Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 3 to FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2007
Commission File Number 000-50045
EMPIRE GLOBAL CORP.
(Name of small business issuer in its charter)
Delaware 33-0823179
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
648 Finch Ave. East, Suite 2
Toronto, Ontario, M2K 2E6
(647) 229-0136
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities 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 filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if Smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
There were 9,796,900 shares of Common Stock outstanding as of March 31, 2007.
ITEM 1. FINANCIAL STATEMENTS
The un-audited quarterly financial statements for the period ended March 31,
2007, prepared by the company, immediately follow.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements F-1 - F-19
Item 2. Management's Discussion and Analysis or Plan of Operation 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits 27
SIGNATURES
Amendments
EXPLANATORY NOTE
This Amendment No. 3 to form 10-Q ("Amendment No. 3") amends the previously
filed Quarterly Report of Empire Global Corp. (the "Company") on form 10-Q and
subsequently filed Amendment No. 1 and Amendment No. 2 for the quarter ended
March 31, 2007, as filed with the Securities and Exchange Commission on
September 18, 2009. This Amendment No. 3 is being filed for the purpose of
correcting a clerical error in the form 10-Q which may confuse the reader and
does not affect the results reported in the interim unaudited consolidated
financial statements. The error was discovered when comparing results while
preparing our statements for the Annual report on form 10-K for the year ended
December 31, 2007.
Description of Change in this Amendment No. 3
---------------------------------------------
On page F-2 - Balance Sheets, the entry for the accounts payable for the year
ended December 31, 2006 incorrectly states $325,650 and has been changed to
correctly state $324,650. The resulting total is accurate and has not been
changed.
2
ITEM 1. FINANCIAL STATEMENTS
EMPIRE GLOBAL CORP.
(FORMERLY TRADESTREAM GLOBAL CORP.)
INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2007 and 2006
CONTENTS
Consolidated Balance Sheets F - 2
Consolidated Statements of Operations and Comprehensive Loss F - 3
Consolidated Statements of Cash Flows F - 4
Notes to Consolidated Financial Statements F - 5 - F - 19
- F1 -
EMPIRE GLOBAL CORP.
(FORMERLY TRADESTREAM GLOBAL CORP.)
Consolidated Balance Sheets
March 31, December 31,
2007 2006
US$ US$
--------- -----------
(Unaudited) (Audited)
ASSETS
Current Assets
Pre-paid and sundry assets of continuing operations 101,433 101,433
------- -------
Total Current Assets 101,433 101,433
Property and equipment, net 6,805 7,163
Investment in Armistice Resources Corp. 834,708 839,207
Organization Cost 1,461 1,469
------- -------
944,408 949,272
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities
of continuing operations 87,699 -
Accounts payable and accrued liabilities
of discontinued operations 324,650 324,650
Advances from related party-discontinued operations 32,500 32,500
------- -------
Total Current Liabilities 444,849 357,150
Commitments and Contingencies - -
Stockholder's Equity
Preferred Stock, $0.0001 par value,
20,000,000 shares authorized,none issued and outstanding. - -
Capital Stock, $0.0001 par value,80,000,000 shares authorized,
shares issued and outstanding,
9,796,900 at March 31, 2007 and December 31, 2006 980 980
Additional paid in capital 4,119,216 4,119,216
Accumulated other comprehensive loss (4,506) -
Deficit (3,616,131) (3,528,074)
------- -------
Total Stockholders' Equity 499,559 592,122
------- -------
944,408 949,272
======= =======
See notes to consolidated financial statements
- F2 -
EMPIRE GLOBAL CORP.
(FORMERLY TRADESTREAM GLOBAL CORP.)
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
March 31, March 31,
2007 2006
US$ US$
--------- -----------
Restated
Income from continuing operations - -
--------- -----------
General and administrative expenses 88,057 81,472
Operating loss- continuing operations (88,057) (81,472)
Other (expense)/income - -
--------- -----------
Loss from continuing operations before income taxes (88,057) (81,472)
Income taxes - -
Loss from continuing operations (88,057) (81,472)
Loss on discontinued operations - (429,437)
--------- -----------
Net Loss (88,057) (510,909)
========= ===========
Foreign currency translation adjustment (4,506) (15,030)
--------- -----------
Comprehensive Loss (92,563) (525,939)
========= ===========
Basic and fully diluted loss per share
- continuing operations (0.01) (0.01)
Basic and fully diluted loss per share
- discontinued operations - (0.06)
Basic and fully diluted loss per share (0.01) (0.07)
========= ===========
Basic and fully diluted weighted
average number of shares 9,796,900 7,799,967
========= ===========
See notes to consolidated financial statements
- F3 -
EMPIRE GLOBAL CORP.
(FORMERLY TRADESTREAM GLOBAL CORP.)
Consolidated Statements of Cash Flows
(Unaudited)
Three months March 31,
2007 2006
US$ US$
------- --------
Restated
Cash Flows from continuing operations - Operating Activities
Net loss (88,057) (510,909)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 358 448
Accounts payable and accrued charges 87,699 416,297
Loss on discontinued operations - 429,438
------- --------
Net cash used in operating activities - 335,274
------- --------
Net cash provided by discontinued operations - (326,432)
------- --------
Cash Flows from Investing Activities
Net cash used in investing activities - -
------- --------
Cash Flows from Financing Activities
Advances from related parties - 17,500
------- --------
Net cash provided by financing activities - 17,500
------- --------
Effect of foreign exchange fluctuation in cash - 7,002
------- --------
Net (decrease) increase in cash and cash equivalents - 33,344
Cash and cash equivalents - beginning of year - 274,186
------- --------
Cash and cash equivalents - end of year - 307,530
======= ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest paid - -
======= ========
Income taxes paid - -
======= ========
(See also Note 6 for disclosures of discontinued operations not affecting cash)
See notes to consolidated financial statements
- F4 -
EMPIRE GLOBAL CORP.
(FORMERLY TRADESTREAM GLOBAL CORP.)
Notes to Consolidated Financial Statements
(Unaudited)
1. Nature of Business and Operations
Empire Global Corp. ("Empire" or "the Company") was incorporated in the state of
Delaware on August 26, 1998 as Pender International Inc. In 2005, pursuant to
two failed proposals to enter into the technology business the Company changed
its name to Vianet Technologies Group Ltd. and subsequently to Tradestream
Global Corp. On September 30, 2005 contemporaneously with a change in management
and business plan changed its name to Empire Global Corp. The Company's
principal executive offices are headquartered in Canada.
In June 2004, the Company acquired IMM Investments Inc. an Ontario Corporation
in exchange for 210,000 (21 million pre reverse stock splits) shares paid to the
former shareholder of IMM thereby making IMM a wholly owned subsidiary. As
described in Note 9 - Recovery of IMM Investments Inc., IMM owns 5 million (20
million pre reverse stock split) shares of Armistice Resources Corp. a mining
company in Northern Ontario. In June 2005, the Company sold its interests in IMM
in exchange for a Promissory Note of $3,000,000 plus interest accrued to
maturity and secured by the shares of IMM. As described in Note 8 - Notes
Receivable, the Note has been cancelled and the shares of IMM recovered by the
Company.
