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EX-31 - EXHIBIT 31.2 - NEW BASTION DEVELOPMENT, INC.nbdi093011q_ex31z2.htm
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EX-31 - EXHIBIT 31.1 - NEW BASTION DEVELOPMENT, INC.nbdi093011q_ex31z1.htm



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)


þ

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


For the quarterly period ended September 30, 2011


¨ 

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


For the transition period from __________ to __________


Commission File Number: 001-04124


NEW BASTION DEVELOPMENT, INC.

 (Exact name of registrant as specified in its charter)


 Pennsylvania

 

 23-1364981

(State or other jurisdiction of incorporation of organization)

 

 

 (I.R.S. Employer

 Identification No.)

  

11985 Southern Boulevard, Suite 191

Royal Palm Beach, FL 33411

 (Address of principal executive offices)


(866) 541-0625

 (Registrant’s telephone number, including area code)


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 ¨ No þ  


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No þ  


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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

(Do not check if smaller reporting company)

¨

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  


Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d)

of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No þ  


Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  28,918,753  shares of common stock are issued and outstanding as of April 5, 2012.

  







 

NEW BASTION DEVELOPMENT, INC.

FORM 10-Q

September 30, 2011


TABLE OF CONTENTS


 

 

Page No.

 

PART I. - FINANCIAL INFORMATION

Item 1.

Financial Statements.

3

 

Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010

3

 

Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010 and for the period from May 29, 2007 (Inception) to September 30, 2011 (Unaudited)

4

 

Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 and for the period from May 29, 2007 (Inception) to September 30, 2011 (Unaudited)

5-6

 

Condensed Notes to Unaudited Financial Statements.

7-18

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

19

Item 3

Quantitative and Qualitative Disclosures About Market Risk.

24

Item 4

Controls and Procedures.

24

 

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

24

Item 1A.

Risk Factors.

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

25

Item 3.

Defaults Upon Senior Securities.

26

Item 4.

Mine Safety Disclosures.

26

Item 5.

Other Information.

26

Item 6.

Exhibits.

26

 

 

FORWARD LOOKING STATEMENTS

 

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC.   You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

 

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.


We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

 



2




PART 1 - FINANCIAL INFORMATION


Item 1.

Financial Statements.


 NEW BASTION DEVELOPMENT, INC. & SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS


 

 September 30,

 

 December 31,

 

2011

 

2010

 

(Unaudited)

 

 

 ASSETS

     

 

     

 CURRENT ASSETS

 

 

 

Cash and cash equivalents

$

13,058

 

$

15,846

Prepaid expenses

47,937

 

11,050

 

 

 

 

 Total Current Assets

60,995

 

26,896

 

 

 

 

 Real estate inventories

635,300

 

804,000

 

 

 

 

 TOTAL ASSETS

$

696,295

 

$

830,896

 

 

 

 

 LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 CURRENT LIABILITIES

 

 

 

 Dividends payable

$

79,552 

 

$

60,652 

 Notes payable

72,500 

 

72,500 

 Convertible notes payable, net of discount

 

79,000 

 Advances from related party

13 

 

163 

 Accounts payable

75,236 

 

61,993 

 Accrued compensation and benefits

129,100 

 

 Accrued real estate taxes and penalties

79,534 

 

67,549 

 Accrued interest payable

45,236 

 

16,416 

 

 

 

 

 Total Current Liabilities

481,171 

 

358,273 

 

 

 

 

 CONTINGENCIES (Note 7)

 

 

 

 

 

 

 

 STOCKHOLDERS' EQUITY :

 

 

 

 Convertible Preferred stock issuable, undesignated, no par,  

 

 

 

   5,000,000 authorized, none issued and outstanding

 

 Series A, convertible preferred stock, $1,000 par value,

 

 

 

   5,000,000 authorized, 210 and 210 issued and outstanding

210,000 

 

210,000 

 Common stock $0.10 par value; 100,000,000 authorized,

 

 

 

   24,518,753 and 20,088,753 issued and outstanding at September 30, 2011 and

 

 

 

   December 31, 2010, respectively.

2,451,876 

 

2,008,876 

 Additional paid-in-capital

555,462 

 

256,311 

 Deficit accumulated during development stage

(3,002,214)

 

(2,002,564)

 

 

 

 

 TOTAL STOCKHOLDERS' EQUITY

215,124 

 

472,623 

 

 

 

 

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

696,295 

 

$

830,896 


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



3




NEW BASTION DEVELOPMENT, INC. & SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


 

  For the Three Months
Ended September 30,

 

  For the Nine Months Ended
September 30,

 

For the period from
May 29, 2007
(Date of Inception)
to September 30,

 

2011

 

2010

 

2011

 

2010

 

2011

 

 

 

 

 

 

 

 

 

 

SALES

$

 

$

 

$

 

$

 

$

163,500 

 

 

 

 

 

 

 

 

 

 

COST OF SALES

 

 

 

 

522,040 

 

 

 

 

 

 

 

 

 

 

GROSS LOSS

 

 

 

 

(358,540)

 

 

 

 

 

 

 

 

 

 

COST AND EXPENSES

 

 

 

 

 

 

 

 

 

Property taxes

7,495 

 

7,230 

 

22,485 

 

21,689 

 

113,508 

Impairment loss on real estate inventories

 

 

168,700 

 

 

742,831 

Loss on expiration of option to purchase real estate

 

 

 

 

51,445 

Loss on real estate deposit

 

 

 

 

45,400 

Impairment of property rights

 

 

 

 

65,308 

Compensation and related benefits

394,434 

 

 

588,600 

 

 

588,600 

Professional fees

58,496 

 

 

196,194 

 

 

196,194 

General and administrative expense

16,996 

 

11,292 

 

50,273 

 

24,742 

 

591,606 

 

 

 

 

 

 

 

 

 

 

Total Costs and Expenses

477,421 

 

18,522 

 

1,026,252 

 

46,431 

 

2,394,892 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

(477,421)

 

(18,522)

 

(1,026,252)

 

(46,431)

 

(2,753,432)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

Gain on extinguishment of debt

96,601 

 

 

96,601 

 

 

96,601 

Interest expense

(37,889)

 

(19,112)

 

(51,099)

 

(108,350)

 

(239,359)

 

 

 

 

 

 

 

 

 

 

Total Other Income (Expenses)

58,712 

 

(19,112)

 

45,502 

 

(108,350)

 

(142,758)

 

 

 

 

 

 

 

 

 

 

NET LOSS

(418,709)

 

(37,634)

 

(980,750)

 

(154,781)

 

(2,896,190)

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

(6,300)

 

(6,352)

 

(18,900)

 

(17,905)

 

(106,024)

 

 

 

 

 

 

 

 

 

 

NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS

$

(425,009)

 

$

(43,986)

 

$

(999,650)

 

$

(172,686)

 

$

(3,002,214)

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE ALLOCABLE

 

 

 

 

 

 

 

 

 

  TO COMMON SHAREHOLDERS:

 

 

 

 

 

 

 

 

 

  BASIC AND DILUTED

$

(0.02)

 

$

 

$

(0.05)

 

$

(0.01)

 

$

(0.16)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

  BASIC AND DILUTED

20,781,766 

 

19,608,753 

 

21,008,900 

 

19,608,753 

 

18,916,679 



The accompanying notes are an integral part of these Consolidated Financial Statements.



4




NEW BASTION DEVELOPMENT, INC. & SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


 

 For the Nine Months Ended September 30,

 

For the period from
May 29, 2007
(Date of Inception)
to September 30,

 

2011

 

2010

 

2011

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net loss

$

(980,750)

 

$

(154,781)

 

$

(2,896,190)

Adjustment to reconcile net loss to net cash

 

 

 

 

 

 used in operating activities

 

 

 

 

 

Stock-based compensation

412,536 

 

 

465,096 

Interest expense from inducement of debt conversion

4,678 

 

 

4,678 

Impairment loss on real estate

168,700 

 

 

742,831 

Impairment of property rights

 

 

65,308 

Interest expense related to beneficial conversion feature

 

95,174 

 

132,024 

Bad debt expense

 

 

12,500 

Loss on expiration of property rights

 

 

51,445 

Gain on extinguishment of convertible debt

(96,601)

 

 

(96,601)

(Increase) decrease in assets

 

 

 

 

 

Inventories

 

 

522,040 

Prepaid expenses

11,050 

 

 

Increase (decrease) in liabilities

 

 

 

 

 

Accounts payable

13,243 

 

1,364 

 

82,505 

       Accrued compensation and benefits

129,100 

 

 

129,100 

       Accrued real estate taxes and penalties

11,985 

 

