Attached files
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| EX-31.1 - EXHIBIT 31.1 SARBANES OXLEY 302 - FBC Holding, Inc. | ex31_1sarbanesoxley.htm |
| EX-32.2 - EXHIBIT 32.1 SARBANES OXLEY 906 - FBC Holding, Inc. | ex32_1sarbanesoxley906.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/ A-2
þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2010
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission File Number: 000-52854
FBC HOLDING INC.
(Name of Small Business Issuer in its charter)
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Nevada
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71-1026782
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(state or other jurisdiction of incorporation or organization)
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(I.R.S. Employer I.D. No.)
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66 Piscataqua Road Dover, NH 03820
(Address of principal executive offices)
(603) 540-0828
Issuer’s telephone number
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ
APPLICABLE ONLY TO CORPORATE ISSUERS
As of January 17, 2011 the registrant had 93,579,262 shares of common stock outstanding, par value $0.001.
AMENDMENT NO. 2 EXPLANATION
Amendment number 1 to the Company’s Form 10-Q for the quarter ended October 31, 2010 was filed with the Securities and Exchange Commission on January 20, 2011 without this explanatory note. This explanatory note details the changes made to the original Form 10-K filed with the Securities and Exchange Commission on December 17, 2010. This amendment to the Company’s Form 10-Q has been significantly changed from the original filing specifically in the following sections:
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1.
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Part I
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a.
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Item 1.Notes to Consolidated Financial Statements;
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b.
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Item 4. Controls and Procedures;
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2.
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Part II Other Information
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a.
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Item 2. Unregistered Sales of equity Securities and Use of Proceeds;
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b.
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Item 6. Exhibits; and
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FBC HOLDING INC.
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PART I - FINANCIAL INFORMATION
Safe Harbor Statement
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.
Item 1. Financial Statements
The unaudited interim financial statements of FBC Holding Inc. (the “Company”, “FBC Holding”, “we”, “our”, “us”) follow. All currency references in this report are in U.S. dollars unless otherwise noted.
The accompanying Financial Statements of FBC Holding Inc., Inc. should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended July 31, 2010. Significant accounting policies disclosed therein have not changed except as noted below.
FBC Holding Inc.
(A Development Stage Company)
Unaudited
(Express in U.S. Dollars)
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FBC Holding Inc.
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(A Development Stage Company)
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CONSOLIDATED BALANCE SHEETS
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October 31, 2010
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July 31 ,2010
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ASSETS
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Current Assets
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Cash
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$ | - | $ | - | ||||
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Total Current Assets
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- | - | ||||||
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Total Assets
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$ | - | $ | - | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current Liabilities
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Bank Over Draft
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$ | 1,263 | $ | 1,263 | ||||
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Accounts Payable
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5,085 | 5,085 | ||||||
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Accrued Interest
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335,310 | 332,006 | ||||||
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Equity Obligations - current
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1,249,500 | 1,249,500 | ||||||
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Current Portion of Notes Payable
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1,883,800 | 1,897,500 | ||||||
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Total Current Liabilities
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3,474,958 | 3,485,354 | ||||||
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Total Liabilities
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3,474,958 | 3,485,354 | ||||||
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Stockholders Equity
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Common Stock .001 Par Value;
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150,000,000 shares authorized;
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74,010,262 (Oct 2010) and 22,810,262 (July 2010) shares
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issued and outstanding
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74,010 | 22,810 | ||||||
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Preferred Stock .001 Par Value
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5,000,000 shares authorized
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0 issued and outstanding
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- | - | ||||||
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Additional paid in capital
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15,492,013 | 10,424,756 | ||||||
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Defitcit accumlated during the development stage
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(19,040,981 | ) | (13,932,920 | ) | ||||
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Total Stockholders' Equity
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(3,474,958 | ) | (3,485,354 | ) | ||||
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Total Liabilities and Stockholders' Equity
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$ | - | $ | - | ||||
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See accompanying notes to the consolidated financial statements.
