Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q/A
(Amendment No. 1)
(Mark one)
[X] Quarterly Report Under Section 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 of 1934
For the transition period from ___________ to ___________
Commission File Number: 002-41703
The X-Change Corporation
(Exact Name of Registrant as Specified in Its Charter)
Nevada 90-0156146
(State of Incorporation) (I. R. S. Employer ID Number)
12655 North Central Expressway, Suite 1000, Dallas, Texas 75243
(Address of Principal Executive Offices)
(972) 386-7350
(Registrant's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant 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 (ss.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 [X]
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. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act): YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: April 19, 2012: 46,108,791
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
THE X-CHANGE CORPORATION
Form 10-Q/A for the Quarter ended September 30, 2011
Table of Contents
Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements 3
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 16
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 20
Item 4 - Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 20
Item 1A - Risk Factors 21
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3 - Defaults Upon Senior Securities 21
Item 4 - (Removed and Reserved) 21
Item 5 - Other Information 21
Item 6 - Exhibits 21
SIGNATURES 22
2
PART I - FINANCIAL INFORMATION
On August 18, 2011, The X-Change Corporation (Company) entered into an Asset
Purchase Agreement (Agreement) with Old West Entertainment Corp. (Old West), a
Nevada corporation, a privately-owned company which was not affiliated with the
Company. As part of the Agreement, the Company acquired all right, title and
interest in all of Old West's Operating Entertainment Business (Assets). The
Assets included a website, client base, capital assets, hardware, software,
intellectual property as well as all of Old West's artists, properties, patents,
trademarks and distribution rights and agreements relating to Old West's music
and entertainment business. The Company would also assume all rights and
obligations under a Management Consulting Agreement between Old West and Arturo
Molina, Jr. (Molina), also known in the music business as "Frost." As
consideration for this Agreement and the execution of the separate management
services agreements with Molina and the Bogat Family Trust (Bogat Trust) on
behalf of Raymond Dabney (Dabney) for Molina's serving as the Company's
President, CEO and acting CFO and Dabney's services in operating the music and
entertainment portion of the business, the Company issued an aggregate
12,252,156 shares of restricted, unregistered common stock.
On February 22, 2012, the Company entered into a Repurchase Agreement
(Repurchase Agreement) with Old West, Molina and the Bogat Trust. As a part of
the Repurchase Agreement, the Company transferred all of the aforementioned
assets back to Old West in exchange for Old West returning the shares which the
Company issued to it as part of the original Asset Purchase Agreement. A
complete copy of the Repurchase Agreement was attached as an exhibit to a
Current Report on Form 8-K on or about March 5, 2012 and the effect of the
Repurchase Agreement was to make the initial agreement null and void Ab Initio.
Concurrent with the rescission of this transaction, the Company recovered
11,000,000 shares of the 12,252,136 shares originally issued. Approximately
1,252,136 shares remained in the possession of Old West, Molina and/or the Bogat
Trust. These net 1,252,136 shares remaining outstanding were initially valued at
an agreed-upon value of approximately $25,042. As the agreed-upon transaction
valuation was below the "fair value" of the securities issued, the Company
experienced an additional non-cash charge to operations of approximately
$475,812. The aggregate approximately $500,854 was charged to operations as
"Loss on rescinded acquisition of Old West Entertainment Corp." in the
accompanying financial statements to reflect the net economic event related to
these transactions.
Additionally, former management, under the direction of Molina and Dabney,
prepared and filed the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2011 without the required review of the Company's auditor
and treated the acquisition of Old West as a "reverse acquisition" whereby Old
West was the accounting acquiror for financial statement purposes.
Due to the February 22, 2012 Repurchase Agreement rendering the transaction null
and void Ab Initio, this filing amends and replaces, in total, the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2011.
(Remainder of this page left blank intentionally)
3
ITEM 1 - FINANCIAL STATEMENTS
The X-Change Corporation and Subsidiaries
Restated Consolidated Balance Sheets
September 30, 2011 and December 31, 2010
(Unaudited) (Audited)
RESTATED
September 30, December 31,
2011 2010
------------ ------------
ASSETS
CURRENT ASSETS
Cash on hand and in bank $ -- $ --
Note receivable -- 40,714
Interest receivable -- 546
------------ ------------
TOTAL CURRENT ASSETS -- 41,260
------------ ------------
OTHER ASSETS
Casino ship -- --
License agreement -- 530,000
------------ ------------
TOTAL OTHER ASSETS -- 530,000
------------ ------------
TOTAL ASSETS $ -- $ 571,260
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Convertible debenture payable, net of unamortized discount $ 285,225 $ 286,225
Notes payable to shareholder 829,598 837,490
Accounts payable - trade -- 4,570
Accrued interest payable 81,451 50,072
------------ ------------
TOTAL CURRENT LIABILITIES 1,196,274 1,178,357
------------ ------------
TOTAL LIABILITIES 1,196,274 1,178,357
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock - $0.001 par value. 75,000,000 shares
authorized. none issued and outstanding -- --
Common stock - $0.001 par value. 750,000,000 shares
authorized. 17,268,427 and 16,309,916 shares
issued and outstanding 17,268 16,310
Additional paid-in capital 23,826,147 23,579,289
Accumulated deficit (25,039,689) (24,202,696)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (1,196,274) (607,097)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ -- $ 571,260
============ ============
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of
these financial statements.
4
The X-Change Corporation and Subsidiaries
Restated Consolidated Statements of Operations and Comprehensive Loss
Nine and Three months ended September 30, 2011 and 2010
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
2011 2010 2011 2010
------------ ------------ ------------ ------------
REVENUES - net of returns and allowances $ -- $ -- $ -- $ --
COST OF SALES -- -- -- --
------------ ------------ ------------ ------------
GROSS PROFIT -- -- -- --
------------ ------------ ------------ ------------
OPERATING EXPENSES
General and administrative expenses 93,466 93,302 18,090 28,762
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 93,466 93,302 18,090 28,762
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (93,466) (93,302) (18,090) (28,762)
OTHER INCOME (EXPENSE)
Interest expense, including amortization
of financing fees and note discounts (201,413) (202,188) (201,413) (38,621)
Loss on rescinded acquisition of Old
West Entertainment Corp. (500,854) -- (500,854) --
Impairment of non-operating assets
acquired in note foreclosure (41,260) -- -- --
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (743,527) (202,188) (702,267) (38,621)
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (836,993) (295,490) (720,357) (67,383)
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET LOSS (836,993) (295,490) (720,357) (67,383)
OTHER COMPREHENSIVE INCOME -- -- -- --
------------ ------------ ------------ ------------
COMPREHENSIVE LOSS $ (836,993) $ (295,490) $ (720,357) $ (67,383)
============ ============ ============ ============
Net loss per weighted-average share of
common stock outstanding, calculated on
Net Loss - basic and fully diluted $ (0.05) $ (0.05) $ (0.04) $ (0.01)
============ ============ ============ ============
Weighted-average number of shares
of common stock outstanding 15,962,024 5,452,963 16,601,528 5,513,000
============ ============ ============ ============
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of
these financial statements.