On November 17, 2005 the Company acquired 501 Canada Inc. an Ontario Corporation
through Empire Global Acquisition Corp. (EGAC) our wholly owned subsidiary in
exchange for 6,240,000 shares paid to the former shareholder of 501. As
explained in Note 6 - Discontinued Operations, on September 30, 2006, the
Company discontinued the 501 business and cancelled the 6,240,000 shares issued
and eliminated the assets and liabilities associated with 501.
As a result of the above, the Company has an interest in Armistice Resources
Corp. and is actively seeking new business opportunities.
2. Going Concern
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America with
the assumption that the Company will be able to realize its assets and discharge
its liabilities in the normal course of business.
During the quarter ended March 31, 2007, we had a loss of $88,057 from
continuing operations. Since inception, the Company has incurred continuing
losses amounting to $790,098 and total losses of $3,616,131 including losses
from discontinued operations of $2,826,033 since inception. Continuation as a
going concern is uncertain and dependant upon obtaining additional sources of
financing to sustain its operations and achieving future profitable operations,
the outcome of which cannot be predicted at this time. In the event the Company
cannot obtain the necessary funds, it will be unlikely that the Company will be
able to continue as a going concern. Management plans to mitigate its losses in
future years by significantly reducing its operating expenses and seeking out
new business opportunities. However, there is no assurance that the Company will
be able to obtain additional financing, reduce their operating expenses or be
successful in locating or acquiring a viable business.
The consolidated financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
- F5 -
3. Summary of Significant Accounting Policies
The Company's significant accounting policies and recent accounting
pronouncements are included in the Company's form 10-K dated and filed on June
29, 2009 for the fiscal year ended December 31, 2006. A summary of critical
accounting policies are described below.
a) Basis of Financial Statement Presentation
The accompanying consolidated interim financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the requirements
of item 310 (b) of Regulation S-B. Certain information and disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). The consolidated interim financial statements
reflect all adjustments (consisting only of normal recurring adjustments),
which, in the opinion of management, are necessary for a fair presentation of
the results for the periods presented. Except for the adoption of new accounting
policies as disclosed in note 3, there have been no significant changes of
accounting policies since December 31, 2006. The results from operations for the
periods are not indicative of the results expected for the full fiscal year or
any future period. These consolidated interim financial statements should be
read in conjunction with the annual consolidated financial statements and notes
for the year ended December 31, 2006.
b) Principles of consolidation
These consolidated financial statements include the accounts of the Company and
an inactive wholly owned subsidiary, Montebello Developments Corp., as well as
results from the discontinued operations of Empire Global Acquisition Corp.
("EGAC") and IMM Investments Inc. a wholly owned subsidiary.
c) Reclassifications
Certain prior period amounts in the accompanying consolidated financial
statements have been reclassified to conform to the current period's
presentation. These reclassifications had no effect on the consolidated results
of operations or financial position for any period presented.
d) Use of Estimates
In preparing the Company's financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenue and
expenses during the reporting periods. Actual results could differ from those
estimates.
Significant estimates made by management are, among others, realizability of
long-lived assets, and deferred taxes. Management reviews its estimates on a
quarterly basis and, where necessary, makes adjustments prospectively.
- F6 -
e) Income Taxes
Income taxes are provided in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
f) Equipment and Depreciation
Revenue producing real estate and equipment are stated at cost less accumulated
depreciation. Depreciation, based on the estimated useful lives of the assets,
is provided as follows:
Equipment 20% Declining Balance
Buildings of discontinued operations 2.5% Straight line
As described in Note 6 the Company discontinued the operations of its former
subsidiary EGAC during the period covered by this report. As a result of the
discontinued EGAC operations the revenue producing real estate and the
depreciation associated with these assets will no longer be reflected.
g) Organization Costs
Organization costs are recorded at cost and is not amortized as its life is
deemed to be indefinite. The cost is tested annually for impairment in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets". The
impairment test consists of comparing the fair value of the incorporation cost
with its carrying amount. If the carrying amount exceeds the fair value, an
impairment loss is recognized in an amount equal to the excess. As of December
31, 2006 and March 31, 2007, no impairment losses have been identified.
h) Fair Value of Financial Instruments
The carrying value of the Company's short term investments, prepaid and sundry
assets, sundry receivables, bank indebtedness, accounts payable and accrued
charges, and advances from shareholder approximate fair value because of the
short term maturity of these financial instruments.
- F7 -
i) Foreign Currency Translation
The Company accounts for foreign currency translation pursuant to SFAS No. 52,
"Foreign Currency Translation". The Company's functional currency was the
Canadian dollar. Assets and liabilities are translated into United States
dollars using the current exchange rate, while revenues and expenses are
translated using the average exchange rates prevailing throughout the year.
Translation adjustments are included in other comprehensive income for the
period.
During the year ended December 31, 2006 the Company discontinued the operations
of its wholly owned subsidiary EGAC (501) for which the operational currency was
the Canadian Dollar. All remaining expenses where incurred in US Dollars.
j) Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income.", SFAS No.
130 establishes standards for reporting and presentation of comprehensive
income and its components in a full set of financial statements. Comprehensive
income is presented in the statements of operations, and consists of net income
and unrealized gains (losses) on available for sale marketable securities;
foreign currency translation adjustments and changes in market value of future
contracts that qualify as a hedge; and negative equity adjustments recognized in
accordance with SFAS 87. SFAS No. 130 requires only additional disclosures in
the financial statements and does not affect the Company's financial position or
results of operations.
k) Concentration of Credit Risk
SFAS No. 105, "Disclosure of Information About Financial Instruments with Off
Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk",
requires disclosure of any significant off balance sheet risk and credit risk
concentration. The Company does not have significant off balance sheet risk or
credit concentration.
l) Recent Accounting Pronouncements
In March 2005, the FASB issued FASB Staff Position ("FSP") No. 46(R) 5,
"Implicit Variable Interests under FASB Interpretation No. ("FIN") 46 (revised
December 2003), Consolidation of Variable Interest Entities" ("FSP FIN 46R 5").
FSP FIN 46R 5 provides guidance for a reporting enterprise on whether it holds
an implicit variable interest in Variable Interest Entities ("VIEs") or
potential VIEs when specific conditions exist. This FSP is effective in the
first period beginning after March 3, 2005 in accordance with the transition
provisions of FIN 46 (revised December 2003), "Consolidation of Variable
Interest Entities an Interpretation of Accounting Research Bulletin No. 51"
("FIN 46R"). The adoption of FSP FIN 46R 5 in 2005 did not have an impact on
the Company's results of operations and financial position.