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FBC HOLDING Inc
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(A Development Stage Company)
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CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months
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Three Months
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May 31, 2006
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Ended
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Ended
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(Inception) through
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October 31, 2010
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October 31, 2009
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October 31, 2010
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Revenue
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$ | - | $ | - | $ | - | ||||||
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Expenses
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General Selling and Adminstrative
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- | 293,952 | 1,565,364 | |||||||||
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Depreciation
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- | 1,062 | 1,889 | |||||||||
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Warrant Expense
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- | - | 861,694 | |||||||||
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Loss On Conversion
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1,356,000 | - | 1,356,000 | |||||||||
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Bank Charges
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- | 596 | 2,094 | |||||||||
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Land Claim Fees
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- | 63,875 | 597,957 | |||||||||
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Non Cash Compensation
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2,500,000 | 15,000 | 10,309,303 | |||||||||
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Amortization of Deferred Finance Charges
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- | 50,000 | 141,861 | |||||||||
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Impairment of Goodwill
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1,250,000 | 720,000 | 2,236,667 | |||||||||
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Other Expenses
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- | - | 187 | |||||||||
| 5,106,000 | 1,144,485 | 17,073,016 | ||||||||||
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Gain(Loss) on Operations
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(5,106,000 | ) | (1,144,485 | ) | (17,073,016 | ) | ||||||
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Other Income (expense)
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Amortization of Debt Discount
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- | (961,167 | ) | (1,648,198 | ) | |||||||
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Interest Expense
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(3,304 | ) | (243,096 | ) | (335,340 | ) | ||||||
| (3,304 | ) | (1,204,263 | ) | (1,983,538 | ) | |||||||
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Net Income (Loss) before provision for income tax
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(5,109,304 | ) | (2,348,748 | ) | (19,056,554 | ) | ||||||
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Provision for income tax
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- | - | - | |||||||||
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Net Income(Loss) from Continuing Operations
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(5,109,304 | ) | (2,348,748 | ) | (19,056,554 | ) | ||||||
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Discontinued Operations: Gain (Loss) from
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discontinued operations (including gain on disposal
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in 2007 of $28,553) - net of tax
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- | - | 15,593 | |||||||||
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Net Income (Loss)
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$ | (5,109,304 | ) | $ | (2,348,748 | ) | $ | (19,040,961 | ) | |||
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Net Income(Loss) per share
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Basic and Fully Diluted, From:
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Continuing operations
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$ | (0.10 | ) | $ | (9.11 | ) | ||||||
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Discontinuted operations
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- | - | ||||||||||
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Combined
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$ | (0.10 | ) | $ | (9.11 | ) | ||||||
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Weighted Average Number of Common Shares
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53,371,128 | 257,728 | ||||||||||
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See accompanying notes to the consolidated financial statements.
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FBC Holding Inc.
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(A Development Stage Company)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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Three Months
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Three Months
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May 31, 2006
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Ended
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Ended
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Inception through
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October 31, 2010
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October 31, 2009
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October 31, 2010
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Cash flow from operating Activity:
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Operating activity from continuing operations
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Net Loss
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$ | (5,109,304 | ) | $ | (2,348,848 | ) | $ | (19,040,981 | ) | |||
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Less: (Income) loss from discontinued
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(15,657 | ) | ||||||||||
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Operations
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- | - | - | |||||||||
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Net loss from continuing operations
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(5,109,304 | ) | (2,348,848 | ) | (19,056,638 | ) | ||||||
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Adustments:
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Stock issued for services
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3,856,000 | 15,100 | 12,478,427 | |||||||||
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Impairment of goodwill
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1,250,000 | 720,000 | 1,970,000 | |||||||||
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Amortization - debt discount
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- | 961,167 | 961,167 | |||||||||
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Depreciation
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- | 1,062 | 1,062 | |||||||||
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Deferred Financing Fees
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- | 50,000 | - | |||||||||
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Changes in assets & liabilities from
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continuing operations:
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Accounts Payable
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- | 2,559 | (3,984 | ) | ||||||||
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Accrued Expenses
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3,304 | 242,296 | 335,310 | |||||||||
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Due Related Parties
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1,263 | - | - | |||||||||
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Cash flow from operating activities
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by continuing operations
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1,263 | (356,664 | ) | (3,314,656 | ) | |||||||
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Cash Flow from investing activities
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Purchase of fixed assets
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- | - | (2,259 | ) | ||||||||
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Net cash provided by (used for) from investing activities
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- | - | (2,259 | ) | ||||||||
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Cash Flow from Financing activities
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Notes payable - borrowings
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- | 335,000 | 1,897,500 | |||||||||
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Notes payable - payments
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- | (120,000 | ) | (8,847 | ) | |||||||
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Issuance of stock
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1,428,262 | |||||||||||
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Net cash provided by (used for) from financing activities
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- | 215,000 | 3,316,915 | |||||||||
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Net cash used in continuing operations
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1,263 | (141,664 | ) | - | ||||||||
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Cash Flow from discontinued operations
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- | - | - | |||||||||
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Net change in cash
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1,263 | (141,664 | ) | - | ||||||||
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Beginning cash
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(1,263 | ) | 234,189 | - | ||||||||
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Ending cash
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$ | - | $ | 92,525 | $ | - | ||||||
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Schedule of Non-Cash Investing and Financing Activities
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In 2007 the Company issued 133,333 shares for all the shares in a private corporation valued at $266,667.
