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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2012

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________.

 

Commission file number: 000-53125

 

InterCore Energy, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   27-2506234
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
1 International Boulevard - Suite 400    
Mahwah, NJ    07495-0027
 (Address of principal executive offices)    (Zip Code)

 

Registrant’s telephone number, including area code (201) 512-8732

 

Heartland Bridge Capital, Inc.

 

(Former Name, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

 

Indicate by check mark whether the registrant 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 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.

 

Large accelerated filer ¨ Accelerated filer ¨
   
Non-accelerated filer ¨ Smaller reporting company x

 (Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.

 

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years:

 

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

 

Applicable only to corporate issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 21, 2012, there were 216,568,982 shares of common stock, $0.0001 par value, issued and outstanding.

 

 
 

 

EXPLANATORY NOTE

 

As explained in our Current Report on Form 8-K filed with the Commission on November 14, 2012, as a result of the impact of Hurricane Sandy, we are filing this Quarterly Report on Form 10-Q for the period ended September 30, 2012 (the “Quarterly Report”) under the revised filing deadlines outlined in the Securities and Exchange Commission’s Order and Release No. 68224, a copy of which can be found here: http://www.sec.gov/rules/other/2012/34-68224.pdf. In accordance with the Order, for companies impacted by Hurricane Sandy that could not timely file their periodic reports, the due date for this Quarterly Report was extended to November 21, 2012, and until November 26, 2012, if we availed ourselves of the five day extension allowed by Exchange Act Rule 12b-25. On November 21, 2012, we filed a Notification of Late Filing on Form 12b-25, extending the due date for this Quarterly Report until November 26, 2012.

 

As noted in the Current Report on Form 8-K, we are a New Jersey-based company with the key members of our management team, including our Chief Executive Officer and Chief Financial Officer, residing in New Jersey. As a result of the impact Hurricane Sandy had on certain parts of New Jersey, these members of our management team were left without electricity, phone service, et cetera, for extended periods of time and/or were displaced completely and, as a result, were not able to timely complete the tasks necessary for us to file this Quarterly Report by the November 14, 2012 due date, or the November 21, 2012 extended due date.

 

 

2
 

 

INTERCORE ENERGY, INC.

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 4
     
ITEM 1 Financial Statements 5
     
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
     
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 27
     
ITEM 4 Controls and Procedures 28
     
PART II – OTHER INFORMATION 29
     
ITEM 1 Legal Proceedings 29
     
ITEM 1A Risk Factors 29
     
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 29
     
ITEM 3 Defaults Upon Senior Securities 29
     
ITEM 4 Mining Safety Disclosures 29
     
ITEM 5 Other Information 29
     
ITEM 6 Exhibits 30

  

3
 

 

PART I – FINANCIAL INFORMATION

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.

 

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

 

4
 

 

ITEM 1            Financial Statements

  

InterCore Energy, Inc.

(Formerly Heartland Bridge Capital, Inc.)

Condensed Balance Sheets

(Unaudited)

 

   September 30,   December 31, 
   2012   2011 
   (Unaudited)   (Note 2) 
         
Assets        
Current assets:          
           
Cash  $2,711   $52,422 
Prepaid expenses and other current assets   2,458    33,104 
           
Total current assets   5,169    85,526 
           
Investments   910,000    350,000 
           
Total assets  $915,169   $435,526 
           
Liabilities and Stockholders' Deficiency          
           
Current liabilities:          
           
Accounts payable  $446,136   $373,359 
Accounts payable due to related parties   38,880    - 
Accrued compensation   329,500    138,000 
Accrued expenses   260,685    137,100 
Convertible note payable   1,666,667    1,666,667 
Note payable due to related party   688,893    384,401 
Note payable other   1,018    10,019 
Deferred revenue   6,849    - 
           
Total liabilities   3,438,628    2,709,546 
           
Commitments and contingencies   -    - 
           
Stockholders' deficiency:          
           
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, 2,000,000 shares of Series A with a liquidation preference of $100,000 and 4,500,000 shares of Series B with a liquidation preference of $750,000 issued and outstanding as of September 30, 2012 and December 31, 2011   650    500 
           
Common stock, $0.0001 par value, 750,000,000 shares authorized, 206,922,310 and 148,464,180 and issued and outstanding as of September 30, 2012 and December 31, 2011, respectively   20,692    14,846 
           
Additional paid-in capital   5,090,967    3,419,264 
           
Accumulated deficit   (7,635,768)   (5,708,630)
           
Total stockholders' deficiency   (2,523,459)   (2,274,020)
           
Total liabilities and stockholders' deficiency  $915,169   $435,526 

 

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

 

5
 

 

InterCore Energy, Inc.