5
The X-Change Corporation and Subsidiaries
Restated Consolidated Statements of Cash Flows
Nine months ended September 30, 2011 and 2010
(Unaudited)
RESTATED
Nine months Nine months
ended ended
September 30, September 30,
2011 2010
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (836,993) $ (295,490)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization -- 76,694
Expenses paid with common stock 25,000 --
Loss on rescinded acquisition of Old West Entertainment Corp. 500,854 --
Impairment of non-operating assets acquired in note foreclosure 41,260 --
Effect of issuance of common stock at less than "fair value" 125,962 --
Interest expense paid with common stock -- 57,756
Increase (Decrease) in
Accounts payable and other (4,570) 31,396
Accrued interest payable 71,379 67,738
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (77,108) (61,906)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from exercise of warrants 10,000 --
Cash received on related party line of credit 67,108 60,865
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES 77,108 60,865
---------- ----------
DECREASE IN CASH -- (1,041)
Cash at beginning of period -- 1,080
---------- ----------
CASH AT END OF PERIOD $ -- $ 39
========== ==========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND INCOME TAXES PAID
Interest paid for the period $ -- $ --
========== ==========
Income taxes paid for the period $ -- $ --
========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Common Stock issued for license agreement $ (530,000) $ --
========== ==========
Conversion of Debenture Payable into Common Stock $ 1,000 $ 32,000
========== ==========
Repayment of Note Payable to Stockholder with Common Stock $ 75,000 $ --
========== ==========
Payment of Accrued Interest Payable to Stockholder with Common Stock $ 40,000 $ --
========== ==========
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of
these financial statements.
6
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements
September 30, 2011 and December 31, 2010
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
The X-Change Corporation (Company) was incorporated under the laws of the State
of Delaware on February 5, 1969 and changed its corporate domicile to the State
of Nevada on October 4, 2000. We were originally organized to seek merger and/or
acquisition candidates and engaged in various transactions since our inception.
As of December 31, 2008, the Company has disposed of all operating assets and
operating activities.
In March 2010, the Company formed the wholly-owned subsidiaries - Caballo Blanco
Communications, Ltd. and Commerce Services, Inc. - as Colorado corporations to
conduct operations related to the various proposed acquisitions. On December 27,
2010, the Company changed the corporate name of Commerce Services, Inc. to
PolySilicon, Inc. to conduct the business activities related to a then proposed
acquisition. There has been no economic activity conducted within either
subsidiary since their formation.
Between March 2010 and October 2010, the Company announced and abandoned several
proposed acquisitions.
On October 7, 2010, the Company announced that it signed an agreement in
principle to acquire 21-Century Silicon, Inc., based in Richardson, Texas
(21-Century). The terms of the acquisition was anticipated to involve a change
in control of the Company and the appointment of new directors. Concurrent with
the execution of the agreement in principle, the Company issued 1,000,000 shares
of restricted, unregistered common stock to license 21-Century's technology and
to secure an exclusive right to negotiate to acquire certain intellectual
property. The closing of the acquisition was subject to the completion of all
appropriate due diligence. On November 8, 2010, 21-Century executed a note
payable to the Company in the amount of approximately $28,500, bearing interest
at 10.0% for working capital advances made by the Company on 21-Century's
behalf. On January 17, 2011, the Company announced that through its wholly-owned
subsidiary, PolySilicon, Inc, it had completed the purchase of the intangible
assets of 21-Century, subject to an agreement to purchase a $3,500,000 note
payable owed to the State of Texas (Texas Note) by 21-Century. On January 28,
2011, the Company announced that it had cancelled the purchase of 21-Century and
canceled its offer to purchase the Texas Note. The purchase of the assets was
conditioned on the Company being able to purchase the Texas Note. The State of
Texas' insistence on additional repetitive reviews of the proposed transaction,
which was scheduled for closing, resulted in the Company's inability to complete
and close the financing necessary for silicon manufacturing. Concurrent with
this action, the Company rescinded the 1,000,000 shares issued in the October 7,
2010 event and executed its lien on the assets of 21-Century Silicon in
satisfaction of a note receivable and accrued interest totaling approximately
$41,200. Upon foreclosure on said assets, the Company's management elected to
take a 100% impairment against the foreclosed value resulting in a charge to
operations in the first quarter of 2011 of approximately $41,200. Any gain, if
any, upon the ultimate disposition of said assets will be recognized at the
point of future sale.
On March 7, 2011, the Company announced that it had entered into an Agreement
and Plan of Exchange with Surrey Vacation Properties, Inc. (a Missouri
corporation) (Seller) to acquire 100% of the issued and outstanding stock of the
Seller. In the transaction, it is anticipated that the Company will issue
63,283,391 restricted, unregistered shares of its $0.001 par value common stock.
A copy of the Contract for Sale was filed as an exhibit to a Current Report on
Form 8-K filed with the SEC on or about March 11, 2011. On April 26, 2011, as
reported on a Current Report on Form 8-K filed with the SEC on or about April
28, 2011, the CEO of Surrey Vacation Resorts, Inc. (Surrey) informed the Company
that Surrey would not able to meet a condition of closing of the acquisition of
Surrey by the Company. Surrey had been unable to obtain the necessary written
approval of the acquisition transaction from its lenders and further informed
the Company that Surrey would be unable to close the transaction. Upon receipt
of this information, the Company agreed to terminate the aforementioned contract
to acquire Surrey Vacation Resorts, Inc.
On May 25, 2011, the Company announced that it had closed on the purchase of a
Casino Ship located in Freeport, Texas. The acquisition was purchased by LDC
Collection Systems, Inc., a newly-formed and wholly-owned subsidiary
incorporated under the Laws of the State of Texas. The purchase price was
2,000,000 shares of restricted, unregistered common stock of the Company with an
agreed-upon valuation of approximately $1,750,000. The Casino ship, known as
"The Texas Star Casino", is a 155-foot ocean going vessel equipped with 250 slot
machines and various table games. The ship also has facilities for
entertainment, beverage service and dining. The ship was purchased from CJP
Entertainment LLC, a Missouri corporation. The ship was built in 1977 and
updated in 1986. The ship previously operated out of ports located in Georgia
and Florida.
On June 6, 2011, the Company has also entered into a Letter of Intent ("LOI")
with George J. Akmon and Jerry Monday & Associates, LLC (collectively referred
to as "Operators") to operate "The Texas Star Casino" outside the nine mile
territorial waters of Texas, in international waters, as a casino ship. As it is
the intent to operate the ship outside the 9-mile State of Texas territorial
limit means that the Company, nor its operators, will be required to acquire or
hold a gaming license from the State of Texas.
On July 25, 2011, the Company, its wholly-owned subsidiary, LDC Collection
Systems, Inc. and CJP Entertainment LLC, mutually agreed to execute a Repurchase
Agreement whereby the May 25, 2011 transaction was reversed. The Company
retained no rights to own or operate the cruise ship and no further action was
taken on the June 6, 2011 LOI to operate said casino ship.
7
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
On August 18, 2011, The X-Change Corporation (Company) entered into an Asset
Purchase Agreement (Agreement) with Old West Entertainment Corp. (Old West), a
Nevada corporation, a privately-owned company which was not affiliated with the
Company. As part of the Agreement, the Company acquired all right, title and
interest in all of Old West's Operating Entertainment Business (Assets). The
Assets included a website, client base, capital assets, hardware, software,
intellectual property as well as all of Old West's artists, properties, patents,
trademarks and distribution rights and agreements relating to Old West's music
and entertainment business. The Company would also assume all rights and
obligations under a Management Consulting Agreement between Old West and Arturo
Molina, Jr. (Molina), also known in the music business as "Frost." As
consideration for this Agreement, the Company issued one million shares
(1,000,000) of its common stock, in restricted form, to Old West.
As part of this Agreement, Molina was issued five million shares (5,000,000) of
the Company's common stock for his management services for a period of one year
and Molina was appointed President and CEO of the Company as well as acting CFO.
The Company also issued five million shares (5,000,000) of its common stock in
restricted form to the Bogat Family Trust (Bogat Trust) on behalf of Raymond
Dabney (Dabney) as consideration for the management services Mr. Dabney will be
providing to the Company in operating the music and entertainment portion of the
business for a period of one year. Neither Molina, Dabney or the Bogat Trust are
shareholders of Old West. Old West's sole shareholder, officer and director is
Mark Jordan. Mr. Jordan, Molina and the Bogat Trust were non-related and
non-affiliates of the Company prior to this transaction.