21,304 

 

11,985 

Accrued expenses

 

 

84,390 

Accrued interest payable

46,421 

 

7,745 

 

41,162 

Net cash used in operating activities

(279,638)

 

(29,194)

 

(647,727)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Proceeds received from sale of stock

230,000 

 

 

429,050 

Proceeds from exercise of warrants

55,000 

 

 

55,000 

Loan to related party

 

 

(12,500)

Partial payments on mortgage notes payable

 

 

(11,178)

Contributed capital

 

 

900 

Advances from shareholders

21,000 

 

22,915 

 

23,748 

Repayment of advances from shareholders

(21,150)

 

(18,654)

 

(23,735)

Repayments of notes payable

(8,000)

 

(2,500)

 

(90,500)

Repayments of notes payable, related parties

 

 

(50,000)

Proceeds from notes payable

 

30,000 

 

290,000 

Proceeds from notes payable, related parties

 

 

50,000 

Net cash provided by financing activities

276,850 

 

31,761 

 

660,785 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

(2,788)

 

2,567 

 

13,058 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

15,846 

 

56 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

13,058 

 

$

2,623 

 

$

13,058 



5




NEW BASTION DEVELOPMENT, INC. & SUBSIDIARIES

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)



 

 For the Nine Months Ended September 30,

 

For the period from
May 29, 2007
(Date of Inception)
to September 30,

 

2011

 

2010

 

2011

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

Taxes paid

$

 

$

 

$

Interest paid

$

 

$

4,917 

 

$

30,275 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

        Real Estate and mortgage payable and acquired in exchange for
           common stock

$

-

 

$

-

 

$

145,000 

Common stock issued in exchange for future real estate

$

-

 

$

-

 

$

12,500 

Common stock and options issued in exchange for future services

$

61,273

 

$

-

 

$

61,273 

Property rights acquired in exchange for real estate

$

-

 

$

-

 

$

65,308 

Acquisition of property in exchange for preferred stock

$

-

 

$

-

 

$

202,000 

Acquisition of property in exchange for common stock

$

-

 

$

-

 

$

1,305,000 

Conversion of note payable and accrued interest into common stock

$

8,000

 

$

-

 

$

62,723 

Dividends converted or paid in common stock

$

-

 

$

-

 

$

46,539 

Cancellation of stock based prepayments for properties

$

-

 

$

-

 

$

12,500 

Acquisition of property for assumed mortgage and preferred stock
            issuance

$

-

 

$

-

 

$

400,000 

Return of property for preferred stock and mortgage cancellation

$

-

 

$

-

 

$

200,000 

Satisfaction of mortgage in exchange for property

$

-

 

$

-

 

$

100,000 

Debt discount for Beneficial Conversion Feature values

$

-

 

$

56,250

 

$

66,159 

Dividend on preferred stock

$

18,900

 

$

17,905

 

$

(106,024)

Debt discount for loan fee

$

-

 

$

10,000

 

$

10,000 



The accompanying notes are an integral part of these Consolidated Financial Statements.





6




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Organization


New Bastion Development, Inc. (the “Company”) was incorporated in the Commonwealth of Pennsylvania on January 12, 1951 as Jetronic Industries, Inc. (“Jetronic”). Jetronic filed a voluntary Petition under Chapter 7 of Title 11, of the United States Code (“Bankruptcy Code”) on November 22, 2000. In February 2008, on behalf of New Bastion Development, Inc., a Florida corporation incorporated on May 29, 2007, (“New Bastion Florida”), a representative of New Bastion Florida purchased the Jetronic corporate shell from the Chapter 7 Trustee pursuant to the Bankruptcy Code.   


On November 21, 2008, pursuant to the Share Exchange Agreement (the "Transaction" or "Share Exchange"), Jetronic acquired all of the outstanding common stock of New Bastion Florida in exchange for Jetronic’s common stock, par value $0.10 per share whereby New Bastion Florida shareholders received one common share of Jetronic for each two shares they held in New Bastion Florida.  This transaction closed on December 29, 2008. The capitalization of Jetronic just subsequent to the exchange consists of 19,180,253 shares of common stock outstanding, of which Jetronic’s stockholders retain 9,677,834 shares of common stock, and New Bastion Florida's stockholders retain 9,502,419 shares of Common Stock.  Additionally, all of the controlling shares of Jetronic Common Stock that was previously issued to New Bastion Florida by Jetronic were cancelled. New Bastion Florida's stockholders holding the 880 shares of Series A Convertible Preferred Stock shall retain such shares until such time that Jetronic’s capital structure will enable it to issue 880 shares of comparable preferred stock. The Transaction was structured so as to qualify as a tax-free exchange under Section 368 of the Internal Revenue Code of 1986, as amended. Jetronic changed its name to New Bastion Development, Inc., effective February 2, 2009.  This share exchange transaction is treated as a combination of entities under common control and recapitalization of New Bastion Florida with New Bastion Florida considered the historical issuer.  New Bastion is deemed to have issued 9,677,834 common shares to the pre-share exchange stockholders of Jetronic.  The consolidated financial statements subsequent to the share exchange consist of the balance sheet of both parent and subsidiary, the historical results of operations of New Bastion Florida, and the results of operations of Jetronic since the date it became under common control in March 2008.


On December 29, 2008, the Company changed its fiscal year end from January 31 to December 31 to conform to the fiscal year end of New Bastion Florida; and on February 2, 2009 the Company filed with the State of Pennsylvania articles of amendment to Jetronic’s articles of incorporation changing its name from Jetronic to New Bastion Development, Inc.


New Bastion Florida was formed for the purpose of exploiting local real estate opportunities in the Panama City Beach/Marianna, Florida area (the “Panama City/Marianna area”) located in Northwest Florida, which is the last major undeveloped area in Florida. The first post-9/11 airport, Northwest Florida Beaches International Airport, broke ground on November 1, 2007 on 4,000 acres located in the Panama City/Marianna area that were donated by the St. Joe Company (NYSE: JOE).  The project was completed on May 23, 2010 and it serves as a gateway to Northwest Florida and its beautiful world-famous beaches. The airport serves Southwest Airlines and Delta Airlines, which together provide daily flights to key U.S. destinations, including cities serving as international gateways.


In September 2010, the Company formed a wholly-owned subsidiary, NB Regeneration, Inc., a Florida corporation (“NB Regeneration”) designed to pursue business opportunities relative to the construction of a facility and the production of nitrogen fertilizers used in the global agricultural market. In May 2011, NB Regeneration entered into a Memorandum of Understanding with United Advisory, a Panamanian corporation that was formed to own and construct an ammonia and urea facility in the Republic of Panama, in the Free trade Zone.  Under the terms of the agreement certain financial partners will subscribe to United Advisory and contribute sufficient funds to complete construction of the Outer Battery Limits (OBL) which are estimated to cost between $300-$500 Million, and NB Regeneration has undertaken to arrange debt financing for the facility, supervise the development of construction, contract for feedstock and raw materials, market and sell the products from the operation of the facility, and to manage the facility's day to day operation upon completion.  NB Regeneration shall receive a 51% interest in United Advisory and its financial partners shall receive a 49% interest.  The Company is actively pursuing this project and expects to finalize all details and to sign a definitive agreement in 2012.


On August 25, 2011, the Company formed NB Medical, Inc. a new wholly-owned division, incorporated in the State of Florida for the purpose of exploring some business prospects in the medical and related fields.





7




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



Basis of presentation, principals of consolidation, and going concern


Management acknowledges its responsibility for the preparation of the accompanying interim consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the interim period presented. These consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Form 10-K annual report for the year ended December 31, 2010.  The accompanying unaudited consolidated financial statements for New Bastion Development, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.


The consolidated financial statements include the accounts of New Bastion Development, Inc. and its subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.


The Company is presented as a development stage company. Activities during the development stage include organizing the business, raising capital and acquiring real estate properties or rights.  The Company is a development stage company with no revenues and no profits.  Since the Company has a limited operating history, there is only a limited basis upon which to evaluate the Company’s performance and its prospects for achieving its intended business objectives.  As reflected in the accompanying consolidated financial statements, the Company had a net loss and net cash used in operations of $980,750 and $279,638, respectively, for the nine months ended September 30, 2011 and an accumulated deficit of $3,002,214 at September 30, 2011 and had no revenues. These matters raise substantial doubt about the company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan, raise additional capital, and generate revenues. Currently, management is seeking capital to implement its business plan.   Management believes that the actions presently being taken provide the opportunity for the Company to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


Use of estimates


The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the 2011 and 2010 periods include assumptions used in assessing impairment of long-term assets, the fair market value of real estate properties held for sale, the valuation of deferred tax assets, and the value of stock-based compensation and fees.