- F8 -
In March 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"), which will result in (1)
more consistent recognition of liabilities relating to asset retirement
obligations, (2) more information about expected future cash outflows associated
with those obligations, and (3) more information about investments in long lived
assets because additional asset retirement costs will be recognized as part of
the carrying amounts of the assets. FIN 47 clarifies that the term "conditional
asset retirement obligation" as used in SFAS No. 143, "Accounting for Asset
Retirement Obligations", refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of the
entity. The obligation to perform the asset retirement activity is unconditional
even though uncertainty exists about the timing and/or method of settlement.
Uncertainty about the timing and/or method of settlement of a conditional asset
retirement obligation should be factored into the measurement of the liability
when sufficient information exists. FIN 47 also clarifies when an entity would
have sufficient information to reasonably estimate the fair value of an asset
retirement obligation. FIN 47 is effective no later than the end of fiscal years
ending after December 15, 2005. The adoption of FIN 47 in 2005 did not have a
material impact on the financial position or results of operations of the
Company.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections", which replaces APB Opinion No. 20, "Accounting Changes", and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements An
Amendment of APB Opinion No. 28". SFAS No. 154 provides guidance on the
accounting for and reporting of changes in accounting principles and error
corrections. SFAS No. 154 requires retrospective application to prior period
financial statements of voluntary changes in accounting principle and changes
required by new accounting standards when the standard does not include
specific transition provisions, unless it is impracticable to do so. SFAS No.
154 also requires certain disclosures for restatements due to correction of an
error. SFAS No. 154 is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005, and is required
to be adopted by the Company as of January 1, 2006. The impact that the adoption
of SFAS No. 154 will have on the Company's results of operations and financial
condition will depend on the nature of future accounting changes adopted by the
Company and the nature of transitional guidance provided in future accounting
pronouncements.
In February 2006, the FASB issued SFAS No. 155 ("SFAS 155"), "Accounting for
Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133
and 140". This Statement amends FASB Statements No. 133, "Accounting for
Derivative Instruments and Hedging Activities", and No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This Statement resolves issues addressed in Statement 133 Implementation Issue
No. D1, "Application of Statement 133 to Beneficial Interests in Securitized
Financial Assets." This statement is effective for all financial instruments
acquired or issued after the beginning of an entities first fiscal year that
begins after September 15, 2006. Adoption of SFAS 155 did not have a material
impact on the Company's consolidated financial statements.
In March 2006, the FASB issued SFAS No. 156 ("SFAS 156"), "Accounting for
Servicing of Financial Assets - an amendment of FASB Statement No. 140". SFAS
156 amends SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities," with respect to accounting for
separately recognized servicing assets and servicing liabilities. SFAS 156 is
effective for fiscal years that begin after September 15, 2006, with early
adoption permitted as of the beginning of an entity's fiscal year. The Company
does not have any servicing assets or servicing liabilities and, accordingly,
the adoption of SFAS 156 did not have a material impact on the Company's
consolidated financial statements.
In July 2006, the FASB issued FASB Interpretation No. 48 ("Interpretation No. 48
or FIN 48"), "Accounting for Uncertainty in Income Taxes". Interpretation No. 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes". Interpretation No. 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Interpretation No.
48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.
Interpretation No. 48 is effective beginning January 1, 2007.
- F9 -
The Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48 provides
detailed guidance for the financial statement recognition, measurement and
disclosure of uncertain tax positions recognized in the financial statements in
accordance with SFAS 109. Tax positions must meet a "more-likely-than-not"
recognition threshold at the effective date to be recognized upon the adoption
of FIN 48 and in subsequent periods. The adoption of FIN 48 had an immaterial
impact on the Company's consolidated financial position and did not result in
unrecognized tax benefits being recorded. Accordingly, no corresponding interest
and penalties have been accrued. The Company files income tax returns in the
U.S. federal and state jurisdictions. There are currently no federal or state
income tax examinations underway for these jurisdictions. Furthermore, the
Company is no longer subject to U.S. federal income tax examinations by the
Internal Revenue service for tax years before 2003 and for state and local tax
authorities for years before 2002. The Company does, however, have prior year
net operating losses which remain open for examination.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS
No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value and enhances disclosures about fair value measures
required under other accounting pronouncements, but does not change existing
guidance as to whether or not an instrument is carried at fair value. SFAS No.
157 will be effective for the Company on January 1, 2008. Adoption of SFAS 157
is not expected to have a significant impact on our consolidated financial
statements.
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair Value
Option for Financial Assets and Financial Liabilities - Including an amendment
of FASB Statement No. 115". SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. SFAS 159 will be
effective for the Company on January 1, 2008. Adoption of SFAS 159 is not
expected to have a material impact on the Company's consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations
("SFAS 141(R)"), which replaces SFAS 141, Business Combinations, requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited exceptions. This Statement also
requires the acquirer in a business combination achieved in stages to recognize
the identifiable assets and liabilities, as well as the non-controlling interest
in the acquiree, at the full amounts of their fair values. SFAS 141(R) makes
various other amendments to authoritative literature intended to provide
additional guidance or to confirm the guidance in that literature to that
provided in this Statement. This Statement applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. We expect
the adoption of SFAS 141(R) will have an impact on our accounting for future
business combinations, but the effect is dependent upon the acquisitions that
are made in the future.
- F10 -
In December 2007, the Emerging Issues Task Force ("EITF") of the FASB reached a
consensus on Issue No. 07-1, Accounting for Collaborative Arrangements
("EITF 07-1"). The EITF concluded on the definition of a collaborative
arrangement and that revenues and costs incurred with third parties in
connection with collaborative arrangements would be presented gross or net based
on the criteria in EITF 99-19 and other accounting literature. Based on the
nature of the arrangement, payments to or from collaborators would be evaluated
and its terms, the nature of the entity's business, and whether those payments
are within the scope of other accounting literature would be presented.
Companies are also required to disclose the nature and purpose of collaborative
arrangements along with the accounting policies and the classification and
amounts of significant financial-statement amounts related to the arrangements.
Activities in the arrangement conducted in a separate legal entity should be
accounted for under other accounting literature; however required disclosure
under EITF 07-1 applies to the entire collaborative agreement. This Issue is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years, and is to be
applied retrospectively to all periods presented for all collaborative
arrangements existing as of the effective date. We do not expect Adoption of
EITF 07-1 to have a significant impact on our consolidated financial statements.
In December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements ("SFAS 160"), which amends Accounting Research
Bulletin No. 51, Consolidated Financial Statements, to improve the relevance,
comparability, and transparency of the financial information that a reporting
entity provides in its consolidated financial statements. SFAS 160 establishes
accounting and reporting standards that require the ownership interests in
subsidiaries not held by the parent to be clearly identified, labelled and
presented in the consolidated statement of financial position within equity, but
separate from the parent's equity. This statement also requires the amount of
consolidated net income attributable to the parent and to the non-controlling
interest to be clearly identified and presented on the face of the consolidated
statement of income. Changes in a parent's ownership interest while the parent
retains its controlling financial interest must be accounted for consistently,
and when a subsidiary is deconsolidated, any retained non-controlling equity
investment in the former subsidiary must be initially measured at fair value.
The gain or loss on the deconsolidation of the subsidiary is measured using the
fair value of any non-controlling equity investment.