On February 22, 2012, the Company entered into a Repurchase Agreement
(Repurchase Agreement) with Old West, Molina and the Bogat Trust. As a part of
the Repurchase Agreement, the Company is transferred all of the aforementioned
assets back to Old West in exchange for Old West returning the shares which the
Company issued to it as part of the original Asset Purchase Agreement. A
complete copy of the Repurchase Agreement was attached as an exhibit to a
Current Report on Form 8-K on or about March 5, 2012 and the effect of the
Repurchase Agreement was to make the initial agreement null and void Ab Initio.
NOTE B - PREPARATION OF FINANCIAL STATEMENTS
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
adopted a year-end of December 31.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-K containing the Company's
financial statements for the year ended December 31, 2010. The information
presented within these interim financial statements may not include all
disclosures required by generally accepted accounting principles and the users
of financial information provided for interim periods should refer to the annual
financial information and footnotes when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-Q, are unaudited and contain all material adjustments,
consisting only of normal recurring adjustments necessary to present fairly the
financial condition, results of operations and cash flows of the Company for the
respective interim periods presented. The current period results of operations
are not necessarily indicative of results which ultimately will be reported for
the full fiscal year ending December 31, 2011.
For segment reporting purposes, the Company operated in only one industry
segment during the periods represented in the accompanying financial statements
and makes all operating decisions and allocates resources based on the best
benefit to the Company as a whole.
8
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE B - PREPARATION OF FINANCIAL STATEMENTS - CONTINUED
These financial statements reflect the books and records of the Company as of
and for respective nine and three month periods ended September 30, 2011 and
2010, respectively. All intercompany transactions, if any, have been eliminated
in consolidation.
NOTE C - GOING CONCERN UNCERTAINTY
As of September 30, 2011 and December 31, 2010, respectively, the Company has no
operations, limited cash on hand, and significant debt related to the financing
of the operations of a liquidated former subsidiary. Because of these factors,
the Company's auditors have issued an audit opinion on the Company's financial
statements which includes a statement describing our going concern status. This
means, in the auditor's opinion, substantial doubt about our ability to continue
as a going concern exists at the date of their opinion.
The Company's business plan is to seek an acquisition or merger with a private
operating company which offers an opportunity for growth and possible
appreciation of our stockholders' investment in the then issued and outstanding
common stock. However, there is no assurance that the Company will be able to
successfully consummate an acquisition or merger with a private operating
company or, if successful, that any acquisition or merger will result in the
appreciation of our stockholders' investment in the then outstanding common
stock.
The Company's current controlling stockholder has maintained the corporate
status of the Company and has provided all working capital support on the
Company's behalf since the December 2008 foreclosure action. Because of the
Company's lack of operating assets, its continuance is fully dependent upon the
majority stockholder's continuing support. It is the intent of this controlling
stockholder to continue the funding the nominal necessary expenses to sustain
the corporate entity. However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding. Further, the Company is at the mercy of future
economic trends and business operations for this controlling stockholder to have
the resources available to support the Company. Should this pledge fail to
provide financing, the Company has not identified any alternative sources of
working capital to support the Company.
The Company's ultimate continued existence is dependent upon its ability to
generate sufficient cash flows from operations to support its daily operations
as well as provide sufficient resources to retire existing liabilities and
obligations on a timely basis. The Company faces considerable risk in it's
business plan and a potential shortfall of funding due any potential inability
to raise capital in the equity securities market. If adequate operating capital
and/or cash flows are not received during the next twelve months, the Company
could become dormant until such time as necessary funds could become available.
The Company anticipates future sales or issuances of equity securities to
fulfill its business plan. However, there is no assurance that the Company will
be able to obtain additional funding through the sales of additional equity
securities or, that such funding, if available, will be obtained on terms
favorable to or affordable by the Company.
The Company's Articles of Incorporation authorize the issuance of up to
75,000,000 shares of preferred stock and 750,000,000 shares of common stock. The
Company's ability to issue preferred stock may limit the Company's ability to
obtain debt or equity financing as well as impede potential takeover of the
Company, which may be in the best interest of stockholders. The Company's
ability to issue these authorized but unissued securities may also negatively
impact our ability to raise additional capital through the sale of our debt or
equity securities.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach its goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
9
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
1. Cash and cash equivalents - continued
Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.
2. Financing Fees
Financing fees recorded in connection with debt issuances were amortized on
a straight-line basis over the maturity term of the related debt.
3. Convertible Debt Instruments
The Company records debt net of debt discount for beneficial conversion
features and warrants, on a relative fair value basis. Beneficial
conversion features are recorded pursuant to the Beneficial Conversion
Feature and Debt Topics of the FASB Accounting Standards Codification. The
amounts allocated to warrants and beneficial conversion rights are recorded
as debt discount and as additional paid-in-capital. Debt discount is
amortized to interest expense over the life of the debt.
4. Accounting for Stock Options
The Company has adopted the provisions of the Compensation Topic of the
FASB Accounting Standards Codification which requires the measurement and
recognition of compensation expense for all share-based payment awards made
to its employees and directors based on estimated fair values at the time
of grant. In addition, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 107 "Share-Based Payment" (SAB 107) in March 2005,
which provides supplemental accounting guidance.
The valuation techniques used in applying these provisions are sensitive to
certain assumptions and parameters used including the volatility and
liquidity of the Company's stock. The Black Scholes option valuation model
used in this process was developed for use in estimating the fair value of
trading options that have no vesting restrictions and are fully
transferable. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes
in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock options.
The Company has recorded in the past, and may record in the future,
substantial non-cash compensation expense which is not expected to have a
significant effect on our financial condition or cash flows but are
expected to have a significant, adverse effect on our reported results of
operations.
The Company follows the provisions of the Compensation topic of the FASB
Accounting Standards Codification for equity instruments granted to
non-employees.
5. Income taxes
The Company files income tax returns in the United States of America and
various states, as appropriate and applicable. The Company is no longer
subject to U.S. federal, state and local, as applicable, income tax
examinations by regulatory taxing authorities for any period prior to
December 31, 2006. The Company does not anticipate any examinations of
returns filed for periods ending after December 31, 2006.
The Company uses the asset and liability method of accounting for income
taxes. At September 30, 2011 and December 31, 2010, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences generally represent differences in the recognition of
assets and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
The Company has adopted the provisions required by the Income Taxes topic
of the FASB Accounting Standards Codification. The Codification Topic
requires the recognition of potential liabilities as a result of
management's acceptance of potentially uncertain positions for income tax
treatment on a "more-likely-than-not" probability of an assessment upon
examination by a respective taxing authority. As a result of the
implementation of Codification's Income Tax Topic, the Company did not
incur any liability for unrecognized tax benefits.
10
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
6. Income (Loss) per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common stockholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
As of September 30, 2011 and 2010, respectively, the Company's outstanding
stock options, warrants, and convertible debentures are considered to be
anti-dilutive due to the Company's net operating loss.
7. New and Pending Accounting Pronouncements
The Company is of the opinion that any and all pending accounting
pronouncements, either in the adoption phase or not yet required to be
adopted, will not have a significant impact on the Company's financial
position or results of operations.
NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to financial risk, if any.
NOTE F - CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash in domestic financial institutions subject to
insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC).
Under FDIC rules, the Company is entitled to aggregate coverage as defined by
Federal regulation per account type per separate legal entity per financial
institution. During the six month period ended September 30, 2011 and the year
ended December 31, 2010, and subsequent thereto, respectively, the Company has
not had any had deposits in a financial institution with credit risk exposures
in excess of statutory FDIC coverage. The Company has incurred no losses as a
result of any unsecured credit risk exposures.
NOTE G - DEBT FINANCING ARRANGEMENTS
Melissa Note
On August 15, 2006, the Company executed a long-term Promissory Note (Melissa
Note) with Melissa CR 364 Ltd., a Texas limited partnership (Melissa Ltd.)
providing a $1,000,000 line of credit. Melissa Ltd. is managed by a former
officer and shareholder of the Company.