Cash and cash equivalents


For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.


Concentration of credit risk


Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash.


On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. The unlimited insurance coverage is available to all depositors, including consumers, businesses, and governmental entities. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to a depositor’s other deposit accounts held at an FDIC-insured institution. A noninterest-bearing transaction account is a deposit account where interest is neither accrued nor paid; depositors are permitted to make an unlimited number of transfers and withdrawals; and the bank does not reserve the right to require advance notice of an intended withdrawal.





8




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2011. There were no balances in excess of FDIC insured levels as of September 30, 2011 and December 31, 2010.


Geographic concentration of real estate inventories


All of the Companies real estate inventories are located in the Panama City Beach/Marianna, Florida area (the “Panama City/Marianna Area”) located in Northwest Florida.


Fair value measurements and fair value of financial instruments


The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:


*

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

*

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

*

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.


The carrying amounts reported in the balance sheets for cash, accounts payable and accrued expenses, notes and mortgages payable, and amounts due to related party approximate their fair market value based on the short-term maturity of these instruments. Mortgage and other notes payable carrying value approximate fair value based on the market interest rates under such notes. The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820.

 

Real estate inventories


Real estate inventories, consisting of 65 undeveloped plots of land and a 27 acre commercial parcel of land primarily in Jackson and Washington, Florida, are recorded at cost on the acquisition date which was based on the fair value of such property using a certified real estate appraisal if the consideration paid was the Company’s common stock or the amount of cash paid. If the Company was to develop the properties, inventory costs may also include land development or home construction costs and interest related to development and construction.  Construction overhead and selling expenses would be expensed as incurred.


Whenever events or changes in circumstances suggest that the carrying amount may not be recoverable, management assesses the recoverability of its real estate by comparing the carrying amount with its fair value.  The process involved in the determination of fair value requires estimates as to future events and market conditions.  This estimation process may assume that the Company has the ability to complete development and dispose of its real estate properties in the ordinary course of business based on management’s present plans and intentions.  If management determines that the carrying value of a specific real estate investment is impaired, a write-down is recorded as a charge to current period operations.  The evaluation process is based on estimates and assumptions and the ultimate outcome may be different.  For the nine months ended September 30, 2011 and 2010, the Company recorded an impairment loss on the properties of $168,700 and $0, respectively.


Capitalization of interest and real estate taxes


Interest and real estate taxes attributable to land and property construction are capitalized and added to the cost of those properties while the properties are being actively developed.  If properties are not being actively developed, such costs are expensed.





9




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



Property Rights


The Company records the purchase of property rights, an intangible asset, not purchased in a business combination, in accordance with ASC 350  “Goodwill and Other Intangible Assets (as amended)”   Property rights generally enable the Company to control a property and participate in any profit from the future sale of such property.  Property rights are recorded at net cost which is typically the appraised value of the property, less any mortgage notes balances due from the property owner, less estimated selling costs.


Property and equipment


Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.  When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.


Impairment of long-lived assets


In accordance with ASC Topic 360, the Company reviews, long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. Other than the impairment of real estate inventories held for sale, the Company did not record any impairment charges during the nine months ended September 30, 2011 or 2010.


Revenue recognition


The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured.  The Company’s specific revenue recognition policies are as follows:


Revenue from the sale of real estate is recognized in full (full accrual method) at the time the sale is closed and title is conveyed to the buyer if the profit is determinable, collectability of the sales price is reasonably assured (demonstrated by meeting minimum down payment and continuing investment requirements), the seller’s receivable is not subject to future subordination, and the earnings process is virtually complete, such that the Company is not obligated to perform significant activities after the sale and does not have substantial continuing involvement with the sold property.


If the criteria for the full accrual method is not met then the revenue and profit is deferred using the deposit, cost recovery, reduced-profit, installment, or percentage of completion method of accounting, as appropriate depending upon the specific terms of the transaction.


When the Company has an obligation to complete improvements on property subsequent to the date of sale, it utilizes the percentage of completion method of accounting to record revenues and cost of sales.  Under percentage of completion accounting, the Company recognizes revenues and costs of sales based upon the ratio of development costs completed as of the date of sale to an estimate of total development costs which will ultimately be incurred, including an estimate for common areas.  Unearned revenues resulting from applying the percentage of completion accounting are reported as deferred revenue in the liabilities section of the balance sheet.

 

Income taxes


The Company is governed by the Income Tax Law of the United States. The Company utilizes ASC Topic 740, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.




10




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



Under ASC Topic 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements.


A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longermeet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.  


Stock-based compensation


The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The Company accounts for non-employee share-based awards in accordance with ASC Topic 505-50.


Advertising


Advertising is expensed as incurred and is included in general and administrative expenses on the accompanying statements of operations. For the nine months ended September 30, 2011 and 2010, advertising expense was $1,750 and $0, respectively.


Research and development


Research and development costs are expensed as incurred. For the nine months ended September 30, 2011 and 2010, the Company did not have any research and development activities.


Net loss per share of common stock

 

Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Because the Company reported a net loss for the nine months ended September 30, 2011 and 2010, any common stock equivalents, including stock options, warrants, and shares issuable upon conversion of convertible debt were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same. All potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:


 

September 30,

 

December 31,

 

 2011

 

 2010

Warrants

760,000

 

-

Stock options

4,000,000

 

-

Convertible debt

-

 

6,320,000

Total

4,760,000

 

6,320,000


Recent accounting pronouncements


Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.




11




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



NOTE 2 – REAL ESTATE INVENTORIES


At September 30, 2011 and December 31, 2010, real estate inventories, consisting of 65 undeveloped plots of land and a 27 acre commercial parcel of land primarily in Jackson and Washington, Florida, consisted of the following:


Location

 

Subdivision

 

2011

 

2010

Jackson County, FL

 

Compass Lake

 

$

418,500

 

$

544,000

Washington County, FL

 

Sunny Hills

 

 

41,000

 

 

82,000

Jackson County, FL

 

Commercial

 

 

175,500

 

 

175,500

Flagler County, FL

 

Flagler County

 

 

300

 

 

2,500

 

 

 

 

$

635,300

 

$

804,000


The Company evaluated the carrying value of the properties as of September 30, 2011. For the nine months ended September 30, 2011 and 2010, the Company recorded an impairment loss on the properties of $168,700 and $0, respectively. The properties are currently not being developed.


NOTE 3 – RELATED PARTY TRANSACTIONS


Advanced from related party


The Company’s chief executive officer (“CEO”) from time to time, provided advances to the Company for working capital purposes. During the nine months ended September 30, 2011, CEO advanced funds of $21,000 and was repaid funds of $21,150.  During the nine months ended September 30, 2010, CEO advanced funds of $22,915 and was repaid funds of $18,654.  At September 30, 2011 and December 31, 2010, the Company had a payable to the CEO of $13 and $163, respectively. These advances were short-term in nature and non-interest bearing and are included in due to related party on the accompanying balance sheet.  


NOTE 4 – NOTES PAYABLE


In April 2009, the Company borrowed $72,500 from a third party with the loan secured by certain property lots located in Compass Lake, Florida.  This note was due on demand after November 1, 2009 with interest accruing at 25% per annum based on the default interest rate.  In October 2010, Somerset Financial Group Pension Trust sued New Bastion Development, Inc. Elliot Bellen, Laurie Bergmann and William Troy for the alleged breach of a promissory note in the amount of $72,500 plus interest, court costs and attorney’s fees.  Somerset’s Motion for Summary Judgment against the Defendants was denied.  On March 20, 2012, Somerset received a Final Judgment of Foreclosure in the amount of $150,853 and the 24 Compass lots that are secured by lien, are scheduled to be sold at a public auction on April 19, 2012 to the highest bidder.  The Company and Somerset are currently in discussions to resolve the matter and to avoid the auctioning of the properties.


During the nine months ended September 30, 2011 and 2010, interest of $0 and $4,917 was paid on the Somerset loan.


At September 30, 2011 and December 31, 2010, interest amounts due under the note amounted to $45,236 and $4,425, respectively. The weighted average interest rate on the Company’s short-term obligations was approximately 25%.






12




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



NOTE 5 – CONVERTIBLE NOTES PAYABLE


At September 30, 2011 and December 31, 2010, convertible notes payable consisted of the following:


 

 

September 30, 2011

 

December 31, 2010

Convertible note payable, original principal of $62,500, entered into on May 26, 2009 with interest of 10% per annum, due on May 25, 2010.  The note is payable in cash or can be converted into shares of the Company's common stock at $0.0125 per share.  However, the payee may not convert this note into shares so that the holder owns in the aggregate more than 9.9% of the then issued and outstanding shares of common stock of the Company.  As of December 31, 2010, this note was in default. This note was extinguished in September 2011. See (a) below.