The Statement also requires entities to provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the non-controlling owners. This Statement applies prospectively to
all entities that prepare consolidated financial statements and applies
prospectively for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. We do not expect adoption of SFAS 160
to have a significant impact on our consolidated financial statements.
In June 2007, the EITF of the FASB reached a consensus on Issue No. 07-3,
Accounting for Nonrefundable Advance Payments for Goods or Services Received for
Use in Future Research and Development Activities ("EITF 07-3"). EITF 07-3
requires that non-refundable advance payments for goods or services that will be
used or rendered for future research and development activities should be
deferred and capitalized. As the related goods are delivered or the services are
performed, or when the goods or services are no longer expected to be provided,
the deferred amounts would be recognized as an expense. This Issue is effective
for financial statements issued for fiscal years beginning after December 15,
2007 and earlier application is not permitted. This consensus is to be applied
prospectively for new contracts entered into on or after the effective date. The
pronouncement is not expected to have a material effect on our consolidated
financial statements.
- F11 -
In March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about
Derivative Instruments and Hedging Activities - An Amendment of FASB Statement
No. 133 (SFAS 133). This statement is intended to improve financial reporting of
derivative instruments and hedging activities by requiring enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations and (c) how derivative instruments and related hedged
items affect an entity's financial position, financial performance and cash
flows. The provisions of SFAS 161 are effective for fiscal years beginning after
November 15, 2008. This statement was effective for us on January 1, 2009. Early
adoption of this provision was prohibited. The adoption of this statement did
not have a material impact on our financial statements.
In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life
of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors to be considered
in developing renewal or extension assumptions used to determine the useful life
of intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets.
Its intent is to improve the consistency between the useful life of an
intangible asset and the period of expected cash flows used to measure its fair
value. This FSP is effective prospectively for intangible assets acquired or
renewed after January 1, 2009. The adoption of FSP 142-3 did not have a material
impact on our financial statements.
m) Investment in Armistice Resources Corp.
The investment in Armistice Resources Corp. consists of 5,000,000 shares of that
Company and was stated at cost at December 31, 2006. The effect of fluctuation
in the value of the Canadian dollar versus the United States dollar was a
reduction of $4,506 reflected in the cost value of our investment in Armistice
on March 31, 2007. On March 31, 2007 shares in that Company had a quoted market
value of $0.61 Canadian per share.
4. Equipment
Equipment of continuing operations at March 31, 2007 consists of the following:
Telephone system $ 11,192
Less accumulated depreciation 4,387
---------
$ 6,805
=========
5. Advances from Related Party
Advances due from related parties for continuing operations are non-interest
bearing and are due on demand. Advances from related parties as of March 31,
2007 are as follows:
Prosper consulting (Retainer for Chan action) $ 15,000
Gold Street Capital (Retainer for SF Group) 17,500
---------
Total Advances from Related Parties: $ 32,500
=========
- F12 -
6. Discontinued Operations
1. Previously on October 27, 2005, the Company entered into a Plan of Merger
and Reorganization (the "501 Plan") with 501 Canada Inc. ("501"), an Ontario
corporation, to acquire 100% of 501. 501 reportedly owned and operated two
revenue-producing commercial real estate properties in Toronto, Canada.
Pursuant to the 501 Plan, the Company issued a total of 6,240,000 shares of
common stock with an effective date of November 17, 2005 to the former
shareholders of the 501. The 501 Plan provided for the survival of
Representations and Warrantees for a period of 12 months from the effective
date of the Plan.
On October 1, 2007 the parties completed a mutual termination agreement
effective as of September 30, 2006 whereby the Company would dispose of 501
to Chan in exchange for return and cancellation of the 6,240,000 shares of
the Company issued to Chan. Additional details of the events leading up to
the discontinuance of our wholly owned subsidiary Empire Global Acquisition
Corp. (EGAC) are included in our form 10-K filed on June 29, 2009 for the
year ended December 31, 2006.
2. On November 4, 2005, the Company entered into a Plan of Merger and
Reorganization with Excel Empire Limited ("Excel") (the "Excel Plan"), a
British Virgin Islands corporation, to acquire a 100% interest in Excel.
Pursuant to the Excel Plan, Excel agreed to merge into the Company. On
completion, the shareholders of Excel would receive a total of 36,400,000
restricted shares of the Company's common stock in exchange for 100% of the
issued and outstanding stock of Excel. The Company issued 36,400,000 shares
as required by the terms and retained the certificates in escrow contingent
upon completion of the Excel Agreement. On August 1, 2006 the Company and
Excel agreed to amend the agreement to a Share Purchase Agreement rather
than a Merger Agreement since the result of the agreement was to ensure the
survival of Excel as a wholly owned subsidiary of the Company.
As a result of delays in completing the Excel Plan, the Company conducted an
onsite evaluation of the Sunwin project and determined that it was not in
the best interests of the stockholders' to complete the acquisition of Excel
therefore, on May 5, 2008 our board members resolved to cancel the
36,400,000 shares issued to Xu Bing and assigns and terminated the Excel
Plan as amended for the acquisition of Excel Empire Limited. Additional
details of the events leading up to the cancellation of the Excel Plan are
included in our form 10-K filed on June 29, 2009 for the year ended December
31, 2006.
As described above, on September 30, 2006 the Company discontinued the
operations of EGAC. The transaction was determined by a mutual termination
agreement between the Company and the former shareholders of 501 whereby the
assets and liabilities of EGAC would be returned to the former shareholders of
501 in exchange for the 6,240,000 shares of the Company issued to the
shareholders of 501 at acquisition of 501 on October 27, 2005.
As a result of the discontinuance of the EGAC Operations, the Company assumed
liabilities associated with development of the EGAC business including legal,
accounting and consulting fees and no longer has revenue producing real estate
or the associated mortgages, bank debt and financing costs as well as fees and
charges. The net losses in 2006 were attributed primarily to costs incurred for
auditing as well as legal fees associated with defending claims made against the
company and its directors by the principals of 501 Canada Inc and business
development fees of $468,699 paid to a related party. Accordingly, net loss of
the EGAC component is reported as a discontinued operation on the income
statement and net income has been reclassified and segregated as loss from
discontinued operations.
- F13 -
In addition, although the company abandoned its intention to complete the Excel
Empire Limited acquisition subsequent to the period covered by this report,
business development charges, legal and accounting fees were incurred during
this period and recorded as expenses. The following table details selected
income statement information related to our discontinued operations that have
been segregated as appropriate in the consolidated balance sheet for the period
ended March 31, 2006.
Three months ended March 31,
2006
---------
Revenue of discontinued operations $ 210,320
Expenses of discontinued operations 639,758
---------
Net loss from discontinued operations $ 429,438
=========
Cash flows from discontinued operations comprise of the following:
Three months ended March 31,
2006
---------
Cash Flow from Discontinued Operations 326,431
As a result of the discontinued operations the Company recorded supplemental
noncash transactions from discontinued operations of $225,544 for the period
ended March 31, 2006.