(Formerly Heartland Bridge Capital, Inc.)

Condensed Statement of Operations

(Unaudited)

 

   Three months ended September 30,   Nine months ended September 30, 
   2012   2011   2012   2011 
                 
Revenues from related party  $2,521   $-   $3,151   $- 
                     
Cost of revenues   -    -    -    - 
                     
Gross profit (loss)   2,521    -    3,151    - 
                     
Operating expenses:                    
                     
Research and development   30,000    37,259    121,450    141,131 
General and administrative   193,846    448,118    772,898    1,263,417 
Charge for shares issued in connection with Myself acquisition agreement (Note 6(g))   855,000    -    855,000    - 
                     
Total operating expenses   1,078,846    485,377    1,749,348    1,404,548 
                     
Operating loss   (1,076,325)   (485,377)   (1,746,197)   (1,404,548)
                     
Other expense - Interest   (64,852)   (46,176)   (180,941)   (143,262)
                     
Net loss from continuing operations   (1,141,177)   (531,553)   (1,927,138)   (1,547,810)
                     
Loss from discontinued operations   -    (189,193)   -    (379,134)
                     
Net loss  $(1,141,177)  $(720,746)  $(1,927,138)  $(1,926,944)
                     
Net loss per common share - Basic and diluted                    
Continuing operations  $(0.006)  $(0.004)  $(0.012)  $(0.011)
Discountinued operations   -   $(0.001)  $-   $(0.003)
   $(0.006)  $(0.005)  $(0.012)  $(0.013)
                     
Weighted average common shares outstanding - Basic and diluted   188,195,677    148,063,068    166,903,634    144,438,534 

  

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

 

6
 

 

InterCore Energy, Inc.

(Formerly Heartland Bridge Capital, Inc.)

Condensed Statement of Stockholders' Deficiency

For the Nine Months Ended September 30, 2012

(Unaudited)

 

   Preferred Stock Series A   Preferred Stock Series B   Common Stock   Additional   Accumulated   Total 
   Shares   Amount   Shares   Amount   Shares   Amount   Paid-In Capital   Deficit   Deficiency 
                                     
Balance, December 31, 2011   2,000,000   $200    3,000,000   $300    148,464,180   $14,846   $3,419,264   $(5,708,630)  $(2,274,020)
                                              
Issuance of common stock for cash in connection with exercise of warrants (Note 6(b))   -    -    -    -    3,515,940    352    390,308    -    390,660 
                                              
Issuance of shares in connection with the cashless exercise of warrants (Notes 6(b) and 7)   -    -    -    -    18,032,166    1,803    (1,803)   -    - 
                                              
Issuance of shares in connection with investment in Epec Biofuels Holdings, Inc. (Notes 4(c) and 6(d))   -    -    -    -    10,000,000    1,000    99,000    -    100,000 
                                              
Issuance of common stock for cash  (Notes 6(e) and 6(f))   -    -    -    -    7,800,000    780    38,220    -    39,000 
                                              
Issuance of shares in connection with Myself acquisition agreement (Note 6(g))   -    -    1,500,000    150    18,000,000    1,800    853,050    -    855,000 
                                              
Shares issued for services (Note 6(h))   -    -    -    -    1,110,024    111    258,895    -    259,006 
                                              
Share-based compensation   -    -    -    -    -    -    34,033    -    34,033 
                                              
Net loss   -    -    -    -    -    -    -    (1,927,138)   (1,927,138)
                                              
Balance, September 30, 2012   2,000,000   $200    4,500,000   $450    206,922,310   $20,692   $5,090,967   $(7,635,768)  $(2,523,459)

  

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

 

7
 

 

InterCore Energy, Inc.