-

 $

54,000

    

 

 

 

Convertible note payable, modified on January 17, 2010, with interest of 10% per annum, due on July 16, 2010. The modification is treated like a debt extinguishment and a new beneficial conversion value of $26,250 was recorded to be amortized over the term. The note was payable in cash or can be converted into shares of the Company's common stock at $0.0125 per share.  However, the payee may not convert this note into shares so that the holder owns in the aggregate more than 9.9% of the then issued and outstanding shares of common stock of the Company.  See (b) below.

 

-

 

25,000

 

 

 

 

 

Total convertible note payable

$

-

$

79,000


(a)

On September 2, 2011, the Company entered into an agreement with the holder of a convertible promissory note that was in default to extinguish the total debt outstanding of $67,402, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,600,000 shares of the Company’s common stock and cash of $8,000 as complete settlement for the convertible promissory note.  Pursuant to ASB 470-20-40, since the convertible debt contained an embedded beneficial conversion feature, the amount of the reacquisition price allocated to the repurchased beneficial conversion was measured using the intrinsic value of the beneficial conversion feature at the extinguishment date. Accordingly, the Company recorded a gain on extinguishment of debt of $67,402. The shares received by the holder will be subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  


(b)

On September 19, 2011, the Company entered into an agreement with the holder of a convertible promissory note to extinguish the total debt outstanding of $29,199, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,000,000 shares of the Company’s common stock as complete settlement for the convertible promissory note.  Pursuant to ASB 470-20-40, since the convertible debt contained an embedded beneficial conversion feature, the amount of the reacquisition price allocated to the repurchased beneficial conversion was measured using the intrinsic value of the beneficial conversion feature at the extinguishment date. Accordingly, the Company recorded a gain on extinguishment of debt of $29,199.  The shares received by the holder will be subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  


NOTE 6 – STOCKHOLDERS’ EQUITY


Preferred stock


In February 2008, a majority of the Company’s subsidiary shareholders approved an amendment to the Articles of Incorporation of the subsidiary to allow 50,000,000 shares of common stock to be authorized and 10,000,000 shares of no par value preferred stock to be authorized.  Included in the preferred shares is 5,000,000 shares designated as Series A Preferred Stock (“Series A”), of which there




13




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



are ten sub-series.  The first set of sub-series are (Series A-1, A-2, A-3, A-4, A-5) of 500,000 shares in each sub-series, with a par value and redemption value of $1,000 per share.  The second set of sub-series are (Series A-6, A-7, A-8, A-9, A-10) of 500,000 shares each, with a par value of $1,000 and the redemption value to be determined by the Board of Directors at a future time.


As of the date of this report, the Company has been unable to authorize preferred stock in the parent entity to allow the preferred stock exchange discussed in Note 1 “Share Exchange” to be completed.  However, as the preferred stockholders of the subsidiary have legal rights to own preferred stock of the parent, the Company has accounted for the exchange as if it has occurred, in substance and reflects this preferred stock in the consolidated financial statements as issuable.


Other rights and preferences of the Series A preferred stock are as follows:


Dividends: Dividends payable pro rata on all outstanding Series A Preferred Stock on a quarterly basis at a rate of 6% of redemption value per year during the first year of issuance, 8% of redemption value per year during the second year of issuance and 12% of redemption value per year during all years through redemption.  The dividends are cumulative.


Optional redemption: any time upon 30 days notice to shareholder the Company has the Option to redeem the Series A Preferred Stock. Accrued but unpaid dividends are to be paid first.


Liquidation Preference: The Series A shares have preference over all other classes of capital stock.


Conversion: right to convert at any time. Conversion Rate: The number of shares to be issued upon conversion will equal the stated redemption value divided by the greater of $1.00 or 20% below the 20 day average trading price of common stock if company is publicly trade at time of conversion.  Any accrued but unpaid dividends can also be converted at the option of the holder.  Conversion price is subject to standard anti-dilution provisions.


No voting rights. However if more than 50% of Series A Preferred Stock is outstanding , holders will be require to approve a change in the company’s line of business, payment of dividends on common stock, repurchase of common stock and all actions concerning preferred stock.


On February 12, 2008 the Board of Directors authorized the offering to accredited investors only of Series A Convertible Preferred Stock at the offering price of $1,000 per share in exchange for real property and accordingly, in February 2008, the Company issued 210 shares of its Series A-3 preferred stock in exchange for real estate valued at $202,000. At September 30, 2011 and December 31, 2010, theses shares remain outstanding.


Common stock issued for cash


In March 2011, the Company initiated a $250,000 offering at $0.25 per share pursuant to Regulation D.  Proceeds from this offering were $230,000, and the Company issued 920,000 shares of its common stock, “A” warrants to purchase 460,000 shares of its common stock at an exercise price of $0.50, expiring six months following the purchase date and “B” warrants to purchase 460,000 shares of its common stock at an exercise price of $1.00, expiring 9 months following purchase date to five investors.  On July 29, 2011, in an effort to induce its warrant holders to exercise their $0.50 “A” warrants  (the “Warrants Inducement”), the Company offered to extend the term of the outstanding $1.00 “B” warrants by three months and to reduce the exercise price to $0.50 for every $0.50 “A” warrant exercised.  Through September 30, 2011, “A” warrants have been exercised for 110,000 shares of common stock for proceeds of $55,000. In connection with the Warrant Inducement, the Company valued the warrants inducement expense as the difference between the fair value of the warrants before the modification and after the modification on the inducement exercise date using the Black-Scholes pricing method.  The value of the warrant modification expensed was $4,678 for investors who exercised their warrants under the inducement offer and was included in interest expense on the accompanying statement of operations.


Common stock issued for services


On July 15, 2011, the Company entered into a six month consulting agreement in exchange for the issuance of 50,000 restricted vested common shares.  The value of these shares is $12,500 based on recent private placement sales at $0.25 per share and was recorded as a prepaid expense to be expensed over the life of the agreement.  Further, the shares issued are subject to a one year leak out agreement.




14




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



In connection with issuance of these common shares, the Company recorded professional fees during the nine months ended September 30, 2011 of $5,208 with a remaining prepaid expense at September 30, 2011 of $7,292.


On February 9, 2011, (employment date or grant date) NB Regeneration, a wholly-owned subsidiary of the Company entered into a five year employment agreement with Michael Sydow (The “Sydow Employment Agreement”) to serve as NB Regeneration’s Chief Executive Officer.  Upon execution, the Company granted 5,000,000 shares valued, for financial accounting purposes on the grant date at the contemporaneous private placement price of $0.25 per share for a total $1,250,000. The shares vest to Mr. Sydow as follows:   September 1, 2011, 1,000,000 shares; Upon the occurrence of the execution of a binding definitive agreement with Panamanian partners relative to the South American fertilizer project, 2,000,000 shares; 500,000 shares annually on the contract anniversary date years 2-5. In January of 2012 the Company and Mr. Sydow agreed to delay any vesting of stock and options as delineated in the employment pending an amendment to the employment agreement or reshaping of their association. Under ASC 718 "Compensation - Stock Compensation", the Company will recognize the $1,250,000 value as follows: $250,000 on the September 1, 2011 vesting date; $500,000 upon satisfaction of the performance condition; and $500,000 pro rata over the 4 year vesting period. Accordingly, for the nine months ended September 30, 2011, the Company recorded stock-based compensation of $250,000 related to the issuance of the 1,000,000 September 1, 2011 vested common shares.


Common stock issued upon conversion of convertible notes payable


On September 2, 2011, the Company entered into an agreement with the holder of a convertible promissory note that was in default to extinguish the total debt outstanding of $67,402, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,600,000 shares of the Company’s common stock and cash of $8,000 as complete settlement for the convertible promissory note.  Pursuant to ASB 470-20-40, since the convertible debt contained an embedded beneficial conversion feature, the amount of the reacquisition price allocated to the repurchased beneficial conversion was measured using the intrinsic value of the beneficial conversion feature at the extinguishment date. Accordingly, the Company recorded a gain on extinguishment of debt of $67,402. The shares received by the holder will be subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  


On September 19, 2011, the Company entered into an agreement with the holder of a convertible promissory note to extinguish the total debt outstanding of $29,199, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,000,000 shares of the Company’s common stock as complete settlement for the convertible promissory note.  Pursuant to ASB 470-20-40, since the convertible debt contained an embedded beneficial conversion feature, the amount of the reacquisition price allocated to the repurchased beneficial conversion was measured using the intrinsic value of the beneficial conversion feature at the extinguishment date. Accordingly, the Company recorded a gain on extinguishment of debt of $29,199.  The shares received by the holder will be subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  


Other


In July 2011, the Company cancelled 250,000 shares of its common stock that were mistakenly issued in 2008.  The shares were tendered by the holder and submitted to the Company’s transfer agent for cancellation. The original amount of $250 was expensed during the year ending December 31, 2008 and this amount is deemed immaterial.