Noncash items of discontinued operations consist of the following changes:
Three months ended March 31,
2006
-----------
Short term investment $ 325
Equipment $ 3,936
Revenue producing real estate $ 52,212
Deferred financing charge $ 19,955
Accounts payable and accrued liabilities $ 81,883
Advances from a related party $ 23,239
Bank Loan payable $ 43,994
-----------
Noncash investing and financing items of discontinued operations $ 225,544
===========
7. Retirement of Treasury Stock
At December 31, 2006, in connection with the discontinued operations of EGAC,
the Company retired 6,240,000 shares issued for the acquisition of 501 Canada
Inc. by using the retirement method to dispose of the shares.
8. Notes Receivable
On June 17, 2005, the Company reported that it entered into an agreement of
Purchase and Sale between the company formerly known as Pender International
Inc. and Blazing Holdings Inc. ("Blazing") an Ontario Corporation controlled
by the father of our former Chairman, a former shareholder,
(the "IMM Agreement") to dispose of IMM to Blazing in exchange for a $3,000,000
Promissory Note.
The Company is required to conduct an analysis of the collectibility of the Note
that may result in our having to recognize a loss under SFAS 5, "Accounting for
Contingencies". Despite several notices to Blazing demanding disclosure
information, Blazing ignored our requests therefore, abandoned communication
with the Company and accordingly, disappeared. The Company considers death or
disappearance of the debtors as a material factor related to the collectibility
of the note. Abandonment was deemed to be default by dishonor of its obligations
under the IMM Agreement.
The Company has therefore terminated the IMM Agreement, disposed of the
Promissory Note and recovered the shares of IMM Investments Inc. (collateral
security of the Note). Since the Company received no consideration at the
closing of the IMM Agreement and the Promissory Note was secured by the shares
of IMM, the Company took back ownership of IMM Investments Inc. and restored the
values on the Company's books and records. The Company filed Articles of Revival
for IMM Investments Inc. with the Province of Ontario and the corresponding
annual tax returns for IMM with both the Province of Ontario and the Government
of Canada. Therefore, IMM Investments Inc. became a wholly owned subsidiary of
the Company.
- F14 -
The Note has been cancelled; therefore the principal and accrued interest no
longer are reflected on our Consolidated Financial Statements. The Note was
impaired as follows:
Determination of Impairment:
Estimated amount collectible None
Impairment recorded before recovery of collateral $ 3,045,000
-----------
Recovery of collateral:
Investment in Armistice at cost: $ 839,207
Incorporation cost 1,469
-----------
Major assets of recovered: 840,676
===========
Net loss on disposal of Note and recovery of collateral $2,204,324
===========
9. Recovery of IMM Investments Inc.
As described in Note 8, due to the rescission of the agreement between the
Company (formerly known as "Pender") and Blazing Holdings Inc., the Company has
recovered its investment in IMM Investments Inc. ("IMM"). On July 9, 2004 the
Company acquired 100% of IMM, thus making IMM a wholly owned subsidiary of the
Company. The Company acquired IMM from KJ Holding Inc. ("KJ"), an Ontario
Corporation, by issuing KJ 210,000 (post share splits) restricted shares of
Pender in exchange for 100% of the issued and outstanding common shares of
IMM. The Company accounted for this acquisition using the purchase method of
accounting.
10. Restatement of Previously Issued Consolidated Financial Statements
As previously announced on form 10-QSB for the period ended September 30, 2006,
the Company has restated its previously issued consolidated financial statements
for the periods ended December 31, 2005, March 31, 2006 and June 30, 2006, to
reflect the effect of accruals related to services provided by contractors.
Furthermore, the restatements adopted changes pursuant to the Company's
responses to the Comment Letter received from the SEC on June 27, 2006 as
previously reported on the form 10QSB for the period ended June 30, 2006.
Restatements to the consolidated financial statements for the year ended
December 31, 2005 on form 10KSB filed April 18, 2006, are included in our form
10K for the year ended December 31, 2006 filed on June 29, 2009 while
restatements for the three and six month periods ended March 31, 2006 and
June 30, 2006 filed on form 10QSB on May 19, 2006 and August 22, 2006
respectively in respect of the above adjustments, and specifically comprise the
following:
Restatement of form 10QSB filed May 19, 2006 and form 10QSB filled August 22,
2006.
On October 12, 2005 the Company authorized the issuance of 814,100 restricted
shares of common stock of the Company to investors in exchange for the
cancellation of debt of $472,178 owed by the Company. On October 18, 2005 the
Company filed a form 8-K announcing that the shares were issued. Although the
Company announced the issuance properly and reported the form 8-K filing on the
form 10KSB report for the period ended December 31, 2005, these shares were not
reflected in the total issued and outstanding shares.
- F15 -
i) The number of issued and outstanding shares for the periods ended March 31,
2006 and June 30, 2006 will increase from 6,985,867 as originally stated to
7,799,967 to reflect the shares added to the total.
ii) For the period ended March 31, 2006 the stockholders' equity will change
from $1,607,051 as originally stated to $1,190,754 and the basic and fully
diluted weighted average number of shares outstanding during the period
will be adjusted from 6,985,867 as originally stated to 7.799,967.
iii) For the period ended June 30, 2006 the stockholders' equity will change
from $1,533,284 as originally stated to $610,690 and the basic and fully
diluted weighted average number of shares outstanding will be adjusted from
6,985,867 as originally stated to 7,799,697.
In addition, over the period from January 1, 2006 to date, the Company engaged
various contractors to carry out duties such as, but not limited to, accounting,
advertising and promotion, project assessment, public and investor relations and
administration and regulatory filing. Although the contractors fulfilled their
obligations to the Company over the relevant periods, the remuneration factors
and basis at that time were non determinable.
At a meeting of the directors held on June 30, 2006, the board of directors
adopted and approved a standard contract format acceptable to the Company, and
entered into informal agreements with the contractors. The contracts provide for
remuneration to be paid in cash or by stock-based compensation in lieu of cash
or a combination thereof on a quarterly basis. At a meeting of the directors
held on August 21, 2006 the board of directors authorized the stock-based
compensation based on the billings provided by each independent contractor
pursuant to their respective contracts received in the current quarter.
The effect of these errors on the interim consolidated financial statements for
the periods ended March 31, 2006 and June 30, 2006 are as follows:
i) The consolidated interim balance sheet will be adjusted to reflect the
outstanding liability shares and shareholder's deficit as a result of the
contractor services. The accrued liability at March 31, 2006 and June 30,
2006 will change from $0 to $416,297 and from $0 to $922,595, respectively.
The shareholders' deficit will be adjusted by the change in the net income
as described below.
ii) The basic and diluted loss per share on the consolidated interim statement
of operations and comprehensive loss at March 31, 2006 and June 30, 2006
will change from $0.02 to $0.07 and from $0.01 to $0.08, respectively.
iii) The consolidated interim statement of operations and comprehensive loss
will be corrected to reflect the added expenses due to the contractor
services. The net loss for the three month periods ended March 31, 2006 and
June 30, 2006 will change from $94,612 to $510,909 and from $51,426 to
$557,723, respectively.
iv) The consolidated interim statement of cash flows will be corrected to
reflect the results of the consolidated statement of operations and
comprehensive loss.