11
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE G - DEBT FINANCING ARRANGEMENTS - CONTINUED
Melissa Note - continued
The Melissa Note had an initial term of 24 months with interest accruing at 10%
per annum. Accrued interest under the note was payable quarterly beginning
November 1, 2006, and the principal and any remaining accrued interest was due
at maturity on August 14, 2008. The Company pledged 100% of the issued and
outstanding common stock of AirGATE as collateral for the note. At the
discretion of Melissa Ltd, the Melissa Note may be converted into restricted
common stock of the Company at any time at an agreed upon conversion rate of
$0.825 per share. In addition, the Melissa Note may be prepaid at any time
without penalty.
The Company valued and recorded an embedded beneficial conversion feature in
connection with the Melissa Note of $756,950, and amortized this amount over the
initial two year life of the note resulting in non-cash charges to earnings as a
component of interest expense through December 31, 2008.
At maturity, the Company failed to make the required payment of the entire
outstanding principal and accrued interest due under the Melissa Note. On August
22, 2008, the Company, AirGATE and the Melissa Ltd. entered into an Amendment to
Promissory Note (the Amendment) amending the Melissa Note. The Amendment
extended the maturity date of the Note to December 15, 2008 and, in a
supplemental Board action, changed the conversion rate to par value ($0.001 per
share). In connection with the Amendment, AirGATE paid Melissa Ltd. (I) $100,000
to be applied against the outstanding principal of the Melissa Note, (ii) all
interest on the Note accrued through August 15, 2008, and (iii) $4,500,
representing Melissa Ltd's attorneys' fees and costs in connection with the
Amendment.
After the application of the $100,000 principal payment against the outstanding
principal under the Note, the outstanding principal owed under the Note was
$697,794. Interest payments were due on the 15th of each month beginning
September 15, 2008. If either the Company and/or AirGATE completes a corporate
financing transaction before December 15, 2008, whereby either the Company
and/or AirGATE receives in excess of $300,000 through the issuance of debt or
equity or a combination thereof, the Company and/or AirGATE agreed to remit to
Melissa Ltd. in payment of the obligations under the Melissa Note, the entire
net proceeds of such transaction, or such smaller amount of net proceeds as is
necessary to pay the entire outstanding principal amount of the Melissa Note,
plus all accrued interest.
In December 2008, Melissa Ltd. began foreclosure proceedings against its
collateral, which included 100% of the Company's holdings in AirGATE, and the
right to convert the Melissa Note into restricted, unregistered shares of the
Company's common stock. The foreclosure proceeding was consummated on January
16, 2009 and the Company's holdings in AirGATE were forfeited. Additionally,
Melissa Ltd. converted approximately $51,000 of principal on the Melissa Note to
51,000,000 shares of the Company's common stock, concurrent with the maturity
date of December 15, 2008.
In May 2011, Melissa, Ltd. converted approximately $75,000 in principal and
$40,000 of accrued interest into 575,000 shares of restricted, unregistered
common stock.
As of September 30, 2011 and December 31, 2010, the outstanding balance on the
Melissa Note is approximately $600,073 and $668,239, inclusive of capitalized
accrued interest. Interest continues to accrue at 10% per annum.
South Beach Live, Ltd. Note
During Calendar 2009, the Company executed a $100,000 Line of Credit Note
Payable with South Beach Live, Ltd. (South Beach), a significant Company
stockholder, to provide funds necessary to support the corporate entity and
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934, as amended. This note bears interest at 10.0% and matures in Calendar
2011. Through September 30, 2011 and December 31, 2010, respectively, an
aggregate of approximately $236,359 and $169,250 has been advanced against this
note.
LCII Debentures
During the quarter ending September 30, 2007, the Company entered into a
Securities Purchase Agreement with La Jolla Cove Investors, Inc. ("LCII")
providing for two convertible debentures totaling $400,000 with two
corresponding sets of non-detachable warrants totaling 4,000,000 shares with an
exercise price of $1.00. The convertible debentures accrue interest at 6-1/4%
until converted or the expiration of their three year term. The respective
debentures matured in August 2010; however, in the absence of a formal extension
agreement, both parties have agreed to stay the maturity and allow future
conversions and warrant exercises to occur.
12
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE G - DEBT FINANCING ARRANGEMENTS - CONTINUED
LCII Debentures - continued
The debentures and warrants have mandatory conversion features. These conversion
features becomes effective in the first full calendar month after the common
stock underlying the debenture is either I) registered under the Securities Act
of 1933 (the "Act"), which is at the Company's option, or ii) available by LCII
to be resold pursuant to Rule 144 of the Act. If the conversion feature becomes
effective, LCII is obliged to convert an average of 10% of the face value of the
debenture each calendar month into a variable number of shares of the Company's
common stock. The number of shares is determined by a formula where the dollar
amount of the debenture being converted is multiplied by eleven, from which the
product of the conversion price and ten times the dollar amount of the debenture
being converted is then subtracted, all of which is then divided by the
conversion price. The conversion price is equal to the lesser of (I) $1.00, or
(ii) 80% of the average of the 3 lowest volume weighted average prices during
the twenty trading days prior to the conversion election. The Company can
prevent conversion if the trading price falls below $0.30 per share on the date
LCII elects to convert. Under certain provisions, if LCII does not convert an
average of at least 5% of the face value of the debenture, the Company may
prepay portions of the debenture. As contractually linked, if LCII converts a
portion of the debenture, LCII must also exercise a proportionate amount of the
warrants.
In the event that the entire $400,000 of the convertible debentures is converted
in conjunction with the required exercise of warrants, the Company will receive
a total of $4.4 million from LCII. The aggregate number of shares issuable to
LCII in this event is dependent on the trading price of the Company's common
stock over the term of the conversion process.
The Company allocated the proceeds from the debentures between the warrants and
the debt based on the estimated relative fair value of the warrants and the
debt. The value of the warrants was calculated at $273,634 using the
Black-Scholes model and the following assumptions: discount rate of 4.1%,
volatility of 156% and expected term of three years. The Company also calculated
a beneficial conversion feature totaling $126,366. The Company is amortizing
both the warrant value and value attributed to the beneficial conversion feature
(total $400,000) over the term of the debentures. This non-cash charge to income
is included in interest expense.
At September 30, 2011 and December 31, 2010, respectively, the outstanding
principal amount of convertible debentures totaled approximately $285,225 and
$286,225.
NOTE H - PREFERRED STOCK
The Company is authorized to issue up to a total of 75,000,000 shares of $0.001
par value Preferred Stock. The Company's Board of Directors has designated
250,000 shares as "Series A Convertible Preferred Stock".
The Company is under no obligation to pay dividends or to redeem the Series A
Convertible Preferred Stock. This series of stock is convertible into 10 shares
of Common Stock at the option of the shareholder or upon automatic conversion.
In the event of any liquidation, dissolution or winding-up of the Company, the
holders of outstanding shares of Series A Preferred shall be entitled to be paid
out of the assets of the Corporation available for distribution to shareholders,
before any payment shall be made to or set aside for holders of the Common
Stock, at an amount of $1 per share.
As of September 30, 2011 and December 31, 2010, respectively, there were no
shares of preferred stock issued and outstanding.
NOTE I - COMMON STOCK TRANSACTIONS
Amendment to the Articles of Incorporation
On January 31, 2011, the Board of Directors of the Company and its majority
shareholder approved an amendment to its Articles of Incorporation increasing
the authorized capital of the Company from 37,500,000 shares of common stock,
par value $.001 and 3,750,000 shares of preferred stock, par value $.001, to
750,000,000 shares of common stock and 75,000,000 share of preferred stock. The
Amended Articles were filed with the Nevada Secretary of State on March 22,
2011, the effective date of the amendment.