Stock options


In connection with the Sydow Employment Agreement, subject to continued employment, Mr. Sydow was also awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date beginning on January 13, 2012.  However, on January 10, 2012  the Company and Mr. Sydow agreed to delay any vesting of stock and options as delineated in the employment pending an amendment to the employment agreement or reshaping of their association.  The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  The value of these options on the grant date was approximately $490,000 based upon the following range of Black-Scholes assumptions; exercise prices from $0.50 to $2.00, volatility from 372% to 448% using actual historical volatility, an expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized in years one through four, respectively, approximately $121,000, $121,000, $123,000 and $125,000. For the nine months ended September 30, 2011, the Company recorded stock-based compensation expense of $82,248.




15




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



On May 16, 2011, the Company entered into a five year employment agreement with Elliot Bellen to serve as the Company’s Chief Executive Officer.  On the employment agreement date, subject to continued employment, Mr. Bellen was awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date on January 1, 2012.  The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  The value of these options on the grant date was approximately $486,000 based upon the following range of Black-Scholes assumptions; Exercise prices from $0.50 to $2.00, volatility from 353% to 430% using actual historical volatility, an expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized $119,000, $121,000, $122,000 and $124,000 approximately in years one through four, respectively. For the nine months ended September 30, 2011, the Company recorded stock-based compensation expense of $66,952.


At September 30, 2011, there was a total of approximately $826,800 of unrecognized compensation expense related to these non-vested option-based compensation arrangements.

 

Stock option activity for the nine months ended September 30, 2011 is summarized as follows:


 

Nine Months Ended September 30, 2011

 

Number of Warrants

 

Weighted Average Exercise Price

Balance at December 31, 2010

-

 

-

Granted

4,000,000

 

1.25

Exercised

-

 

-

Forfeited

-

 

-

Balance at September 30, 2011

4,000,000

 

1.25

Stock options exercisable at September 30, 2011

-

 

-


The following table summarizes the shares of the Company's common stock issuable upon exercise of stock option outstanding at September 30, 2011:


Stock Options Outstanding

 

Stock Option Exercisable

 

Range of Exercise Price

 

Number Outstanding at September 30, 2011

 

Weighted Average Remaining Contractual Life (Years)

 

Weighted Average Exercise Price

 

Number

Exercisable at

September 30, 2011

 

Weighted Average Exercise Price

$

0.50

 

1,000,000

 

1.29

$

0.50

 

-

$

-

$

1.00

 

1,000,000

 

2.29

 

1.00

 

-

 

-

$

1.50

 

1,000,000

 

3.29

 

1.50

 

-

 

-

$

2.00

 

1,000,000

 

4.29

 

2.00

 

-

 

-

 

 

 

4,000,000

 

2.79

$

1.25

 

-

$

-


Warrants


On August 24, 2011, the Company entered into a six month investor relations agreement beginning September 2, 2011 with Rubenstein Investor Relations, (“RIR”) New York.  Under the terms of the agreement, services will commence on September 1, 2011. The agreement calls for a monthly fee of $8,250 per month and two-year warrants to purchase 200,000 shares of the Company’s common stock at $0.80 per share.  These warrants have a term of two years, with cashless exercise provisions.  The Company valued these warrant at $48,773 using the Black-Scholes method and has recorded it as a prepaid expense to be expensed over the term of the contract.  Black-Scholes assumptions were as follows:  stock price of $0.25 based on recent private placement sales, exercise price of $0.80, volatility based on historical volatility of 347.4% expected term of the 2 years based on the contractual term and a discount rate of 0.19%. In connection with issuance of these stock options, the Company recorded professional fees during the nine months ended September 30, 2011 of $8,128 with a remaining prepaid expense at September 30, 2011 of $40,645.





16




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



Warrant activity for the nine months ended September 30, 2011 is summarized as follows:


 

Nine Months Ended September 30, 2011

 

Number of Warrants

 

Weighted Average Exercise Price

Balance at December 31, 2010

$

-

Granted

1,230,000 

 

0.74

Exercised

(110,000)

 

0.50

Forfeited

(360,000)

 

0.65

Balance at September 30, 2011

760,000 

$

0.81

Warrants exercisable at September 30, 2011

760,000 

$

0.81


The following table summarizes the shares of the Company's common stock issuable upon exercise of warrants outstanding at September 30, 2011:


Warrants Outstanding

 

Warrants Exercisable

 

Range of Exercise Price

 

Number Outstanding at September 30, 2011

 

Weighted Average Remaining Contractual Life (Years)

 

Weighted Average Exercise Price

 

Number

Exercisable at

September 30, 2011

 

Weighted Average Exercise Price

$

0.50 - 1.00

 

760,000

 

0.72

 

0.81

 

760,000

 

0.81

 

 

 

760,000

 

0.72

$

0.81

 

760,000

$

0.81


NOTE 7 – COMMITMENT AND CONTINGENCIES


Employment Agreements


On February 9, 2011, (employment date or grant date) NB Regeneration, a wholly-owned subsidiary of the Company entered into a five year employment agreement with Michael Sydow to serve as NBR’s Chief Executive Officer.  Upon execution, the Company granted 5,000,000 shares valued, for financial accounting purposes on the grant date at the contemporaneous private placement price of $0.25 per share for a total $1,250,000. The shares vest to Mr. Sydow as follows:   September 1, 2011, 1,000,000 shares; Upon the occurrence of the execution of a binding definitive agreement with Panamanian partners relative to the South American fertilizer project, 2,000,000 shares; 500,000 shares annually on the contract anniversary date years 2-5.  Under ASC 718 "Compensation - Stock Compensation", the Company will recognize the $1,250,000 value as follows: $250,000 on the September 1, 2011 vesting date; $500,000 upon satisfaction of the performance condition; and $500,000 pro rata over the 4 year vesting period. On the employment agreement date, subject to continued employment, Mr. Sydow was also awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date on January 13, 2012.  The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  However in January 2012, the Company and Mr. Sydow agreed to delay any vesting of stock and options as delineated in the employment pending an amendment to the employment agreement or reshaping of their association. The value of these options on the grant date was approximately $490,000 based upon the following range of Black-Scholes assumptions; Exercise prices from $0.50 to $2.00, volatility from 372% to 448%, expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized in years one through four, respectively, approximately $121,000, $121,000, $123,000 and $125,000.


On May 16, 2011, the Company entered into a five year employment agreement with Elliot Bellen to serve as the Company’s Chief Executive Officer.  On the employment agreement date, subject to continued employment, Mr. Bellen was awarded  2,000,000 common stock options that cliff vest 500,000 per year over four years with first vesting date on January 1, 2012.  The options each have a term of one year from the vesting date and have exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  The value of these options on the grant date was approximately $486,000 based upon the following range of Black-Scholes assumptions; Exercise prices from $0.50 to $2.00, volatility from 353% to 430% expected term based on simplified method from 1 to 2.5 years and discount rate averaging 0.81% and is to be recognized $119,000, $121,000, $122,000 and $124,000 approximately in years one through four, respectively.





17




NEW BASTION DEVELOPMENT, INC. AND SUBSIDIARIES

(A Development Stage Company)

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011



Somerset Financial Lawsuit


In October 2010, Somerset Financial Group Pension Trust sued New Bastion Development, Inc. Elliot Bellen, Laurie Bergmann and William Troy for the alleged breach of a promissory note in the amount of $72,500 plus interest, court costs and attorney’s fees.  The promissory note is secured by 24 property lots with a recorded value of approximately $240,000 as of December 31, 2010.  On March 20, 2012, Somerset received a Final Judgment of Foreclosure in the amount of $150,853.32 and the 24 Compass lots that are secured by lien are scheduled to be sold at a public auction on April 19, 2012 to the highest bidder.  The Company and Somerset are currently in discussions to resolve the matter and to avoid the auctioning of the properties.


