. See Note 4 and Note 6.
NOTE 6 – COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES
Contingencies and Uncertainties
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. With the exception of the lawsuit discussed in more detail below, the Company is currently not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
We have one legal action – Confederate Motors, Inc. v. Francois-Xavier Terny, et al.
On November 26, 2012, the Company entered into a Mutual Settlement Agreement & General Release (the “Settlement Agreement”) with Francois Xavier Terny. The purpose of the Settlement Agreement was to settle the outstanding dispute and settle all claims between the parties. Under the Settlement Agreement, the Company agreed to make scheduled payments to Mr. Terny totaling $350,000 in exchange for 805,000 shares held by Mr. Terny. The Company agreed to pay Mr. Terny $50,000 upon the execution of the Settlement Agreement. An additional $25,000 was paid to Mr. Terny on or before December 31, 2012 and the final payment of $275,000 was required to be paid on or before September 30, 2013. On April 4, 2013, counsel for Francois-Xavier Terny filed a stipulated judgment in connection with the final payment under the Mutual Settlement Agreement & General Release between the Company and Mr. Terny. Management believes the judgment may be defective and is seeking legal clarification concerning same.
A payment of $275,000 on the settlement with Francois Xavier Terny was due on September 30, 2013. The Company paid $50,000 to Mr. Terny’s designee on July 17, 2013 and $25,000 to Mr. Terny’s designee on November 25, 2013. As of the date of this report the Company still has a balance due of $200,000 recorded in the books.
The Company’s basis in the treasury shares is $313,950. The Company used the market value on November 26, 2012, the date of settlement, to value the shares.
On August 3, 2013, the Board of Directors resolved that following receipt of equity financing of at least $1,000,000 pursuant to the private offering initiated in July 2013 or upon collection of the remaining subscriptions from the private offering initiated in May 2013, the Company will issue up to 3,742,000 shares of common stock at a value of $0.125 per share as follows: 1,890,000 shares to Mr. Chambers as satisfaction in full, including interest and penalties, for 75% of the unpaid salary and bonus for each of 2009, 2010, and 2011; and 2013 bonuses to the directors payable under the 2008 Incentive Plan on January 1, 2014, as follows: 768,000 shares to Paolo Chiaia and 384,000 shares for Patrick Aisher. The 1,890,000 shares at $.125 equate to $236,250.
The employment agreement dated February 15, 2012, with Mr. Chambers was amended to extend the term of the employment for an additional two years. As a bonus for extending the term of the employment agreement Mr. Chambers will be issued 200,000 fully-vested shares pursuant to the Company’s 2008 Incentive Plan, provided that the Company receives equity financing of at least $1,000,000 pursuant to the July 2013 private offering or upon collection of the remaining subscriptions for the May 2013 private offering.
Operating Lease
The Company has engaged a lease for a 24,179 square foot office and warehouse located in Birmingham, Alabama. The lease was executed on October 21, 2013 with commencement on November 1, 2013. The Company sub-leased the premises for the term of ten years with the option of an additional ten years provided 180 days prior written notice is given. The monthly base rental is $7,059.67 for the first year with a 2% increase each year after. The Company prepaid the December 2013 rent and the security deposit; equal to the first month’s rent. The lessor waived the November 2013 rent as an incentive to enter into the lease.
Rent expense under the new operating lease totaled $21,179 for the quarter ended March 31, 2014 and $14,938 for the quarter ended March 31, 2013. Future minimum payments due under the operating lease agreements are as follows:
April 1 through March 31, 2015
|
|
|
$
|
85,563
|
|
|
|
|
|
|
|
|
|
Future minimum lease payments
|
|
|
|
|
|
|
|
|
|
April - March
|
|
|
|
|
|
|
|
2015-2016
|
|
|
$
|
87,724
|
|
|
|
2016-2017
|
|
|
$
|
89,020
|
|
|
|
2017-2018
|
|
|
$
|
90,800
|
|
|
|
2018-2019
|
|
|
$
|
92,616
|
|
|
|
2019-2020
|
|
|
$
|
94,469
|
|
|
|
Remaining
|
|
|
$
|
354,122
|
|
|
|
Total
|
|
|
$
|
894,314
|
|
NOTE 7 – RECENT ACCOUNTING PRONOUNCEMENTS
Various ASU’s up through ASU No. 2014-08 that contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.
NOTE 8 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed giving effect to all potential dilutive common stock, including common stock options and common stock warrants. The common stock warrants and common stock options were not included in the computation of the per share loss for the current periods because the effect would be anti-dilutive. These items could be dilutive in the future.
NOTE 9 – NOTE RECEIVABLE
On September 27, 2012, the Company sold the design and manufacturing rights to the discontinued Fighter model to a third party for $100,000. The full asset purchase price was recorded as other income. In conjunction with the sale, an initial payment of $25,000 was received and a promissory note for the balance was issued. The term of the promissory note is one year with an interest rate of 7% The promissory note calls for two installment payments of $12,500 each and a final payment of $50,000 due on September 30, 2013.
As of the date of this report two installments have been received, through prepayment credits and certified funds, and no interest has been paid. As of March 31, 2014, interest has accrued an additional $400. Accumulated fees for 2014 are $1,500.
The current amount due is $12,124.
NOTE 10 – CONCENTRATION OF CREDIT RISK
At March 31, 2014, the Company had monies in bank accounts exceeding the federally insured limits. The Federal Deposit Insurance Corporation (FDIC) insures deposit account balances to at least $250,000 per insured bank.
NOTE 11 – GOING CONCERN
As shown in the accompanying financial statements, the Company had an accumulated deficit incurred through March 31, 2014, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
The Company will need significant funding to continue operations and increase development through the next fiscal year. The timing and amount of capital requirements will depend on a number of factors, including demand for products and services and the availability of opportunities for expansion through affiliations and other business relationships. Management intends to continue to seek new capital from equity securities issuances to provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan.
If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used.
NOTE 12 – SUBSEQUENT EVENTS
On April 15, 2014 the Company paid the $30,000 balance for Matt Chambers’ shares in lieu of salary. See Note 5.