13
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE I - COMMON STOCK TRANSACTIONS - CONTINUED
Reverse Stock split
Effective August 9, 2010, Company's Board of Directors declared a 1-for-20
reverse split of the issued and outstanding shares of common stock. The reverse
stock split was implemented by adjusting the stockholders' book entry accounts
to reflect the number of shares held by each stockholder following the split. No
fractional shares were issued in connection with the reverse stock split and any
fractional shares resulting from the reverse split were rounded up to the
nearest whole share. The reverse stock split reduced the number of the Company's
issued and outstanding shares of common stock on this date from 136,089,746 to
approximately 5,513,000.
On January 31, 2011, the Company's Board of Directors and its majority
shareholder approved an amendment to its Articles of Incorporation increasing
the authorized capital of the Company from 37,500,000 shares of $0.001 par value
common stock and 3,750,000 shares of $0.001 par value preferred stock to
750,000,000 shares of $0.001 par value common stock and 75,000,000 shares of
$0.001 par value preferred stock. The Amended Articles were filed with the
Nevada Secretary of State on March 22, 2011, the effective date of the
amendment.
The effects of these actions are reflected in the accompanying financial
statements as of the first day of the first period presented.
Stock issuances
On March 26, 2010, LJII issued a Debenture Conversion Notice to the Company for
the conversion of $32,000 of the outstanding debenture balance into 3,902,439
shares (approximately 195,122 post-reverse split shares) of the Company's common
stock. This conversion was completed on April 12, 2010 with the delivery of the
shares to LJII. As the conversion price was below the "fair value" of the
securities issued, the Company experienced a non-cash charge to operations of
approximately $57,760 which was classified as "interest expense" in the
accompanying financial statements.
In September 2010 and December 2010, the Company issued an aggregate 9,797,416
restricted, unregistered post-reverse split shares to Melissa CR 364 LTD. to
retire a combination of approximately $50,000 on the aforementioned line of
credit and approximately $146,000 in accumulated accrued interest on both the
AirGATE and line of credit notes. As the valuation of the conversion as stated
in the separate note agreements was below the "fair value" of the securities
issued, the Company experienced a non-cash charge to operations of approximately
$4,950,000 which was classified as "interest expense" in the accompanying
financial statements.
On October 7, 2010, the Company issued 1,000,000 shares of restricted,
unregistered post-reverse split shares, valued at approximately $530,000 which
was equal to the closing quotation of the Company's securities on the
transaction date, to 21-Century Silicon, Inc. (a Texas corporation) to license
the use of 21-Century's technology and to secure an exclusive right to negotiate
to acquire certain intellectual property from 21-Century. On January 28, 2011,
concurrent with the abandonment of the 21-Century transaction, the Company
rescinded the October 2010 transaction where 1,000,000 shares of restricted,
unregistered common stock was issued to license the use of 21-Century's
technology and to secure an exclusive right to negotiate to acquire certain
intellectual property from 21-Century. Further, concurrent with this action, the
Company executed its lien on the assets pledged by 21-Century in satisfaction of
a note receivable and accrued interest totaling approximately $41,200. Upon
foreclosure on said assets, the Company's management elected to take a 100%
impairment against the foreclosed value resulting in a charge to operations in
the first quarter of 2011 of approximately $41,200. Any gain, if any, upon the
ultimate disposition of said assets will be recognized at the point of future
sale.
On January 3, 2011, LJII issued a Debenture Conversion Notice to the Company for
the conversion of $1,000 of the outstanding debenture balance into 21,375 shares
of the Company's common stock. Additionally, LJII exercised 10,000 outstanding
warrants to obtain 10,000 shares of the Company's common stock for $10,000 cash.
This conversion was completed on January 5, 2011 with the delivery of the shares
to LJII. As the aggregate conversion and exercise price was below the "fair
value" of the securities issued, the Company experienced a non-cash charge to
operations of approximately $10,962 which was classified as "interest expense"
in the accompanying financial statements.
In May 2011, the Company issued an aggregate 575,000 restricted, unregistered
post-reverse split shares to Melissa CR 364 LTD. to retire a combination of
approximately $75,000 on the aforementioned notes and approximately $40,000 in
accumulated accrued interest. As the valuation of the conversion as stated in
the separate note agreements was below the "fair value" of the securities
issued, the Company experienced a non-cash charge to operations of approximately
$115,000 which was classified as "interest expense" in the accompanying
financial statements.
14
The X-Change Corporation and Subsidiaries
Notes to Restated Consolidated Financial Statements - Continued
September 30, 2011 and December 31, 2010
NOTE I - COMMON STOCK TRANSACTIONS - CONTINUED
Stock issuances - continued
In July 2011, in connection with the execution of a Letter of Intent ("LOI")
with George J. Akmon and Jerry Monday & Associates, LLC (collectively referred
to as "Operators") to operate "The Texas Star Casino" outside the nine mile
territorial waters of Texas, in international waters, as a casino ship, the
Company issued 100,000 shares of restricted, unregistered common stock as an
inducement to execute the LOI. This transaction was valued at approximately
$25,000 which approximated "fair value" of the Company's securities on the date
of issuance.
In August 2011, the Company issued an aggregate 12,252,136 shares of restricted,
unregistered common stock to Old West, Molina and the Bogat Trust, as previously
discussed. Concurrent with the rescission of this transaction, the Company
recovered 11,000,000 shares of the 12,252,136 shares originally issued.
Approximately 1,252,136 shares remained in the possession of Old West, Molina
and/or the Bogat Trust. These net 1,252,136 shares remaining outstanding were
initially valued at an agreed-upon value of approximately $25,042. As the
agreed-upon transaction valuation was below the "fair value" of the shares
issued, the Company experienced an additional non-cash charge to operations of
approximately $475,812. The aggregate approximately $500,854 was charged to
operations as "Loss on rescinded acquisition of Old West Entertainment Corp." in
the accompanying financial statements to reflect the net economic event related
to these transactions.
NOTE J - SUBSEQUENT EVENTS
In October and November 2011, the Company issued an aggregate 6,800,000 shares
of free-trading common stock in settlement of approximately $13,600 of debt on
the books of Old West Entertainment Corp. while Old West was an operating
component of the Company and prior to the March 2012 rescission of the entire
transaction. As the debt reduction was less than the "fair value" of the shares
issued, the Company recognized an additional non-cash charge to operations of
approximately $1,091,000 which will be recognized as "Loss on rescinded
acquisition of Old West Entertainment Corp." in the Company's 4th quarter
financial statements.
On March 20, 2012, the Company issued 8,747,864 shares of restricted,
unregistered shares to Melissa CR 364, Ltd. in partial repayment of
approximately $17,496 in notes payable principal. As the valuation of the
conversion as stated in the respective note agreements was below the "fair
value" of the securities issued, the Company will experience a non-cash charge
to operations of approximately $1,494,684 which will be classified as "interest
expense" in the Company's financial statements.
During March and April 2012, the Company has placed approximately 100,000 acres
in eastern Montana and western North Dakota under lease for oil and gas
exploration, subject to the completion of due diligence and the acquisition of
capital necessary to perform under the terms of the arrangement.
Management has evaluated all activity of the Company through April 30, 2012 (the
issue date of the restated financial statements) and concluded that no
subsequent events, other than as disclosed above, have occurred that would
require recognition in the financial statements or disclosure in the notes to
financial statements.
15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(1) CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates",
"expects", "aims" and words of similar import, constitute forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-Q/A and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) GENERAL
The X-Change Corporation (Company) was incorporated under the laws of the State
of Delaware on February 5, 1969 and changed its corporate domicile to the State
of Nevada on October 4, 2000. We were originally organized to seek merger and/or
acquisition candidates and engaged in various transactions since our inception.
As of December 31, 2008, the Company disposed of all of the assets and
operations.