Memorandum Of Understanding


In May 2011, NB Regeneration entered into a Memorandum of Understanding with United Advisory, a Panamanian corporation that was formed to own and construct an ammonia and urea facility in the Republic of Panama, in the Free trade Zone.  Under the terms of the agreement certain financial partners will subscribe to United Advisory and contribute sufficient funds to complete construction of the Outer Battery Limits (OBL) which are estimated to cost between $300-$500 Million, and NB Regeneration has undertaken to arrange debt financing for the facility, supervise the development of construction, contract for feedstock and raw materials, market and sell the products from the operation of the facility, and to manage the facility's day to day operation upon completion.  NBR shall receive a 51% interest in United Advisory and its financial partners shall receive a 49% interest. Both parties to the MOU are currently waiting for the Panamanian government to legally recognize the Pan American Economic Industrial Free-Trade Zone (“PEIZ”) to finalize and formalize its transaction.  As there can be no assurances that such action shall ever occur, the Company has decided to explore the pursuit of an alternative location of the facility in the Colon, Free Trade Zone (“CFTZ”) in the Republic of Panama.


BP Oil Spill


In May 2011 the Company filed a claim with the Gulf Coast Claim Facility (“GCCF”) for profits lost that resulted from the BP/Deep Horizon oil spill that occurred on April 23, 2010.  In its claim the Company alleges that it suffered significant economic losses as a direct result of the oil spill.  The GCCF has conditionally denied the Company’s claim pending the submission, by the Company, of further documentation.  In August 2011 pursuant to GCCF’s request, the Company provided the requested documentation. Subsequent to providing additional documentation, the Company’s claim was denied.  BP is currently negotiating a settlement with a class of most private economic damage and medical claims plaintiffs estimated to be approximately $7.8 billion. The Company, and is currently waiting for that process to be completed prior to determining the best course of action to pursue its claims.


NOTE 8 – SUBSEQUENT EVENTS

In February 2012, the Company entered into a Master Services Agreement (“MSA”) with CH2M Hill for the performance of various engineering services by CH2 relative to the Company’s potential development of a nitrogen fertilizer facility in the CFTZ to be paid on a negotiated basis.

In February 2012, following the suspension of the Company’s securities by the Securities and Exchange Commission, to induce Mr. Bellen to continue his efforts on behalf of the Company, the Company’s Board of Director’s voted to issue Mr. Bellen 4,000,000 restricted common shares of the Company’s stock.


On February 23, 2012 the Company was informed effective immediately it shares had been suspended from trading by the United States Securities and Exchange Commission (the “Commission”), and the Commission has initiated administrative proceedings File No. 3-14767 to determine whether revocation of the Company’s registration due to its delinquency in filing its periodic reports with the Commission pursuant to Section 12 of the Exchange Act.  The Company filed an answer with affirmative defenses and is requesting that such administrative proceeding be dismissed.  There can be no assurance that the Company will be successful in being able to halt the Commissions efforts to revoke of the Company’s registration.


In March of 2012, the Company initiated a $1,000,000 offering at $0.05 per share pursuant to Regulation D.  On March 29, 2012, the Company has received proceeds from this offering of $20,000 and the Company issued 400,000 shares of its common stock.




18






Item 2.

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


The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section 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. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.


Plan of Operations


Currently, through our subsidiary, New Bastion Florida we own real estate inventories, consisting of 65 undeveloped plots of land and a 27 acre commercial parcel located primarily in Jackson County and Washington County, Florida.  The land plots are primarily located in the Panama City Beach/Marianna, Florida area (the “Panama City/Marianna area”) located in Northwest Florida, which is the last major undeveloped area in Florida. The first post-9/11 airport, Northwest Florida Beaches International Airport, broke ground on November 1, 2007 on 4,000 acres located in the Panama City/Marianna area.  The project was completed on May 23, 2010 and it serves as a gateway to Northwest Florida and its beautiful world-famous beaches. The airport serves Southwest Airlines and Delta Airlines, which together provide daily flights to key U.S. destinations, including cities serving as international gateways.  In April 2010, Northwest Florida was negatively impacted by the BP/Deep Horizon oil spill.  This environmental disaster had a negative impact on both tourism and real estate values.  Further, given the use of dangerous dispersants on a 1:1 basis, as spilled oil, it is unclear as to the ultimate effect that this spill and its cleanup efforts, will have on the environment, the food chain, and the health of area residents. As a result, the Company has decided to delay any development and future purchases until the lasting effects from the spill can be determined with more certainty.


In September 2010, we formed a wholly-owned subsidiary, NB Regeneration, Inc., a Florida corporation (“NB Regeneration”), designed to pursue business opportunities relative to the construction of a facility and the production of nitrogen fertilizers used in the global agricultural market. In May 2011, NB Regeneration entered into a Memorandum of Understanding with United Advisory, a Panamanian corporation that was formed to own and construct an ammonia and urea facility in the Republic of Panama, in the Free trade Zone.  Under the terms of the agreement certain financial partners will subscribe to United Advisory and contribute sufficient funds to complete construction of the Outer Battery Limits (OBL) which are estimated to cost between $300-$500 Million, and NB Regeneration has undertaken to arrange debt financing for the facility, supervise the development of construction, contract for feedstock and raw materials, market and sell the products from the operation of the facility, and to manage the facility's day to day operation upon completion.  NBR shall receive a 51% interest in United Advisory and its financial partners shall receive a 49% interest.


Both parties to the MOU are currently waiting for the Panamanian government to legally recognize the Pan American Economic Industrial Free-Trade Zone (“PEIZ”) to finalize and formalize its transaction.  As there can be no assurances that such action shall ever occur, the Company has decided to explore the pursuit of an alternative location of the facility in the Colon, Free Trade Zone (“CFTZ”) in the Republic of Panama. To that end, in February 2012 the Company entered into a Master Services Agreement (“MSA”) with CH2M Hill for the performance of various engineering services by CH2 relative to the Company’s potential development of a nitrogen fertilizer facility in the CFTZ.


Limited Operating History


We have generated limited financial history and have not previously demonstrated that we will be able to expand our business. Our business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.


Critical Accounting Policies and Estimates


While our significant accounting policies are more fully described in Note 1 to our consolidated financial statements for the nine months ended September 30, 2011, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.

 




19







Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to real estate inventory fair values, recovery of long-lived assets, the valuation of deferred tax assets, and the value of stock-based compensation and fees and other equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.


Real estate inventories


Real estate inventories, consisting of 65 undeveloped plots and a 27 acre commercial parcel of land located primarily in Jackson County and Washington County, Florida, are recorded at cost on the acquisition date which was based on the fair value of such property using a certified real estate appraisal if the consideration paid was our common stock or the amount of cash paid. If we were to develop the properties, inventory costs may also include land development or home construction costs and interest related to development and construction.  Construction overhead and selling expenses would be expensed as incurred.


Whenever events or changes in circumstances suggest that the carrying amount may not be recoverable, management assesses the recoverability of its real estate by comparing the carrying amount with its fair value.  The process involved in the determination of fair value requires estimates as to future events and market conditions.  This estimation process may assume that the Company has the ability to complete development and dispose of its real estate properties in the ordinary course of business based on management’s present plans and intentions.  If management determines that the carrying value of a specific real estate investment is impaired, a write-down is recorded as a charge to current period operations.  The evaluation process is based on estimates and assumptions and the ultimate outcome may be different.  For the nine months ended September 30, 2011 and 2010, we recorded an impairment loss on the properties of $168,700 and $0, respectively.


Impairment of long-lived assets


In accordance with ASC Topic 360, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. We did not record any impairment charges during the nine months ended September 30, 2011 and 2010, respectively.


Stock-based compensation


We account for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. We account for non-employee share-based awards in accordance with ASC Topic 505-50.

  

Recent accounting pronouncements


Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.


Results of Operations


For the Three and Nine Months Ended September 30, 2011 and 2010


Revenues


For the three and nine months ended September 30, 2011 and 2010, we did not recognize any revenues.

 





20






Costs and Expenses


For the nine months ended September 30, 2011 and 2010, costs and expenses amounted to $1,026,252 and $46,432, respectively, an increase of $979,820 or 2,110.0%. For the three months ended September 30, 2011 and 2010, operating expenses amounted to $477,421 and $18,523, respectively, an increase of $458,898 or 2,477.4%.  Changes in operating expenses consisted of the following:


 

 

Three Months ended September 30,

 

Nine Months ended September 30,

 

 

2011

 

2010

 

2011

 

2010

Property taxes

 

$

7,495

 

$

7,230

 

$

22,485

 

$

21,689

Impairment loss on real estate inventories

 

 

-

 

 

-

 

 

168,700

 

 

-

Compensation and related benefits

 

 

394,434

 

 

-

 

 

588,600

 

 

-

Professional fees

 

 

58,496

 

 

-

 

 

196,194

 

 

-

General and administrative

 

 

16,996

 

 

11,293

 

 

50,273

 

 

24,743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

477,421

 

$

18,523

 

$

1,026,252

 

$

46,432


*

For the three and nine months ended September 30, 2011, property taxes related to our undeveloped land increased by $265 and $796, respectively, and was attributable to the accrual of penalties and interest on unpaid real estate taxes offset by a reduction in real estate taxes incurred due to a decrease in the taxable values of the properties as determined by the respective country’s property appraisers office.