Retroactive treatment has been given to reclassifications in these consolidated
financial statements.
- F16 -
11. Share based payments and Shareholder Equity
On July 9, 2004, the Company issued 3,000,000 shares for the acquisition of IMM
Investments Inc. The shares have been retroactively presented to reflect the
three subsequent stock splits.
On July 26, 2004, the company authorized a 7 for 1 forward split of the
Company's issued and outstanding common shares. The forward split has been
retroactively presented in these financial statements.
On June 27, 2005, the Company issued 2,088,720 shares in cancellation of debt
amounting to $208,872. The shares have been retroactively presented to reflect
the two subsequent stock splits.
On June 30, 2005, the Company authorized a 10 for 1 reverse stock split of the
company's issued and outstanding common shares. The reverse stock split has been
retroactively presented in these financial statements.
On July 26, 2005, the Company issued 1,000,000 shares to third parties in
exchange for consulting services. The shares have been retroactively presented
to reflect the subsequent stock split.
On July 27, 2005, the Company issued 500,000 shares in cancellation of debt
amounting to $150,000. The shares have been retroactively presented to reflect
the subsequent stock split.
On September 30, 2005, the Company authorized a 10 for 1 reverse stock split of
the Company's issued and outstanding common shares. The reverse stock split has
been retroactively presented in these financial statements.
On October 12, 2005, the Company issued 814,100 shares in cancellation of debt
amounting to $472,178.
On November 17, 2005 the Company issued 6,240,000 restricted common shares for
the completion of the Plan of Merger and Reorganization Agreement with 501
Canada Inc. As described in Note 1, on September 30, 2006 the Company
discontinued the Operations of EGAC (formerly 501 Canada Inc.) and cancelled
the 6,240,000 shares.
On November 4, 2005, the Company issued 36,400,000 restricted common shares
contingent upon the completion of the Plan of Merger and Reorganization with
Excel Empire Limited ("Excel") (the "Excel Plan"). As described elsewhere in
this report, the Excel Plan was terminated and the 36,400,000 shares where
subsequently returned and cancelled by the Company.
As previously reported on form 10-QSB for the interim period ended September 30,
2006, the Company provides payment for professional fees, administration,
business development and public relations expenses in accordance to SFAS No. 123
(R) "Share Based Payment" to certain contractors under share based payment
arrangements based on 75% of the average market bid price on the shares of
common stock of the Company quoted on the Over The Counter Pink Sheets quotation
system.
On August 21, 2006, a total of 7,236,300 one year restrictive common shares
under Rule 144 of the Securities Exchange Act of 1934 were issued to contractors
with a total value of $922,595.
On November 11, 2006, a total of 1,000,000 one year restrictive common shares
under Rule 144 of the Securities Exchange Act of 1934 were issued to a third
party with a total value of $127,975. The payment was used to pay $30,000 to our
former auditor as well as to pre-pay office expenses.
Refer to Note 13 - Subsequent Events for additional details regarding capital
stock issued subsequent to these Consolidated Financial Statements.
- F17 -
12. Commitments and Contingencies
The Company is subject to claims arising in the ordinary course of business. The
Company and Management believe that, after consultation with counsel, the
allegations against the Company included in the claims described below are
subject to substantial legal defenses, and the Company is vigorously defending
each of the allegations. At this time, it is not possible to estimate the
ultimate loss or gain, if any, related to these claims, nor if any such loss
will have a material adverse effect on the Company's results of operations or
financial position.
On November 1, 2005, the Company was served with a Statement of Claim filed in
the Ontario Superior Court of Justice by Advanced Refractive Technologies Inc.
("Advanced") claiming $6,000,000 in aggregate damages plus unspecified amounts
against 16 co-respondents including the Company for unknown loses claimed by
Advanced in its dealings with an unknown and unrelated entity or person (the
"unrelated entity"). Advanced alleges that this unrelated entity, in a private
transaction with Advanced, may have promised to exchange shares of the Company
that the unrelated entity had claimed to have owned. The Company has never been
a party to any dealings with Advanced and prior to receiving notice from
Advanced had never heard of Advanced. The Company denies any wrongdoing and is
vigorously defending this claim. Because of the uncertainties inherent in
litigation, the company cannot predict whether the outcome which remains
unresolved will have a material adverse affect. The Company is unrepresented by
legal counsel in this matter.
On December 10, 2004, the Ontario Securities Commission ("OSC") served upon the
former President and C.E.O. of the Company (the "former executive"), and
companies controlled by the former executive, as well as a shareholder of the
Company related to the father of our former Chairman Kalson Jang and an
unrelated party collectively the "respondents" an order to cease trading in
shares of the Company formerly known as Pender International, Inc. ("Pender").
The allegations stated among other things that Armistice was a worthless,
flooded mine and that there was no basis for the increase in the share price of
the Company. On September 26, 2006 the Royal Canadian Mounted Police ("RCMP")
charged our former executive. Our former executive has denied the allegations
and has filed a consent to committal to trial as described in
Note 13 - Subsequent Events. Our former executive and the Company have been
complying with orders imposed by the OSC and cooperating with informal inquiries
made by the United States Securities and Exchange Commission ("SEC").
- F18 -
13. Subsequent Events
1. On November 5, 2007, at a properly convened board meeting held at our head
office in Toronto, our board members authorized the issuance of 3,378,900
restricted shares with a total value of $405,468 to independent contractors
in exchange for cancellation of debt owed respectively to each contractor for
services rendered to the Company for the period covering July 2006 through
September 2007. The shares were priced at $0.1275 per share or 85% of the
average closing bid price of the common shares of the Empire Global Corp.
over a period of 60 days preceding the final day of the billing period.
Of the 3,378,900 shares issued on November 5, 2007 a total of 2,061,138
shares were allocated to extinguish accounts payable in the amount of
$247,337 for the period ended December 31, 2006.
2. On September 9, 2005, the Company was served with a Statement of Claim filed
in the Ontario Superior Court of Justice by Research Capital Corporation
("Research") a broker/dealer in Ontario claiming $100,000 in aggregate
damages plus interest and costs against 4 co-respondents including the
Company and a former consultant engaged by the Company. Our director of
operations, Michael Ciavarella, who is not a solicitor, was granted leave by
the court to represent the Company. On November 26, 2007, the Company and
Research entered into a Settlement Agreement to resolve the claim.
Accordingly, the matter was dismissed by Madame Justice Bennett of the
Ontario Superior Court of Justice and will no longer be reflected on our
financial statements.