On January 31, 2011, the Company's Board of Directors and its majority
shareholder approved an amendment to its Articles of Incorporation increasing
the authorized capital of the Company from 37,500,000 shares of $0.001 par value
common stock and 3,750,000 shares of $0.001 par value preferred stock to
750,000,000 shares of $0.001 par value common stock and 75,000,000 shares of
$0.001 par value preferred stock. The Amended Articles were filed with the
Nevada Secretary of State on March 22, 2011, the effective date of the
amendment.
(3) PLAN OF BUSINESS
On August 16, 2010, the Company announced the pending acquisition of IPTV World,
a company based in Los Angeles with hosting facilities in the One Wilshire
carrier hotel. This acquisition was subject to the execution of a definitive
agreement and the completion of appropriate due diligence by all parties
On September 8, 2010, the Company announced the pending acquisition of Genesis
Key, Inc., based in Washington, DC. This acquisition was subject to the
execution of a definitive agreement and the completion of appropriate due
diligence by all parties.
On September 20, 2010, the Company announced that the Company has signed an
agreement to acquire Cybertel USA, Inc., based in Los Angeles, California, for
$800,000 cash payable to the shareholders of Cybertel USA in exchange for 100%
of the issued and outstanding stock of Cybertel USA, Inc. The closing of this
transaction remains subject to the completion of appropriate due diligence by
all parties.
On October 7, 2010, the Company announced that it was unable to conclude
definitive agreements in all previously announced acquisitions of IPTV World,
Genesis Key, Inc. and Cybertel USA and will not be acquiring these companies.
On October 7, 2010, the Company announced that it has signed an agreement in
principle to acquire 21-Century Silicon, Inc., based in Richardson, Texas
(21-Century Silicon). The terms of the acquisition is anticipated to involve a
change in control of the Company and the appointment of new directors. As of the
date of this report, this transaction remains subject to the completion of all
appropriate due diligence and has not closed. On November 8, 2010, 21-Century
executed a note payable to the Company in the amount of approximately $28,500,
bearing interest at 10.0% for working capital advances made by the Company on
21-Century's behalf.
On December 27, 2010, the Company changed the corporate name of its wholly-owned
subsidiary, Commerce Services, Inc., to PolySilicon, Inc. to conduct the
business activities related to the acquisition of any intellectual property of
21-Century Silicon, Inc. PolySilicon, Inc. (formerly Commerce Services, Inc.)
had no history of operations or other economic activity since its formation on
March 24, 2010.
On January 17, 2011, the Company announced that through its wholly-owned
subsidiary, PolySilicon, Inc, it had completed the purchase of the intangible
assets of 21-Century Silicon, Inc. ("21-Century"). At the same time, the Company
announced an agreement to purchase a $3,500,000 note payable by 21-Century owed
to the State of Texas (Texas Note).
16
On January 28, 2011, the Company announced that it had cancelled the purchase of
21-Century and canceled its offer to purchase the Texas Note. The purchase of
the assets was conditioned on the Company being able to purchase the Texas Note.
The State of Texas' insistence on additional repetitive reviews of the proposed
transaction, which was scheduled for closing, resulted in the Company's
inability to complete and close the financing necessary for silicon
manufacturing.
On March 7, 2011, the Company announced that it had entered into an Agreement
and Plan of Exchange with Surrey Vacation Properties, Inc. (a Missouri
corporation) (Seller) to acquire 100% of the issued and outstanding stock of the
Seller. In the transaction, it is anticipated that the Company will issue
63,283,391 restricted, unregistered shares of its $0.001 par value common stock.
A copy of the Contract for Sale was filed as an exhibit to a Current Report on
Form 8-K filed with the SEC on or about March 11, 2011.
On April 26, 2011, as reported on a Current Report on Form 8-K filed with the
SEC on or about April 28, 2011, the CEO of Surrey Vacation Resorts, Inc.
(Surrey) informed the Company that Surrey would not able to meet a condition of
closing of the acquisition of Surrey by the Company. Surrey had been unable to
obtain the necessary written approval of the acquisition transaction from its
lenders and further informed the Company that Surrey would be unable to close
the transaction. Upon receipt of this information, the Company agreed to
terminate the aforementioned contract to acquire Surrey Vacation Resorts, Inc.
On May 25, 2011, the Company announced that it had closed on the purchase of a
Casino Ship located in Freeport, Texas. The acquisition was purchased by LDC
Collection Systems, Inc., a newly-formed and wholly-owned subsidiary
incorporated under the Laws of the State of Texas. The purchase price was
2,000,000 shares of restricted, unregistered common stock of the Company with an
agreed-upon valuation of approximately $1,750,000. The Casino ship, known as
"The Texas Star Casino", is a 155-foot ocean going vessel equipped with 250 slot
machines and various table games. The ship also has facilities for
entertainment, beverage service and dining. The ship was purchased from CJP
Entertainment LLC, a Missouri corporation. The ship was built in 1977 and
updated in 1986. The ship previously operated out of ports located in Georgia
and Florida.
On June 6, 2011, the Company has also entered into a Letter of Intent ("LOI")
with George J. Akmon and Jerry Monday & Associates, LLC (collectively referred
to as "Operators") to operate "The Texas Star Casino" outside the nine mile
territorial waters of Texas, in international waters, as a casino ship. As it is
the intent to operate the ship outside the 9-mile State of Texas territorial
limit means that the Company, nor its operators, will be required to acquire or
hold a gaming license from the State of Texas.
On July 25, 2011, the Company, its wholly-owned subsidiary, LDC Collection
Systems, Inc. and CJP Entertainment LLC, mutually agreed to execute a Repurchase
Agreement whereby the May 25, 2011 transaction to purchase a Casino Ship,
located in Freeport, Texas, was cancelled. The original transaction was valued
at approximately $1,750,000 (which approximated 21.9% of a November 8, 2006
independent third-party appraisal by Cruise Research and Management of the
casino ship (see Exhibit 99.1 of the Company's Current Report on Form 8-K filed
on or about June 2, 2011) and consideration of 2,000,000 shares of the Company's
restricted, unregistered common stock was issued to the seller. Concurrent with
the execution of the July 25, 2011 Repurchase Agreement, the 2,000,000 shares of
the Company's common stock held by the CJP Entertainment LLC was returned to the
Company and cancelled. As the Company retained no rights to own or operate the
cruise ship, no further action was taken by Management, George J. Akmon and/or
Jerry Monday & Associates, LLC with regard to the June 6, 2011 LOI to operate
said casino ship and said negotiations and obligations ceased on the part of all
parties. Pursuant to the appropriate accounting literature, this transaction is
reflected in the accompanying restated financial statements net of all the
aforementioned events as of June 30, 2011.
On August 18, 2011, the Company entered into an Asset Purchase Agreement with
Old West Entertainment Corp. (Old West), a corporation formed February 3, 2011
in accordance with the Laws of the State of Nevada. Prior to this transaction,
Old West was not affiliated with or related to the Company or its management. As
part of the Agreement, the Company acquired all rights, title and interest in
all of Old West's Operating Entertainment Business (Assets). The Assets included
a website, client base, capital assets, hardware, software, intellectual
property as well as all of Old West's artists, properties, patents, trademarks
and distribution rights and agreements relating to Old West's music and
entertainment business. The Company also assumed all rights and obligations
under a Management Consulting Agreement between Old West and Arturo Molina, Jr.
(Molina), also known in the music business as "Frost." In exchange, the Company
issued 1,000,000 shares of restricted, unregistered shares of the Company's
common stock to Old West.
As part of the Agreement, Molina/Frost was issued 5,000,000 shares of
restricted, unregistered shares of the Company's common stock and was appointed
President and CEO of the Company. The Company also issued 5,000,000 shares of
restricted, unregistered shares of common stock to the Bogat Family Trust as
consideration for the management services that beneficiaries of the Trust was to
provide to the Company in operating the music and entertainment portion of the
business.