*

For the nine months ended September 30, 2011, we recorded an impairment loss related to the reduction of the fair values of our real estate inventories which consists of undeveloped land.  Whenever events or changes in circumstances suggest that the carrying amount may not be recoverable, management assesses the recoverability of its real estate by comparing the carrying amount with its fair value.  We compared the carrying value of our properties to the taxable value determined by the respective property appraiser’s tax bill and accordingly, for the nine months ended September 30, 2011, we recorded an impairment loss on the properties of $168,700.


*

For the three and nine months ended September 30, 2011, compensation and related benefits amounted to $394,434 and $588,600, respectively, as compared none for the same periods in 2010.  During 2011, we entered into employment agreements with our chief executive officer and the chief executive officer of our subsidiary, NB Regeneration. Pursuant to the employment agreements, we issued common stock and/or stock options to these employees. For the three and nine months ended September 30, 2011, we recorded stock-based compensation of $327,534 and $399,200, respectively, We expect compensation and related benefits to increase as we continue to implement our business plan.  


*

For the nine months ended September 30, 2011, professional fees amounted to $196,194 as compared to $0 for the same period in 2010.  For the three months ended September 30, 2011, professional fees amounted to $58.496 as compared to $0 for the same period in 2010.  We expect professional fees to increase as we incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission and implement our business plan. During the three and nine months ended September 30, 2011, we incurred consulting fees of $7,380 and $118,540 related to the development of business opportunities related to the construction of a facility and the production of nitrogen fertilizers used in the global agricultural market.


*

For the nine months ended September 30, 2011, general and administrative expenses increased by $25,530 or 103.2% as compared to the same period in 2010.  For the three months ended September 30, 2011, general and administrative expenses increased by $5,703 or 50.5% as compared to the same period in 2010.   During the three and nine months ended September 30, 2011, the increase in general and administrative expenses primarily related to an increase in travel expenses incurred  for the development of  or NB Regeneration business. We expect general and administrative expenses to increase in the future at such time as we further implement of our business plan.


Other Income (Expense)


For the nine months ended September 30, 2011 and 2010, we recorded interest expense of $51,099 and $108,350, respectively, related to our notes and convertible notes payable. For the three months ended September 30, 2011 and 2010, we recorded interest expense of $37,889 and $19,112, respectively, related to our notes and convertible notes payable. During the three and nine months ended September 30, 2011, we recorded additional default interest expense of $27,155, respectively, related to a note payable in default.




21






During the three and nine months ended September 30, 2010, we recorded interest expense of $14,102 and $95,174 related to the amortization of previously recorded debt discount, respectively. We did not record such amortization in the 2011 periods. Additionally, in September 2011, in connection with the extinguishment of convertible notes payable, we recorded a gain on the extinguishment of such debt of $96,601.


Net Loss


As a result of the factors described above, our net loss for the nine months ended September 30, 2011 and 2010 was $980,750 and $154,781, respectively. Our net loss for the three months ended September 30, 2011 and 2010 was $418,709 and $37,634, respectively.


Net Loss Allocable to Common Shareholders


As a results of the recording of a cumulative preferred stock dividend, for the nine months ended September 30, 2011 and 2010, net losses allocable to common shareholders were $999,650 and $172,686, or a net loss per common share of $0.05 and $0.01 (basic and diluted), respectively. For the three months ended September 30, 2011 and 2010, net losses allocable to common shareholders were $425,009 and $43,986, or a net loss per common share of $0.02 and $0.00 (basic and diluted), respectively.


Liquidity and Capital Resources


Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. To date, we have funded our operations through the sale of our common stock.


Our primary uses of cash have been for salaries and for the payment of fees to third parties for the development of our business plan primarily to pursue business opportunities related to the construction of a facility and the production of nitrogen fertilizers used in the global agricultural market. In May 2011, NB Regeneration entered into a Memorandum of Understanding with United Advisory, a Panamanian corporation that was formed to own and construct an ammonia and urea facility in the Republic of Panama, in the Free trade Zone.  Under the terms of the agreement certain financial partners will subscribe to United Advisory and contribute sufficient funds to complete construction of the Outer Battery Limits (OBL) which are estimated to cost between $300-$500 Million, and NB Regeneration has undertaken to arrange debt financing for the facility, supervise the development of construction, contract for feedstock and raw materials, market and sell the products from the operation of the facility, and to manage the facility's day to day operation upon completion.  NBR shall receive a 51% interest in United Advisory and its financial partners shall receive a 49% interest.  Both parties to the MOU are currently waiting for the Panamanian government to legally recognize the Pan American Economic Industrial Free-Trade Zone (“PEIZ”) to finalize and formalize its transaction.  As there can be no assurances that such action shall ever occur, the Company has decided to explore the pursuit of an alternative location of the facility in the Colon, Free Trade Zone (“CFTZ”) in the Republic of Panama.  To that end, in February 2012, the Company entered into a Master Services Agreement (“MSA”) with CH2M Hill for the performance of various engineering services by CH2 relative to the Company’s potential development of a nitrogen fertilizer facility in the CFTZ.

 

The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:

 

*

An increase in working capital requirements to finance additional business development,

*

Addition of administrative and sales personnel as the business grows,

*

Increases in public relations and professional fees to develop our business plan as we attempt to enters new markets,

*

The cost of being a public company, and

*

Capital expenditures for the construction of an ammonia and urea facility in Panama.


Our net revenues are not sufficient to fund our operating expenses.  At September 30, 2011, we had a cash balance of $13,058.


In March 2011, we initiated a $250,000 offering at $0.25 per unit pursuant to Regulation D.  Proceeds from this offering were $230,000, and we issued 920,000 shares of its common stock, “A” warrants to purchase 460,000 shares of its common stock at an exercise price of $0.50, expiring six months following the purchase date and “B” warrants to purchase 460,000 shares of its common stock at an exercise price of $1.00, expiring 9 months following purchase date to five investors.  On July 29, 2011, in an effort to induce its warrant holders to exercise their $0.50 “A” warrants  (the “Warrants Inducement”), we offered to extend the term of the outstanding $1.00 “B” warrants by three months and to reduce the exercise price to $0.50 for every $0.50 “A” warrant exercised.  Through September 30, 2011, “A” warrants have been exercised for 110,000 shares of common stock for proceeds of $55,000.





22






Additionally, during the nine months ended September 30, 2011, we received advances from our CEO of $21,000 and repaid $21,150 of these advances.  


These funds were used to working capital purposes. We currently have no material commitments for capital expenditures. We need to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations.   We estimate that based on current plans and assumptions, that our available cash will not be sufficient to satisfy our cash requirements under our present operating expectations, without further financing, for up to 12 months. We presently have no other alternative source of working capital. We do not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations. We will need to raise significant additional capital to fund our operating expenses, pay our obligations, grow our company, and to develop our business plan. We do not anticipate we will be profitable in 2012.  Therefore our future operations will be dependent on our ability to secure additional financing.  Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will be required to curtail our marketing and development plans and possibly cease our operations.

 

In March of 2012, we initiated a $1,000,000 offering at $0.05 per share pursuant to Regulation D.  On March 29, 2012, we received proceeds from this offering of $20,000 and we issued 400,000 shares of our common stock


We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern on their audit opinion for the year ended December 31, 2010.

 

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.


Operating activities

 

For the nine months ended September 30, 2011 and 2010, net cash flows used in operating activities amounted to $279,638 and $29,194, respectively. For the nine months ended September 30, 2011, net cash used in operations of $279,638 was primarily attributable to our net loss of $980,750 offset by the add back of non-cash items such as stock based compensation of $412,536, an impairment of real estate inventories of $168,700, and a gain on extinguishment of convertible debt of $96,601, and changes in operating assets and liabilities of $211,799. For the nine months ended September 30, 2010, net cash used in operation of $29,194 was primarily attributable to our net loss of $154,781 offset by the add back of non-cash interest expense of $95,174 and changes in operating assets and liabilities of  $30,413.