(Formerly Heartland Bridge Capital, Inc.)

Condensed Statement of Cash Flows

(Unaudited)

 

   Nine months ended September 30, 
   2012   2011 
         
Cash flows used in operating activities:          
           
Net loss  $(1,927,138)  $(1,547,810)
           
Loss from discountinued operations   -    (379,134)
           
Loss from continuing operations   (1,927,138)   (1,926,944)
           
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:          
Stock-based compensation expense:          
Common shares issued for services   259,006    235,739 
Warrants issued for services   34,033    335,212 
Charge for shares issued in connection with Myself acquisition agreement (Note 6(g))   855,000    - 
           
Changes in operating assets and liabilities:          
Decrease in prepaid expenses and other current assets   30,646    14,467 
Increase in accounts payable   72,777    448,243 
Increase in accounts payable due to related parties   38,880    - 
Increase in accrued compensation   191,500    106,500 
Increase in accrued expenses   177,927    48,442 
Increase in deferred revenue   6,849    - 
           
Net cash used in continuing operations   (260,520)   (738,341)
           
Net cash provided by discontinued operations   -    166,776 
           
Net cash used in operations   (260,520)   (571,565)
           
Cash flows provided by (used in) investing activities:          
           
Investment in HepatoChem   (110,000)   - 
Investment in Legends & Heroes   (75,000)   - 
Investment in Epec   (275,000)   - 
           
Net cash used in investing activities in continuing operations   (460,000)   - 
           
Net cash provided by the acquisition of discountinued operations   -    229,819 
           
Net cash provided by (used in) investing activities   (460,000)   229,819 
           
Cash flows provided by (used in) financing activities:          
           
Proceeds from sale of common stock   39,000    97,703 
Proceeds from the exercise of warrants   390,660    171,650 
Proceeds from issuance of notes payable to related party   250,150    81,297 
Repayment of notes payable   (9,001)   (9,103)
           
Net cash flows provided by financing activities in continuing operations   670,809    341,547 
           
Net cash flows used in financing activities in discontinued operations   -    (16,173)
           
Net cash flows provided by financing activities   670,809    325,374 
           
Net increase (decrease) in cash   (49,711)   (16,372)
           
Cash - Beginning of period   52,422    19,997 
           
Cash - End of period  $2,711   $3,625 
           
Supplemental disclosures of cash flow information:          
           
Cash paid for:          
Interest  $1,625   $193 
Income taxes  $-   $- 
           
Supplemental disclosures of non-cash operating, investing, and financing activities:          
           
Issuance of common stock - Cashless exercise of warrants  $1,803   $- 
Issuance of common stock - Investment in Epec Biofuels Holdings, Inc.  $100,000   $- 
Issuance of Series A Convertible Preferred Stock - Satisfaction of subscription liability  $-   $100,000 
Issuance of Series B Convertible Preferred Stock - Satisfaction of subscription liability  $-   $750,000 
Issuance of common stock in payment of principal and interest  $-   $521,894 
           
Acquisition of iSafe companies:          
Acquisition of assets other than cash  $-   $1,089,373 
Assumption of liabilities  $-   $348,792 
Issuance of common stock  $-   $875,000 
Issuance of warrants  $-   $95,400 

 

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

 

8
 

 

InterCore Energy, Inc. and Subsidiaries

(Formerly Heartland Bridge Capital, Inc.)

Notes to the Condensed Financial Statements

September 30, 2012

(Unaudited)

 

1)Business

 

InterCore Energy, Inc. (formerly known as Heartland Bridge Capital, Inc.) (the "Company") was organized under the laws of the State of Delaware on April 29, 2010. While operating as Heartland Bridge Capital, inc., the Company focused upon investments and acquisition opportunities primarily in products and companies involved in the market segments of clean and renewable energy, medical technology, nanotechnology, and environmentally-friendly (green) waste management. On March 30, 2012, the Company decided to intensify its focus in the energy sector and the related opportunities within and, to that end, the Board of Directors elected to change the name of the Company to InterCore Energy, Inc.