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In 2008 lendors to the Company converted $386,653 of notes payable and accrued interest into 3,563 shares of
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common stock.
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In 2010 the Company issued 8 million shares in fulfillment of a stock subscription payable of $720,000 and
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14,550,000 shares for consulting and services valued at $6,989,267.
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Supplemental Disclosures
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Cash Paid For:
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Interest
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$ | - | ||||||||||
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Income Taxes
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$ | - | ||||||||||
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See accompanying notes to the consolidated financial statements.
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FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Wave Uranium Holding's ("Wave", the "Company") business has been to acquire mineral land positions. In October 2009 the Company was redomiciled as a Nevada corporation under the name FBC Holding Corp. On July 21, 2009 the Company entered into an acquisition agreement to purchase FBC Holdings, Inc., a California corporation ("FBC Holdings, Inc. - California"), and as such the Company will abandon its former business plan in the industry of mining and land acquisition. FBC Holdings, Inc. - - California had no material activity up to the agreement date and no material assets or liabilities. The acquisition agreement calls for the Company to purchase FBC Holdings, Inc. - California by acquiring all the outstanding shares of FBC Holdings, Inc. - California in exchange for 8 million shares of the Company. As of July 31, 2009 the Company had not completed the transaction by issuing the 8 million shares, so the Company has recorded a stock subscription payable of $720,000 based on the market price of $.09 per share on the date the acquisition agreement was entered into, with a corresponding recording and immediate write-off of goodwill in the same amount. The stock was subsequently issued in November 2009. The new entity will be focused in three areas, branding (product placement) in tv production, movies, etc.; the sale of mini-choppers and the associated merchandise of the brand Beverly Hills Choppers, including clothing, accessories, parts, etc; last the new Company plan will have internet platforms focused on social networking and the database built around the Johnny Fratto Social Club. The Company returned all interest in BHC, and JFSC for return of all shares issued. We acquired all of the assets of Super Rad Corporation on August 11, 2010.
DEVELOPMENT STAGE COMPANY
The Company is in the development stage and has not yet realized any revenues from its planned operations. The Company's business plan is to evaluate structure and complete a merger with, or acquisition of, prospects consisting of private companies, partnerships or sole proprietorships.
Based upon the Company's business plan, it is a development stage enterprise. Accordingly, the Company presents its financial statements in conformity with the accounting principles generally accepted in the United States of America that apply in establishing operating enterprises. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from inception to the current balance sheet date.
CONSOLIDATION
FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets of three to seven years.
Earnings Per Share
The Company calculates net income (loss) per share as required by ASC 260, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods when they would be anti-dilutive common stock equivalents, if any, are not considered in the computation.
(2) Stock-Based Compensation.
The Company accounts for stock based compensation in accordance with ASC 718, "Accounting for Stock-Based Compensation." The provisions of ASC 718 allow companies to either expense the estimated fair value of stock options or to continue to follow the intrinsic value method set forth in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma effects on net income (loss) had the fair value of the options been expensed.
Stock Splits
On July 30th, 2007 the Company’s board of directors authorized a 15 for 1 forward stock split.
On November 11, 2008 the Company and shareholders authorized a 1 for 300 reverse stock split. All references to the number of shares and per share amounts in the financial statements are presented on a post- split basis.