3. Between February and March 2008 a preliminary inquiry was held in the Ontario
Court of Justice with respect to the previously described matter involving
the Royal Canadian Mounted Police, the Ontario Securities Commission (jointly
IMET "Integrated Market Enforcement Team") and our former executive. Our
former executive has consented committal to trial and is vigorously denying
the allegations and challenging the charges. The trial date is set down to
commence September 8, 2009. On June 25, 2008 the Securities and Exchange
Commission ("SEC") issued a notice to Michael Ciavarella, our former officer
and director. The notice advised that the (SEC) investigation has been
completed as to Mr. Ciavarella, against whom they do not intend to recommend
enforcement by the commission.
4. On May 5, 2008 at a properly convened meeting of the Board of directors, the
board resolved to issue 3,000,000 restricted shares of common stock to a
private investor for a $200,000 private placement. The funds are to be used
to bring the outstanding financial filings into good standing. Also, on the
same date the board resolved to pay fees of $125,000 due to independent
contractors for work involved in the rescission of the Blazing Holding Inc.
agreement and recovery of IMM Investments Inc. and the preparation and filing
of IMM tax returns in Canada, as well as paralegal and litigation work
leading to the dismissal of legal actions against the company launched in
Delaware and Ontario. The Company issued 2,500,000 restricted shares of
common stock of the Company in lieu of cash.
- F19 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain information included in this form 10-Q and other materials filed or to
be filed by us with the Securities and Exchange Commission (as well as
information included in oral or written statements made by us or on our behalf),
may contain forward-looking statements about our current and expected
performance trends, growth plans, business goals and other matters. These
statements may be contained in our filings with the Securities and Exchange
Commission, in our press releases, in other written communications, and in oral
statements made by or with the approval of one of our authorized officers. Words
or phrases such as "believe," "plan," "will likely result," "expect," "intend,"
"will continue," "is anticipated," "estimate," "project," "may," "could,"
"would," "should," and similar expressions are intended to identify
forward-looking statements. These statements, and any other statements that are
not historical facts, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, as codified in Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, as amended from time to time (the "Act").
In connection with the "safe harbor" provisions of the Act, we have identified
and filed important factors, risks and uncertainties that could cause our actual
results to differ materially from those projected in forward-looking statements
made by us, or on our behalf (see Part I, Item 1, "Risk Factors" included in our
form 10-KSB for the fiscal year ended December 31, 2006). These cautionary
statements are to be used as a reference in connection with any forward-looking
statements. The factors, risks and uncertainties identified in these cautionary
statements are in addition to those contained in any other cautionary
statements, written or oral, which may be made or otherwise addressed in
connection with a forward-looking statement or contained in any of our
subsequent filings with the Securities and Exchange Commission. Because of these
factors, risks and uncertainties, we caution against placing undue reliance on
forward-looking statements. Although we believe that the assumptions underlying
forward-looking statements are reasonable, any of the assumptions could be
incorrect, and there can be no assurance that forward-looking statements will
prove to be accurate. Forward-looking statements speak only as of the date on
which they are made. We do not undertake any obligation to modify or revise any
forward-looking statement to take into account or otherwise reflect subsequent
events or circumstances arising after the date that the forward-looking
statement was made.
General
This discussion and analysis should be read in conjunction with our interim
unaudited consolidated financial statements and related notes on form 10Q and
the audited consolidated financial statements and related notes thereto included
in our Annual Report on form 10-K for the fiscal year ended December 31, 2006.
The inclusion of supplementary analytical and related information herein may
require us to make appropriate estimates and assumptions to enable us to fairly
present, in all material respects, our analysis of trends and expectations with
respect to our results of operations and financial position taken as a whole.
Empire Global Corp. (Empire) and its subsidiary IMM Investments Inc. (IMM) mean
"we", "us" or "our" and will be referred to as such throughout the balance of
this document.
Our Objectives and Areas of Focus
Empire was organized under the laws of the State of Delaware on August 28, 1998.
The Company went through various name changes prior to September 2005 when the
name was changed to Empire Global Corp. We currently intend to purchase, merge
with or acquire any business or assets which management believes has potential
for being profitable.
During the three months ended March 31, 2007, we had no income.
Due to limited operations, we are presently seeking new business opportunities.
- 22 -
Challenges and Risks
We have accumulated a deficit of approximately $3,616,000 to March 31, 2007 and
will require additional debt or equity financing to continue operations and to
seek out new business opportunities. We plan to mitigate our losses in future
years through maintaining minimal operational costs and locating a viable
business.
There is no assurance that we will be able to obtain additional financing, be
successful in seeking new business opportunities, or that we will be able to
reduce operating expenses. Our consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
Critical Accounting Policies
Our significant accounting policies and recent accounting pronouncements
described in Note 1 to our consolidated financial statements are included in the
annual report for the year ended December 31, 2006 and a summary of critical
accounting policies and recent accounting pronouncements is included in Note 1
of this form 10-Q.
We prepare our financial statements in conformity with U.S. GAAP, which requires
our management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities on the date of the financial statements and the reported amounts of
revenues and expenses during the financial reporting period. Since the use of
estimates is an integral component of the financial reporting process, actual
results could differ from those estimates. Some of our accounting policies
require higher degrees of judgment than others in their application and as a
result, such estimates may significantly impact our consolidated financial
results. The precision of these estimates and the likelihood of future changes
depend on a number of underlying variables and a range of possible outcomes. We
have applied our critical accounting policies and estimation methods
consistently. A comprehension of our critical accounting policies is necessary
to understand our financial results as their application places the most
significant demands on our management's judgment.
Overall Results of Operations
As a result of our discontinued EGAC operations, we had significant changes in
our overall results. During the three months ended March 31, 2007, we had a net
loss of $88,057 versus $81,472 continuing net loss during the same period in
2006. The reduction in continuing net loss was a result of reduced expenses
attributed to the limited operations of the Company. As of March 31, 2007, we
have no cash and total current assets of $101,433 which is primarily prepaid
office expenses. When these current assets are compared to our current
obligations of $444,849 we are left with a working capital deficit of $343,416.
We have no cash as of the date of this filing and therefore are not able to
satisfy our working capital needs for the next year. We anticipate funding our
working capital needs for the next twelve months through private advances and
loans from our management and key shareholders, or if available, equity capital
markets. Although the foregoing actions are expected to cover our anticipated
cash needs for working capital and capital expenditures for at least the next
twelve months, no assurance can be given that we will be able obtain financing
or raise sufficient cash to meet our cash requirements.
Over the next twelve months we plan to seek out a viable new business
opportunity. If we enter into a new business opportunity, will need to raise
additional working capital and we may be required to hire additional employees,
independent contractors as well as purchase or lease additional equipment. We
plan to raise this additional working capital through the private placement of
shares, private advances and loans.
We anticipate continuing to rely on equity sales of common stock to fund our
operations and to seek out or enter into new business opportunities. The
issuance of any additional shares will result in dilution to our existing
shareholders.
- 23 -
Related-Party Transactions
Included in the $444,849 of current liabilities at March 31, 2007 is $32,500 in
advances from related parties as well as $412,349 in accounts payable and
accrued liabilities which includes $101,207 due to a company controlled by our
Chief Executive Officer. None of the amounts due to related parties bear
interest, have any fixed terms of repayment or are secured.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
Revenues
We had no revenue during the three months ended March 31, 2007 and the three
months ended March 31, 2006 from our continuing operations.