Financing activities

 

For the nine months ended September 30, 2011 and 2010 net cash flows provided by financing activities was $276,850 and $31,761, respectively. In the 2011 period, we received proceeds from the sale of common stock of $230,000 and proceeds from the exercise of warrants of $55,000 and paid $8,000 of notes payable and net payments on related party advances of $150. In the 2010 period, we received proceeds from notes payable of $30,000 and net proceeds from advances from related party of $4,261 and repaid notes of $2,500.

 

Contractual Obligations


We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our financial position, results of operations, and cash flows.




23







The following tables summarize our contractual obligations as of September 30, 2011 and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

 

 

 

Payments due by period

Contractual obligations

 

Total

 

Less than 1 year

 

1-3 Years

 

3-5 Years

 

5+ Years

Notes payable

$

72,500

$

72,500

$

-

$

-

$

-

Accrued compensation and benefits

 

129,100

 

129,100

 

 

 

 

 

 

Interest payments

 

45,236

 

45,236

 

 

 

 

 

 

Real estate taxes and penalties

 

79,534

 

79,534

 

 

 

 

 

 

Preferred dividends payable

 

79,552

 

79,552

 

 

 

 

 

 

Total contractual obligations

$

405,922

$

405,922

$

-

$

-

$

-


Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.


Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for smaller reporting companies.


Item 4.

Controls and Procedures.


Evaluation of Disclosure Controls and Procedures


The Company’s management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2011.  Based on this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that, as of September 30, 2011 the Company’s disclosure controls and procedures were ineffective, in that they do not provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is not accumulated and communicated to the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


Changes in Internal Control Over Financial Reporting


There were no changes in our internal control over financial reporting during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


 

PART II - OTHER INFORMATION


Item 1.

Legal Proceedings.

 

Somerset Financial Lawsuit

In October 2010, Somerset Financial Group Pension Trust sued, inter alia, New Bastion Development, Inc. for the alleged breach of a promissory note in the amount of $72,500 plus interest, court costs and attorney’s fees.  Somerset filed a Motion for Summary Judgment against the Defendants, which was denied. On March 20, 2012, Somerset received a Final Judgment of Foreclosure in the amount of $150,853 and the 24 Compass lots that are secured by lien are scheduled to be sold at a public auction on April 19, 2012 to the highest bidder.  The Company and Somerset are currently in discussions to resolve the matter and to avoid the auctioning of the properties.


BP Oil Spill Lawsuit


In May 2011 our Company filed a claim with the Gulf Coast Claim Facility (“GCCF”) for profits lost that resulted from the BP/Deep Horizon oil spill that occurred on April 23, 2010.  In our claim we alleged that we suffered significant economic losses as a direct result of the oil spill. The GCCF conditionally denied our claim pending our submission of further documentation.  In August




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2011 pursuant to GCCF’s request, we provided the requested documentation.  Subsequent to providing additional documentation, our claim was denied. Our Company retains its right to sue BP and other interested parties, in either State or Federal Court, and is currently determining the best course of action to pursue its claims.


In the Matter of Jetronic Industries, Inc., et. al  

SEC Administrative Proceedings File No. 3-14767


On February 23, 2012 we were informed that our shares had been suspended from trading by the United States Securities and Exchange Commission (the “Commission”) effective at that time, and that the Commission had initiated administrative proceedings File No. 3-14767 to determine whether revocation of our registration due to our delinquency in filing our periodic reports with the Commission pursuant to Section 12 of the Exchange Act.  We filed an answer with affirmative defenses and are requesting that such administrative proceeding be dismissed.  There can be no assurance that we will be successful in halting the Commissions efforts to revoke our registration.


We are not aware of any other litigation or threatened litigation of a material nature.


Item 1A. 

Risk Factors.

 

Not required to be provided by smaller reporting companies.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

 Securities issued for cash


Date

 

Security/Value

 

 

 

March  2011

 

600,000 shares of common stock and warrants to purchase up to 600,000 shares of common stock for proceeds of $150,000.

July-Sept  2011

 

320,000 shares of common stock and warrants to purchase up to 320,000 shares of common stock for proceeds of $80,000.

July-Sept  2011

 

110,000 shares of common stock issued upon the exercise of warrants for proceeds of $55,000.


Securities issued for services


Date

 

Security/Value

 

 

 

February 2011

 

Stock option – 2,000,000 shares of common stock at exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  

 

 

 

February  2011

 

Common stock – 5,000,000 shares of common stock, subject to vesting. The common stock was valued at $1,250,000.

May  2011

 

Stock option – 2,000,000 shares of common stock at exercise prices of $0.50, $1.00, $1.50 and $2.00 for each 500,000 that vest, respectively.  

July 2011

 

Common stock – 50,000 shares of common stock for $12,500 in services.

 

 

 

August 2011

 

Warrant - 200,000 shares of common stock at $.80 per share for services.


Securities issued upon conversion of promissory notes


Date

 

Security/Value

 

 

 

September  2011

 

Common stock – 1,600,000 shares of common stock and cash of $8,000 to extinguish a total amount of debt outstanding of $67,402, including accrued interest.

September 2011

 

Common stock – 1,000,000 shares of common stock to extinguish a total amount of debt outstanding of $29,199, including accrued interest.


No underwriters were utilized and no commissions were paid with respect to any of the above transactions.  We relied on Section 4(2) and Rule 506 of Regulation D of the Securities Act since the transactions did not involve any public offering.




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Item 3. 

Defaults Upon Senior Securities.


On September 2, 2011, we entered into an agreement with the holder of a convertible promissory note that was in default to extinguish the total debt outstanding of $67,402, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,600,000 shares of the Company’s common stock and $8,000 as complete settlement for the convertible promissory note.   The shares received by the holder are subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  


On September 19, 2011, the Company entered into an agreement with the holder of a convertible promissory note to extinguish the total debt outstanding of $29,199, including accrued interest.  Under the terms of the original agreement, the holder was able to convert the promissory note and interest at $0.0125 per share up to 9.9% of the issued and outstanding Company’s common stock.  The holder agreed to receive 1,000,000 shares of the Company’s common stock as complete settlement for the convertible promissory note.  The fair market value of these shares was $250,000 ($0.25 per share based on recent private placement sales) and the reacquisition value of the embedded beneficial conversion feature of this note on the settlement date is $554,774, which is the total outstanding amount of $29,199 at the original convertible price per share for 2,335,890 shares at the intrinsic price $0.2375 per share. A gain of $333,973 was recognized on the debt extinguishment.  The shares received by the holder are subject to a sales restriction agreement that prohibits the sale, transfer and hypothecation of the subject shares for a twenty-four (24) month period.  


In April 2009, the Company borrowed $72,500 issued a secured promissory note to a third party, which was due on demand after November 1, 2009 with interest accruing at 9.75% per annum.  In October 2010, the note holder sued our Company, inter alia, for the alleged breach of the promissory note in the amount of $72,500 plus interest, court costs and attorney’s fees. On March 20, 2012, the note holder received a Final Judgment of Foreclosure in the amount of $150,853.32 and the collateral security is scheduled to be sold at a public auction on April 19, 2012 to the highest bidder.  The Company and the note holder are currently in discussions to resolve the matter and to avoid the auctioning of the collateral security.


Item 4. 

Mine Safety Disclosures.

 

None.


Item 5. 

Other Information.

 

None.


Item 6.

Exhibits.


Exhibit Number

Description

10.1

Employment Agreement- Michael Sydow dated February 9, 2011(incorporated by reference to our Form 8-K filed on 2/16/11)

10.2

Employment Agreement –Elliot Bellen dated May 16, 2011(incorporated by reference to our Form 10-Q for the period ended March 31, 2010 filed on 4/16/12)

10.3

Memorandum of Understanding between NB Regeneration, Inc., and United Advisory (incorporated by reference to our Form 8-K filed on 11/04/11)

10.4

Master Services Agreement with CH2M Hill dated February 1, 2012 (incorporated by reference to our Form 10-Q for the period ended March 31, 2010 filed on 4/16/12)

31.1

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Executive Officer of the Company *

31.2

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Financial Officer of the Company *

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Executive Officer and Chief Financial Officer *

101.INS

XBRL Instance Document *

101.SCH

XBRL Taxonomy Extension Schema Document *

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB

XBRL Taxonomy Extension Label Linkbase Document *

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document *


*

Filed herein




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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 

NEW BASTION DEVELOPMENT, INC.

 

 

 

Date: April 16, 2012

By:

/s/ Elliot Bellen  

 

 

Elliot Bellen, Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

 

Date: April 16, 2012

By:

/s/ Elliot Bellen  

 

 

Elliot Bellen

Chief Financial Officer and Principal Accounting Officer







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