Reclassifications
FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
Certain items previously reported in the prior year have been reclassified to conform to current year presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
AFC Topic 820, "Disclosures About Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of July 31, 2010 and 2009.
The respective carrying value of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include cash, restricted cash, trade accounts receivables, accounts payable, accrued expenses, notes payable and due to investors. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value or they are receivable or payable on demand. The carrying value of the Company's long-term debt, notes payable and due to investors approximates fair values of similar debt instruments.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
(3) INCOME TAX
The Company accounts for income taxes under ASC 720, Under ASC 720 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
At July 31, 2010 and 2009 the Company had net operating loss carryforwards of approximately $13,000,000 and $5,800,000 which begin to expire in 2026. The deferred tax asset of approximately $1,900,000 and $860,000 in 2010 and 2009 created by the net operating losses have been offset by a
FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
100% valuation allowance. The change in the valuation allowance in 2010 and 2009 was $1,040,000 and $360,000.
RECLASSIFICATIONS
Certain items previously reported in the prior year have been reclassified to conform to current year presentation.
(4) BASIS OF REPORTING
The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company has experienced a significant loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. For the three months ended October 31, 2010, the Company incurred a net loss of $5,123,304.
The Company's ability to continue as a going concern is contingent upon its ability to attain profitable operations and secure financing. In addition, the Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which the Company operates.
The Company is pursuing equity financing for its operations. Failure to secure such financing or to raise additional capital or borrow additional funds may result in the Company depleting its available funds and not being able pay its obligations.
The 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.
(5) NOTES PAYABLE
At October 31, 2010 and 2009 the Company had two unsecured notes payable outstanding for $120,000 total, all currently due and bearing compound interest at 9% per annum. On March 20, 2008, Wave Uranium Holding (the "Company") entered into a securities purchase agreement (the "Agreement") with accredited investors (the "Investors") pursuant to which the Investors purchased an aggregate principal amount of $1,562,500 of 8% Original Issue Discount Senior Secured Convertible Debentures for an aggregate purchase price of $1,250,000 (the "Debentures"). The Debentures bore interest at 8% and mature twenty-four months from the date of issuance. The Debentures were convertible at the option of
FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
the holder at any time into shares of common stock, at an initial conversion price equal to $0.25 ("Initial Conversion Price").
In connection with the Agreement, each Investor received a warrant to purchase such number of shares of common stock equal to their subscription amount divided by the Initial Conversion Price ("Warrants"). Each Warrant is exercisable for a period of five years from the date of issuance at an initial exercise price of $90. The investors may exercise the Warrants on a cashless basis if the shares of common stock underlying the Warrants are not then registered pursuant to an effective registration statement. In the event the Investors exercise the Warrants on a cashless basis, then we will not receive any proceeds.
The conversion price of the Debentures and the exercise price of the Warrants are subject to full ratchet and anti-dilution adjustment for subsequent lower price issuances by the Company, as well as customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like.
The full principal amount of the Debentures is due upon default under the terms of Debentures. Beginning on the seven (7) month anniversary of the closing of the Debentures and continuing on the same day of each successive month thereafter, the Company must prepay 1/18th of the aggregate face amount of the Debentures, plus all accrued interest thereon, either in cash or in commonstock, at the option of the Company. If the Debenture is prepaid in shares of common stock, the conversion price of such shares shall be equal to the lesser of (i) the conversion price then in effect and (ii) 80% of the average of the three (3) closing bid prices for the 20 consecutive trading days ending on the trading day that is immediately prior to the applicable redemption date.
Notwithstanding the foregoing, the Company's right to prepay the Debentures in shares of common stock on each prepayment date is subject to, among other things, the following conditions: (i) that a registration statement must be effective on such prepayment date and available for use by the Investors (ii) the shares to be issued are registered with the Securities and ExchangeCommission and (iii) the aggregate number of shares to be issued under any monthly redemption amount is less than 20% of the total dollar trading volume of the Company's common stock for the 20 trading days prior to the applicable monthly redemption date.