Operating Expenses
Our operating expenses from continuing operations increased by $6,585 or 8%,
from $81,472 for three months ended March 31, 2006 to $88,057 for the three
months ended March 31, 2007. The slight increase was due to administrative
expenses incurred from the discontinuance of Empire Global Acquisition Corp.
We expect our operating costs to be approximately $182,000 over the next year,
unless we locate a new viable business.
Liquidity and Capital Resources
The notes to our unaudited consolidated financial statements as of March 31,
2007, contain footnote disclosure regarding our uncertain ability to continue as
a going concern. We have not generated sufficient revenues to cover our
expenses, and we have accumulated a deficit of $3,616,131. As of March 31, 2007,
we had $444,849 in current liabilities, when these liabilities are compared with
our current assets of $101,433 we are left with a working capital deficit of
$343,416 and as such we cannot assure that we will succeed in locating a viable
business opportunity or that we will be able to achieve a profitable level of
operations sufficient to meet our ongoing cash needs.
Below is a discussion of our sources and uses of funds for the three months
ended March 31, 2007.
Net Cash Used In Operating Activities
We had no cash used in operating activities during the three months ended March
31, 2007.
Net Cash Provided By Financing Activities
We did not have any financing activities during the three months ended March 31,
2007.
Net Cash Used In Investing Activities
We did not have any investing activities during the three months ended March 31,
2007.
- 24 -
Contingencies and Commitments
We had no contingencies or long-term commitments at March 31, 2007.
Contractual Obligations
None.
Inflation
We do not believe that inflation will have a material impact on our future
operations.
Off-Balance-Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenue or expenses, results of operations, liquidity, capital
expenditures or capital resources that we expect to be material to investors. We
do not have any non-consolidated, special-purpose entities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Empire is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and is not required to provide the information required under this item.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange
Act"), the Company carried out an evaluation, with the participation of the
Company's management, Director of Operations including the Company's Chief
Executive Officer ("CEO") and Chief Financial Officer (the Company's principal
financial officer), of the effectiveness of the Company's disclosure controls
and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of
the end of the period covered by this report. Based upon that evaluation and the
identification of material weaknesses in our internal control over financial
reporting, the Company's CEO and CFO concluded that the Company's disclosure
controls and procedures are not effective to ensure that information required to
be disclosed by the Company in the reports that the Company files or submits
under the Exchange Act, is recorded, processed, summarized and reported, within
the time periods specified in the SEC's rules and forms.
Changes in Internal Controls
During the quarter of the fiscal year covered by this report, there were no
changes in Empire's internal controls or, to Empire's knowledge, in other
factors that have materially affected, or are reasonably likely to materially
affect, these controls and procedures subsequent to the Evaluation Date.
Management's Report on Internal Controls over Financial Reporting
Empire is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and is not required to provide the information required under this item.
- 25 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to claims arising in the ordinary course of business. The
Company and Management believe that, after consultation with counsel, the
allegations against the Company included in the claims described below may be
subject to substantial legal defences, and the Company is vigorously defending
each of the allegations. At this time, it is not possible to estimate the
ultimate loss or gain, if any, related to these claims, nor if any such loss
will have a material adverse effect on the Company's results of operations or
financial position.
Pending Legal Matters
Directly affecting the Company
On November 1, 2005, the Company was served with a Statement of Claim filed in
the Ontario Superior Court of Justice by Advanced Refractive Technologies Inc.
("Advanced") claiming $6,000,000 in aggregate damages plus unspecified amounts
against 16 co-respondents including the Company for unknown loses claimed by
Advanced in its dealings with an unknown and unrelated entity or person (the
"unrelated entity"). Advanced alleges that this unrelated entity, in a private
transaction with Advanced, may have promised to exchange shares of the Company
that the unrelated entity had claimed to have owned. The Company has never been
a party to any dealings with Advanced or the unrelated party and prior to
receiving notice from Advanced had never heard of Advanced. The Company denies
any wrongdoing and is vigorously defending this claim. Although the claim
remains a live issue, Advanced has made no attempt to further its claim. Because
of the uncertainties inherent in litigation, the company cannot predict whether
the outcome, which remains unresolved, will have a material adverse affect.
Indirectly affecting the Company
On December 10, 2004, the Ontario Securities Commission ("OSC") served upon the
former President and C.E.O. of the Company (the "former executive"), and
companies controlled by the former executive, as well as a shareholder of the
Company related to the father of our former Chairman Kalson Jang and an
unrelated party collectively the "respondents" an order to cease trading in
shares of the Company formerly known as Pender International, Inc. ("Pender")
and subsequently issued a Statement of Allegations against the respondents on
December 21, 2004. The Company is aware of the proceedings; however, is not a
respondent to these proceedings. The order was purportedly issued to allow the
OSC an opportunity to investigate trading in shares of Pender over the period
between October 27, 2004 and November 19, 2004. The allegations stated among
other things that Armistice was a worthless, flooded mine and that there was no
basis for the increase in the share price of the Company.
On September 26, 2006 the Royal Canadian Mounted Police ("RCMP") charged our
former executive. Our former executive is challenging the charges and has filed
consent to committal to trial. The date for trial has been set down to begin on
September 8, 2009.
Our former executive and the Company have been complying with orders imposed by
the OSC and cooperating with informal inquiries made by the United States
Securities and Exchange Commission ("SEC").
- 26 -
Legal Matters Settled or Dismissed
1. On November 26, 2007, the Company and Research Capital Corporation
("Research") a broker/dealer in Ontario entered into a Settlement Agreement
pursuant to a claim initiated by Research on September 9, 2005. Accordingly,
the matter was dismissed by Madame Justice Bennett of the Ontario Superior
Court of Justice.
2. The complaint filed on September 6, 2006 in the Court of Chancery in the
State of Delaware against the Company, and its management Ken Chu, Vic
Dominelli and Xu Bing was abandoned by Hoi Ming Chan and his wife Florence
Tsun (the shareholders of 501 Canada Inc.). Accordingly the claim was
dismissed and subsequent Stipulated Order Maintaining Status Quo was vacated
by Chancellor Strine of the Court of Chancery.
Item 1A. Risk Factors.
Empire is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and is not required to provide the information required under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders through the solicitation
of proxies or otherwise, during the quarter of the fiscal year covered by this
report.
Item 5. Other Information.
During the quarter of the fiscal year covered by this report, Empire reported
all information that was required to be disclosed in a report on form 8-K.
Item 6. Exhibits
(a) Index to and Description of Exhibits
All Exhibits required to be filed with the form 10-Q are included in this
quarterly filing or incorporated by reference to Empire's previous filings with
the SEC, which can be found in their entirety at the SEC website at www.sec.gov
under SEC File Number 000-50045.
31 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- 27 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EMPIRE GLOBAL CORP.
By: /s/ Vic Dominelli Date: October 23, 2009.
-------------------------
Vic Dominelli
Chairman of the Board and
Principal Financial Office