On February 22, 2012, the Company entered into a Repurchase Agreement
(Repurchase Agreement) with Old West, Molina and the Bogat Trust. As a part of
the Repurchase Agreement, the Company is transferred all of the aforementioned
assets back to Old West in exchange for Old West returning the shares which the
Company issued to it as part of the original Asset Purchase Agreement. A
complete copy of the Repurchase Agreement was attached as an exhibit to a
Current Report on Form 8-K on or about March 5, 2012 and the effect of the
Repurchase Agreement was to make the initial agreement null and void Ab Initio.
17
During March and April 2012, the Company has placed approximately 100,000 acres
in eastern Montana and western North Dakota under lease for oil and gas
exploration, subject to the completion of due diligence and the acquisition of
capital necessary to perform under the terms of the arrangement.
(4) RESULTS OF OPERATIONS
The Company had no revenue for either of the nine or three month periods ended
September 30, 2011 and 2010, respectively.
General and administrative expenses for the nine months ended September 30, 2011
and 2010 were approximately $93,000, respectively. During the first quarter of
2011, the Company expended additional funds on various due diligence activities
related to the proposed acquisitions of 21-Century and Surrey, as discussed
above, which were in excess of comparable expenses for the first quarter of
2010. Further, much of the general and administrative expenses expended during
the quarters ended in June and September 2011 were expended by the Company in
order to remain current with its reporting requirements under the Securities
Exchange Act of 1934, as amended. Since the 1st quarter of Calendar 2009, the
Company has been virtually dormant due to the foreclosure of the Company's
former wholly-owned subsidiary, AirGATE Technologies, Inc. Subsequent to that
date, management focused on exploring possible candidates for a business
combination transaction. Future expenditure levels will fluctuate depending on
the Company's acquisition endeavors.
On January 28, 2011, concurrent with the abandonment of the 21-Century Silicon
transaction, the Company rescinded the December 2011 transaction where 1,000,000
shares of restricted, unregistered common stock was issued to the shareholders
of 21-Century Silicon to license the use of 21-Century Silicon's technology and
to secure an exclusive right to negotiate to acquire certain intellectual
property from 21-Century Silicon. Additionally, concurrent with this action, the
Company executed its lien on the assets of 21-Century Silicon in satisfaction of
a note receivable and accrued interest totaling approximately $41,200. Upon
foreclosure on said assets, the Company's management elected to take a 100%
impairment against the foreclosed value resulting in a charge to operations in
the first quarter of 2011 of approximately $41,200. Any gain, if any, upon the
ultimate disposition of said assets will be recognized at the point of future
sale.
On May 25, 2011, the Company announced that it had closed on the purchase of a
Casino Ship located in Freeport, Texas. The acquisition was purchased by LDC
Collection Systems, Inc., a newly-formed and wholly-owned subsidiary
incorporated under the Laws of the State of Texas. The purchase price was
2,000,000 shares of restricted, unregistered common stock of the Company with an
agreed-upon valuation of approximately $1,750,000. The Casino ship, known as
"The Texas Star Casino", is a 155-foot ocean going vessel equipped with 250 slot
machines and various table games. The ship also has facilities for
entertainment, beverage service and dining. The ship was purchased from CJP
Entertainment LLC, a Missouri corporation. The ship was built in 1977 and
updated in 1986. The ship previously operated out of ports located in Georgia
and Florida.
On June 6, 2011, the Company has also entered into a Letter of Intent ("LOI")
with George J. Akmon and Jerry Monday & Associates, LLC (collectively referred
to as "Operators") to operate "The Texas Star Casino" outside the nine mile
territorial waters of Texas, in international waters, as a casino ship. As it is
the intent to operate the ship outside the 9-mile State of Texas territorial
limit means that the Company, nor its operators, will be required to acquire or
hold a gaming license from the State of Texas.
On July 25, 2011, the Company, its wholly-owned subsidiary, LDC Collection
Systems, Inc. and CJP Entertainment LLC, mutually agreed to execute a Repurchase
Agreement whereby the May 25, 2011 transaction to purchase a Casino Ship located
in Freeport, Texas. The original transaction was valued at approximately
$1,750,000 (which approximated 21.9% of a November 8, 2006 independent
third-party appraisal by Cruise Research and Management of the casino ship) (see
Exhibit 99.1 of the Company's Current Report on Form 8-K filed on or about June
2, 2011) and consideration of 2,000,000 shares of the Company's restricted,
unregistered common stock was issued to the seller. Concurrent with the
execution of the July 25, 2011 Repurchase Agreement, the 2,000,000 shares of the
Company's common stock held by the CJP Entertainment LLC was returned to the
Company and cancelled. As the Company retained no rights to own or operate the
cruise ship, no further action was taken by Management, George J. Akmon and/or
Jerry Monday & Associates, LLC with regard to the June 6, 2011 LOI to operate
said casino ship and said negotiations and obligations ceased on the part of all
parties. Pursuant to the appropriate accounting literature, this transaction was
reflected in the restated financial statements net of all the aforementioned
events as of June 30, 2011, as reported on Form 10-Q/A.
On August 18, 2011, the Company entered into an Asset Purchase Agreement with
Old West Entertainment Corp. (Old West), a corporation formed February 3, 2011
in accordance with the Laws of the State of Nevada. Prior to this transaction,
Old West was not affiliated with or related to the Company or its management. As
part of the Agreement, the Company acquired all rights, title and interest in
all of Old West's Operating Entertainment Business (Assets). The Assets included
a website, client base, capital assets, hardware, software, intellectual
property as well as all of Old West's artists, properties, patents, trademarks
and distribution rights and agreements relating to Old West's music and
entertainment business. The Company also assumed all rights and obligations
under a Management Consulting Agreement between Old West and Arturo Molina, Jr.
(Molina), also known in the music business as "Frost." In exchange, the Company
issued 1,000,000 shares of restricted, unregistered shares of the Company's
common stock to Old West.
As part of the Agreement, Molina/Frost was issued 5,000,000 shares of
restricted, unregistered shares of the Company's common stock and was appointed
President and CEO of the Company. The Company also issued 5,000,000 shares of
restricted, unregistered shares of common stock to the Bogat Family Trust as
consideration for the management services that beneficiaries of the Trust was to
provide to the Company in operating the music and entertainment portion of the
business.
18
The Company recognized interest accruals, amortization of debt financing fees
and accretion of debt discounts of approximately $201,000 and $202,000 during
the nine months ended September 30, 2011 and 2010, respectively. The Company's
convertible debenture with La Jolla Cove Investors, Inc. matured in August 2010.
This debenture is discussed more fully in our Annual Report on Form 10-K for the
year ended December 31, 2010. We specifically note that all of the Company's
debt is in default due to the December 2008 foreclosure action and, accordingly,
has been classified as "current" on the Company's balance sheet regardless of
the stated maturity date(s).
Earnings per share for the respective nine month periods ended September 30,
2011 and 2010 were $(0.0x) and $(0.05) based on the weighted-average shares
issued and outstanding at the end of each respective period as adjusted for the
August 2010 1-for-20 reverse stock split.
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under the Securities Exchange Act of 1934 unless and until
such time that the Company completes a business combination transaction.
(5) LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2011 and December 31, 2010, respectively, the Company had a
working capital of approximately $(1,196,000) and $(1,137,000).
The Company's current controlling stockholder has maintained the corporate
status of the Company and has provided all working capital support on the
Company's behalf since the December 2008 foreclosure action. Because of the
Company's lack of operating assets, its continuance is fully dependent upon the
majority stockholder's continuing support. It is the intent of this controlling
stockholder to continue the funding the nominal necessary expenses to sustain
the corporate entity. However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding. Further, the Company is at the mercy of future
economic trends and business operations for this controlling stockholder to have
the resources available to support the Company. Should this pledge fail to
provide financing, the Company has not identified any alternative sources of
working capital to support the Company.