At any time after the effectiveness of the registration statement described below, the Company may, upon written notice, redeem the Debentures in cash at 115% of the then outstanding principal amount of the Debentures provided, among other things, that (i) the volume weighted average price ("VWAP") for any 20 consecutive trading days exceeds $0.50, (ii) a registration statement must be effective on such redemption date and available for use by the Investors and (iii) the Company has satisfied all conditions under the transaction documents.
FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
Each of the Investors have contractually agreed to restrict their ability to exercise the Warrants and convert the Debentures such that the number of shares of the Company common stock held by each
of them and their affiliates after such conversion or exercise does not exceed 4.99% of the Company's then issued and outstanding shares of common stock.
The Company is obligated to file a registration statement registering the resale of shares of (i) the Common Stock issuable upon conversion of the Debentures, (ii) the Common Stock issuable upon exercise of the Warrants, and (iii) the shares of common stock issuable as payment of interest on the Debenture. If the registration statement is not filed within 45 days from the final closing, or declared effective within 105 days thereafter (120 days if the registration statement receives a review by the SEC), the Company is obligated to pay the investors certain fees in the amount of 2% of the total purchase price of the Debentures, per month, and the obligations may be deemed to be in default.
Additionally the Company has shown the current portion of the debt in current liabilities, also the Company has discounted the note under the interest method and is amortizing the debt discount over the life of the loan. On July 6, 2009 the debenture terms were amended with the interest rate being changed to nil (0.00%) and the conversion price changed to $.62 per share.
The Company has discounted the Debentures under the interest method, and the original issue discount on the Debentures of $312,500 plus the additional calculated debt discount of $1,250,000 derived from the calculated cost of the conversion feature and attached warrants as limited by the face amount of the Debentures ($1,562,500 total) is being amortized over the life of the loan. The effective amortization rate is 96%. During the years ended July 31, 2010 and 2009 the Company amortized $168,403 and $961,167 of the debt discount, leaving a remaining balance of $0. The Company's potential equity cost from the conversion feature and attached warrants of $1,249,500 was recorded as an equity obligation liability in 2008.
On March 16th, 2009 the Company borrowed $40,000 under a note payable, due in June 2009, bearing interest at 10% per annum with upward adjustments for default, secured by Company assets, and convertible into Company common shares at $.10 per share anytime at the maker's discretion. In Conjunction with the note the maker agreed to convert 16,668 warrants from the March 20, 2008 debenture financing into 16,668 shares of common stock.
On June 8th, 2009 the Company borrowed $25,000 under a note payable, due in December 2009, bearing interest at 10% per annum with upward adjustments for default, secured by Company assets, and convertible into Company common sharesat $.10 per share anytime at the maker's discretion.
On July 6th, 2009 the Company borrowed $150,000 under a convertible debenture, due in January 2011, bearing interest at 8% per annum with upward adjustments for default, secured by
FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
(Continued)
Company assets, and convertible into Company common shares at $.75 per share anytime at the maker's discretion. The debenture calls for monthly principal and interest payments over 18 months of approximately $8,900 per month commencing in August 2009.
The balance due under all notes payable at July 31, 2010 and 2009 was $1,897,500 with all notes currently due at July 31, 2010. Interest expense from notes payable in 2010 and 2009 was $36,498 and $243,096, and accrued interest payable at July 31, 2010 and 2009 was $332,006 and $295,508.
(6) STOCKHOLDERS' EQUITY
As of Otctober 31, 2010 and 2009, the Company had 150,000,000 authorized shares, $.001 par value, with 74,010,282and 262,300 shares issued and outstanding.
STOCK OPTIONS AND WARRANTS
At October 31, 2010 and 2009 the Company had stock options and warrants outstanding as described below.
NON-EMPLOYEE STOCK OPTIONS AND WARRANTS
The Company accounts for non-employee stock options and warrants under ASC 718, whereby option and warrant costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Unless otherwise provided for, the Company covers option and warrant exercises by issuing new shares.
During fiscal year 2008 the Company granted 20,833 common stock warrants in connection with debenture borrowings as more fully described in Note 5. In addition the Company issued 1,828 warrants to various individuals and entities for compensation, allowing the holder to purchase one share of common stock per warrant, exercisable immediately at $150 per share with the warrant terms expiring in November and December of 2009. The fair value of these warrant grants were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 3.2%, dividend yield of 0%, expected life of 2 years, volatility of 26%. The Company recorded total compensation expense under these warrant issuances of $861,694 in fiscal year 2008.