 

On March 22, 2011, the Company acquired 100% of the ownership interests in iSafe Imaging, LP, eMediSafe, LP, and iSafe Imaging Canada Ltd. (collectively referred to as "iSafe") and on November 22, 2011, sold iSafe to a company controlled by the Company's majority shareholder.

 

2)Basis of Presentation and Going Concern

 

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America ("US GAAP"). However, in the opinion of management, the accompanying unaudited condensed financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of the Company as of September 30, 2012 and the related statements of operations and cash flows for the interim period then ended. The balance sheet amounts as of December 31, 2011 were derived from audited financial statements. For further information, refer to the audited financial statements and related disclosures that were filed by the Company with the Securities and Exchange Commission on Form 10-K/A for the fiscal year ended December 31, 2011 on May 11, 2012.

 

The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred significant losses and negative cash flows from operations since its inception in April 2010 and has an accumulated deficit of $7,635,768 as of September 30, 2012. Cash used in operating activities during the nine months ended September 30, 2012 totaled $260,520 and it has a working capital deficiency of $3,433,459 as of September 30, 2012. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company has historically financed its activities through the private placement of equity securities. To date, it has dedicated most of its financial resources to general and administrative expenses in the pursuit of the business plan described in the preceding paragraphs.

 

9
 

 

The Company’s ability to execute its business plan is dependent upon its ability to raise additional equity, secure debt financing, and/or generate revenue.

 

The Company can give no assurance that such financing will be available on reasonable terms or available at all or that it can generate revenue. Should the Company not be successful in obtaining the necessary financing or generating revenue to fund its operations, the Company would need to curtail or cease its operational activities. The accompanying condensed financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

3)Significant Accounting Policies and Recent Accounting Pronouncements

 

a)Significant Accounting Policies

 

The Company's complete accounting policies are described in Note 3 to the audited financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2011.

 

Use of Estimates - The preparation of financial statements in conformity with US GAAP 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 for the reporting period. Such estimates include, but are not limited to, the valuation of investments, the valuation of deferred tax assets, and stock-based compensation expense. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

 

Stock-Based Compensation - The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as expense over the period during which the recipient is required to provide services in exchange for that award. Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period.

 

Stock-based compensation expense aggregated $67,304 and $201,686 for the three months ended September 30, 2012 and 2011, respectively, and $293,009 and $570,951 for the nine months ended September 30, 2012 and 2011, respectively was classified in general and administrative expense.

 

Earnings (Loss) Per Share - The Company calculates basic and diluted net loss per common share by dividing net loss by the weighted-average number of common shares outstanding for the period. Basic and diluted net loss per common share were the same since the inclusion of common shares issuable pursuant to the exercise of warrants and the conversion of preferred stock in the calculation of diluted net loss per common share would have been anti-dilutive.

 

10
 

 

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the nine months ended September 30, 2012 and 2011:

 

   2012   2011 
         
Warrants   40,480,390    48,630,150 
Series A Convertible Preferred Stock   18,000,000    18,000,000 
Series B Convertible Preferred Stock   202,500,000    135,000,000 
Convertible note   17,256,168    15,572,061 
Total   278,236,558    217,382,211 

 

Investments - The Company accounts for investments in other entities under the cost method of accounting when the Company does not hold a significant interest in nor has any management control over those entities.

 

Fair Value - The Company determines the estimated fair value of amounts presented in these financial statements using available market information and appropriate methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. The estimates presented in the financial statements are not necessarily indicative of the amounts that we could realize in a current exchange between buyer and seller. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. We have based these fair value estimates on pertinent information available as of September 30, 2012 and December 31, 2011 and, as of those dates, the carrying value of all amounts approximates fair value.

 

We have categorized our assets and liabilities at fair value based upon the following fair value hierarchy:

 

a)Level 1 inputs which utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.

 

b)Level 2 inputs which utilize other-than-quoted prices that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and other information that are observable at commonly quoted intervals.

 

c)Level 3 inputs which are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, we categorize such asset or liability based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 

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Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category. As a result, the unrealized gains and losses for assets within the Level 3 category presented in the tables below may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in historical company data) inputs.