The Company's ultimate continued existence is dependent upon its ability to
generate sufficient cash flows from operations to support its daily operations
as well as provide sufficient resources to retire existing liabilities and
obligations on a timely basis. The Company faces considerable risk in its
business plan and a potential shortfall of funding due any potential inability
to raise capital in the equity securities market. If adequate operating capital
and/or cash flows are not received during the next twelve months, the Company
could become dormant until such time as necessary funds could become available.
The Company anticipates future sales or issuances of equity securities to
fulfill its business plan. However, there is no assurance that the Company will
be able to obtain additional funding through the sales of additional equity
securities or, that such funding, if available, will be obtained on terms
favorable to or affordable by the Company.
The Company's Articles of Incorporation authorize the issuance of up to
75,000,000 shares of preferred stock and 750,000,000 shares of common stock. The
Company's ability to issue preferred stock may limit the Company's ability to
obtain debt or equity financing as well as impede potential takeover of the
Company, which may be in the best interest of stockholders. The Company's
ability to issue these authorized but unissued securities may also negatively
impact our ability to raise additional capital through the sale of our debt or
equity securities.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach its goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.
(6) CRITICAL ACCOUNTING POLICIES
Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
(GAAP). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
Our significant accounting policies are summarized in Note D of our financial
statements. While all these significant accounting policies impact our financial
condition and results of operations, we view certain of these policies as
critical. Policies determined to be critical are those policies that have the
19
most significant impact on our financial statements and require management to
use a greater degree of judgment and estimates. Actual results may differ from
those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report.
(7) EFFECT OF CLIMATE CHANGE LEGISLATION
The Company currently has no known or identified exposure to any current or
proposed climate change legislation which could negatively impact the Company's
operations or require capital expenditures to become compliant. Additionally,
any currently proposed or to-be-proposed-in-the-future legislation concerning
climate change activities, business operations related thereto or a publicly
perceived risk associated with climate change could, potentially, negatively
impact the Company's efforts to identify an appropriate target company which may
wish to enter into a business combination transaction with the Company.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company may be subject to certain market risks, including changes in
interest rates and currency exchange rates. At the present time, the Company
does not undertake any specific actions to limit those exposures.
ITEM 4 - CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief
Executive and Financial Officer (Certifying Officer), has evaluated the
effectiveness of our disclosure controls and procedures as defined in Rules
13a-15 promulgated under the Exchange Act as of the end of the period covered by
this Quarterly Report. Disclosure controls and procedures are controls and
procedures designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Commission's
rules and forms and include controls and procedures designed to ensure that
information we are required to disclose in such reports is accumulated and
communicated to management, including our Certifying Officer, as appropriate, to
allow timely decisions regarding required disclosure. Based upon that
evaluation, our Certifying Officer concluded that as of such date, our
disclosure controls and procedures were not effective to ensure that the
information required to be disclosed by us in our reports is recorded,
processed, summarized and reported within the time periods specified by the SEC
due to a inherent weakness in our internal controls over financial reporting due
to our status as a shell corporation and having a sole officer and director.
However, our Certifying Officer believe that the financial statements included
in this report fairly present, in all material respects, our financial
condition, results of operations and cash flows for the respective periods
presented.
(b) Changes in Internal Controls
There were no significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls over
financial reporting that occurred during the quarter ended September 30, 2011
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
(c) Corrective Actions
The Company's former management, controlled by Molina and Dabney, failed to
comply with the SEC's requirement that the financial statements contained in the
Company's original filing on Form 10-Q be reviewed by the Company's auditor. In
conjunction with the failure to disclose the August 18, 2011 transaction in our
initial Form 10-Q filing done on or about August 19, 2011 was the result of the
change in management to Molina and/or Dabney and a lack of oversight on the part
of all parties reviewing the filing. Additionally, this information was not made
available to certain of our key consulting professionals, including legal
counsel and our auditors, so that they were in an appropriate position to advise
us on the necessary disclosures and timing thereof.
Concurrent with the February 2012 action, it is the intent of current management
to assure that all future events are made known to all appropriate parties for
their timely review and inclusion in our filings, as appropriate.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company may become involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters should not have an adverse material impact either
individually or in the aggregate on results of operations, financial position or
cash flows of the Company.
20
ITEM 1A - RISK FACTORS
Not applicable
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On January 3, 2011, La Jolla Cove Investors, Inc. (LJII) issued a Debenture
Conversion Notice to the Company for the conversion of $1,000 of the outstanding
debenture balance into 21,375 shares of the Company's common stock.
Additionally, LJII exercised 10,000 outstanding warrants to obtain 10,000 shares
of the Company's common stock for $10,000 cash. This conversion was completed on
January 5, 2011 with the delivery of the shares to LJII. As the aggregate
conversion and exercise price was below the "fair value" of the securities
issued, the Company experienced a non-cash charge to operations of approximately
$10,962 which was classified as "interest expense" in the accompanying financial
statements. The $10,000 in cash proceeds was used to support the working capital
needs of the Company.
In May 2011, the Company issued an aggregate 575,000 restricted, unregistered
post-reverse split shares to Melissa CR 364 LTD. to retire a combination of
approximately $75,000 on the aforementioned line of credit and approximately
$40,000 in accumulated accrued interest on the AirGATE note. As the valuation of
the conversion as stated in the separate note agreements was below the "fair
value" of the securities issued, the Company experienced a non-cash charge to
operations of approximately $115,000 which was classified as "interest expense"
in the accompanying financial statements.
In July 2011, in connection with the execution of a Letter of Intent ("LOI")
with George J. Akmon and Jerry Monday & Associates, LLC (collectively referred
to as "Operators") to operate "The Texas Star Casino" outside the nine mile
territorial waters of Texas, in international waters, as a casino ship, the
Company issued 100,000 shares of restricted, unregistered common stock as an
inducement to execute the LOI. This transaction was valued at approximately
$25,000 which approximated "fair value" of the Company's securities on the date
of issuance.
In August 2011, the Company issued an aggregate 12,252,136 shares of restricted,
unregistered common stock to Old West, Molina and the Bogat Trust, as previously
discussed. Concurrent with the rescission of this transaction, the Company
recovered 11,000,000 shares of the 12,252,136 shares originally issued.
Approximately 1,252,136 shares remained in the possession of Old West, Molina
and/or the Bogat Trust. These net 1,252,136 shares remaining outstanding were
initially valued at an agreed-upon value of approximately $25,042. As the
agreed-upon transaction valuation was below the "fair value" of the securities
issued, the Company experienced an additional non-cash charge to operations of
approximately $475,812. The aggregate approximately $500,854 was charged to
operations as "Loss on rescinded acquisition of Old West Entertainment Corp." in
the accompanying financial statements to reflect the net economic event related
to these transactions.
In October and November 2011, the Company issued an aggregate 6,800,000 shares
of free-trading common stock in settlement of approximately $13,600 of debt on
the books of Old West Entertainment Corp. while Old West was an operating
component of the Company and prior to the March 2012 rescission of the entire
transaction. As the debt reduction was less than the "fair value" of the shares
issued, the Company recognized an additional non-cash charge to operations of
approximately $1,091,000 which will be recognized as "Loss on rescinded
acquisition of Old West Entertainment Corp." in the Company's 4th quarter
financial statements.
On March 20, 2012, the Company issued 8,747,864 shares of restricted,
unregistered shares to Melissa CR 364, Ltd. in partial repayment of
approximately $17,496 in notes payable principal. As the valuation of the
conversion as stated in the respective note agreements was below the "fair
value" of the securities issued, the Company will experience a non-cash charge
to operations of approximately $1,494,684 which will be classified as "interest
expense" in the Company's financial statements.
ITEM 3 - DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4 - (REMOVED AND RESERVED)
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002
21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE X-CHANGE CORPORATION
Dated: May 4, 2012 By: /s/ R. Wayne Duke
---------------------------------
R. Wayne Duke
Chairman, Chief Executive Officer,
Acting Chief Financial Officer and
Director
2