As of July 31, 2008, all of the 2008 warrant grants of 22,661 remained outstanding.
The Company issued 100,000 warrants in 2009 under a $150,000 convertible debenture, allowing the holder to purchase one share of common stock per warrant, exercisable immediately at $1 per share
FBC Holding Inc.
Notes to Consolidated Financial Statements
October 31, 2010 and 2009
(Continued)
with the warrant terms expiring in July 2014. The warrants were out of the money with no material recording value. At July 31, 2009 there were 122,661 warrants outstanding.
In year end July 31, 2010, 1,828 warrants expired leaving a year end balance of 120,833 warrants.
(7) CONTINGENCIES
In November 2008 a note holder filed a legal action against the Company in the Superior Court of Orange County, California alleging breach of contract and other malfeasance and seeking damages of approximately $225,000. The Company disputes the allegations and the matter is currently ongoing.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
Overview
FBC Holding Inc. ("FBC Holding", "the Company", “our” or "we") was incorporated as a Nevada company on May 31, 2006 as Wave Uranium Holding. On September 24, 2009 we merged with FBC Holding Inc. and changed our name to FBC Holding Inc. We are a development stage company. On May 1st, 2010 we returned the assets of Beverly Hills Choppers, Johnny Fratto Social Club and FBC Group, in return all shares that were issued were returned to the company. We acquired all of the assets of Super Rad Corporation on August 11, 2010. On October 26, 2010, a majority of our shareholders and our board of
directors authorized a name change to Super Rad Industries, Inc. Our principal offices are located at 66 Piscataqua Road, Dover, NH 03820. Our fiscal year end is July 31.
Our common stock trades on the FINRA-operated Over-the-Counter Bulletin Board (“OTCBB”) under the ticker symbol “FBCD.OB”. The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information for over-the-counter equity securities. OTCBB securities are traded by a community of market makers that enter quotes and trade through a sophisticated computer network. Information on the OTCBB can be found at www.otcbb.com. We have not paid any dividends on our common stock. We currently intend to retain any earnings for use in our business, and therefore do not anticipate paying cash dividends in the foreseeable future.
Plan of Operation
As we have recently completed our acquisition of FBC Holding, we have not completed a plan of operation and have not anticipated the cost of further exploiting and expanding our new business opportunities. We intend to complete a plan of operation during the next quarter. There no assurance that we will be able to accurately anticipate the cost of expanding our new business opportunities.
Our plan of operation will include a budget for a planned expansion program. However, there is no assurance that our actual costs will not exceed the budgeted costs. Factors that could cause actual costs to exceed budgeted costs include increased prices due to competition for personnel and supplies, unanticipated problems in implementing our business plan and delays experienced in completing our business plan. Increases in costs could result in us not being able to carry out our business without additional financing. There is no assurance that we would be able to obtain additional financing in this event. This could prevent us from achieving revenues.
Results of Operations for the Period From May 31, 2006 (Date of Inception) to October 31, 2010 and for the Three Months Ended October 31, 2010
Lack of Revenues
We are a development stage company with limited operations since our inception on May 31, 2006 to October 31, 2010. We have not generated any revenues. As of October 31, 2010, we had total assets of $-0- and total liabilities of $3,474,958. Since our inception to October 31, 2010, we have accumulated a deficit of $19,056,224. We anticipate that we will continue to incur substantial losses and our ability to generate any revenues in the next 12 months remains uncertain.
Expenses
We have accumulated total operating expenses of $17,073,016 since our inception on May 31, 2006 to October 31, 2010, including $1,565,364 in general and administrative expenses (including accounting, auditing and legal fees), $1,889 in depreciation, $861,694 in warrant expense, $2,094 in bank charges, $597,957 in land claim fees, $10,309,303 in non-cash compensation, $141,861 in amortization of deferred finance charges, $2,236,667 in impairment of goodwill and $187 in other expenses.
We have accumulated other expenses of $1,983,538 since our inception on May 31, 2006 to October 31, 2010, including $1,648,198 in amortization of debt discount and $335,340 in interest expense.
Our total expenses increased by $2,760,556 to $5,109,304 for the three months ended October 31, 2010 from $2,348,748 for the three months ended October 31, 2009. For the three months ended October 31, 2010, total expenses were comprised of $1,356,000 on the loss on conversion, $2,500,000 in non-cash compensation, $1,250,000 in impairment of goodwill and $3,304 in interest expense.
The types of expenses that we may categorize as general and administrative expenses include foreign exchange loss, transfer agent and filing fees, office supplies, travel expenses, rent, communication expenses (cellular, internet, fax and telephone), bank charges, advertising and promotion costs, office maintenance, courier and postage costs and office equipment.
Net Loss
Since our inception on May 31, 2006 to October 31, 2010, we have incurred a net loss of $19,040,961. For the three months ended October 31, 2010, we incurred a net loss of $5,109,304 compared to a net loss of $2,348,748 for the three months ended October 31, 2009, which is an increase in net loss of $2,760,556.
We have no significant 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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Inflation
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.
Item 4. Controls and Procedures.
Management’s Report on Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of our inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of October 31, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework.
Management conducted a walkthrough of the procedures and controls documented in this memo or relied on personal knowledge where no walk through was possible in order to test the effectiveness of the Company’s internal control over financial reporting.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of October 31, 2010, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
1. There is a lack of segregation of duties and therefore the Company is susceptible to fraud and misappropriation of assets.
2. There are no preventative and detective IT systems in place to prevent and/or detect fraud other than password protection. There no software based accounting controls in place to prevent double entries, monitor performance, etc.
3. There is a lack of entity wide controls establishing a “tone at the top”, including no audit committee, no policy on fraud and no code of ethics. A whistleblower policy is not necessary given the small size of the organization.
The Company is working on the following remediation efforts:
1. The Company has hired an external accountant to record transactions and prepare the financial statements. The information should be sent to the accountant by someone who is not in control of the bank account.
2. Obtain quotes for prevention and detection software in order to protect against fraud.
3. Once we obtain funding, we will purchase basic accounting software to record accounting transactions and print checks.
4. Adopt a corporate records and document retention policy to ensure that all significant records are kept for the appropriate amount of time as required by law.
5. Appoint a minimum of two independent directors to the board of directors and then implement an audit committee to review all financial statements and SEC filings and oversee the development of corporate policies.
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of the quarter ended October 31, 2010 based on criteria established in Internal Control—Integrated Framework issued by COSO.
This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
We did not change our internal control over financial reporting during our last fiscal quarter of 2010 in connection with the results of Management’s report, nor have we made any changes to our internal control over financial reporting.
Item 4T. Controls and Procedures.
Not applicable.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On August 11, 2010, FBC Holding, Inc. issued 12,500,000 shares of its common stock to Super Rad Corporation for and in consideration for the acquisition of the Super Rad Corporation assets. No solicitation was made and no underwriting discounts were given or paid in connection with this transaction. The Company believes that the issuance of was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.
On August 13, 2010, FBC Holding, Inc. issued 24,000,000 shares of its common stock to Christopher LeClerc for and in consideration for reimbursement of salary and expenses. No solicitation was made and no underwriting discounts were given or paid in connection with this transaction. The Company believes that the issuance of was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
None.
Item 6. Exhibits
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Exhibit
Number
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Exhibit
Description
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3.1
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Articles of Incorporation including Amendments(1)
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3.2
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Bylaws (1)
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10.1
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Employment Agreement with Mr. LeClerc(2)
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10.2
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Asset Purchase Agreement with Super Rad Corporation (3)
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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2003
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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003
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(1)
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Filed with the Registration Statement on Form SB-2 on September 27, 2006, file number 333-137,613 and incorporated by reference to this Annual Report.
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(2)
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Filed with the Current Report on Form 8-K dated June 18, 2007 and incorporated by reference to this Annual Report.
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(3)
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Filed with the Current Report on Form 8-K/A dated January 19, 2011 and incorporated by reference to this Annual Report.
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In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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FBC Holding Inc.
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By: /s/ Christopher LeClerc
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Date: March 4, 2011
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Christopher LeClerc
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President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, , Treasurer and Director
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