 

The following are the major categories of assets measured at fair value during the nine months ended September 30, 2012, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3):

 

   Level 1:                 
   Quoted Prices   Level 2:   Level 3:   Total   Total 
   In Active   Significant   Significant   Assets   Impairment 
   Markets For   Other   Unobservable   As Of   For 
   Identical   Observable   Inputs   The Period   The Period 
   Assets   Inputs      Ended   Ended 
                          
Investments  $-   $-   $910,000   $910,000   $- 

 

Based on its assessments, the Company did not record any asset impairment charges during the nine months ended September 30, 2012 and 2011, Additionally, there were no changes in fair value, including net transfers in and/or out of the Level 3 type asset/liability category, of all financial asset and liabilities measured at fair value on a recurring basis using significant unobservable inputs during the three and nine months ended September 30, 2012 and 2011.

 

Impairment of Long-Lived Assets - The Company reviews long-lived assets, including intangible assets other than goodwill, for impairment whenever changes in circumstances indicate that the carrying value of the asset may not be recoverable. In connection with this review, the Company also reevaluates the periods of depreciation and amortization for these assets. The Company assesses recoverability by determining whether the net book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company determined that the carrying value of the asset may not be recoverable, it measures any impairment based on the projected future discounted cash flows as compared to the asset’s carrying value. Based on its assessments, the Company did not incur any impairment charges during the nine months ended September 30, 2012 and 2011.

 

Financial Instruments - The Company records financial instruments consisting of cash, accounts receivable, and accounts payable at historical cost and notes payable at face value less principal repayments and considers such amounts to approximate fair value due to their short term nature of those instruments.

 

Discontinued Operations - On March 22, 2011 and as more fully described in Note 10, the Company acquired the operations of iSafe and on November 22, 2011, sold it to a company controlled by the Company's majority shareholder. Consequently, the operating results of that entity during 2011 are presented in these financial statements as discontinued operations.

 

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Retroactive Adjustment For Forward Stock Split - On May 15, 2012, the Company effected a nine-for-one forward stock split of its Common Stock. Consequently, all earnings per share and other share related amounts and disclosures have been retroactively adjusted for this action.

 

b)Recent Accounting Pronouncements

 

In May 2011, the FASB issued "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs". This updated accounting guidance establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards. This guidance includes amendments that clarify the intent about the application of existing fair value measurements and disclosures, while other amendments change a principle or requirement for fair value measurements or disclosures. This guidance is effective for interim and annual periods beginning after December 15, 2011. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

 

In June 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income". This update provides companies two options for presenting Other Comprehensive Income (“OCI”) which currently is included as part of the statement of stockholders’ equity. An OCI statement can now be included within the income statement, which together will make a statement of total comprehensive income. Alternatively, companies can also present an OCI statement that is separate from an income statement, but the two statements must appear consecutively within a financial report. This statement is effective for fiscal quarters and years beginning after December 15, 2011. The effect of adopting this statement had no impact on the Company’s financial position or results of operations.

 

Other recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated financial statements.

 

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4)Investments

 

Investments as of September 30, 2012 and December 31, 2011 consisted of the following:

 

   2012   2011 
         
HepatoChem, Inc.  $210,000   $100,000 
          
Legends and Heroes, Inc   325,000    250,000 
           
Epec Biofuels Holdings, Inc.   375,000    - 
           
Total  $910,000   $350,000 

 

The Company owns 12% or less of the common stock of each entity on a fully diluted basis, and has no control or significant influence over management. All such investments are accounted for utilizing the cost method of accounting

 

a)HepatoChem, Inc.

 

HepatoChem is a privately held company that offers pharmaceutical and biotech companies a reliable and efficient means of accessing small molecule metabolites in quantities needed in the drug development process. The investment consists of 21,000 shares of Series A Convertible Preferred Stock as of September 30, 2012 representing no more than approximately 4% of the total shares outstanding on a fully diluted basis as of that date. Such securities have liquidation preference over the company’s common stock, are convertible into the company’s common stock, have voting rights, and have certain protective voting provisions to help maintain their preferential position.

 

b)Legends & Heroes, Inc.

 

Legends & Heroes is a privately held company that developed and markets garments that constantly delivers cosmetic and other ingredients to the wearer's skin. The investment consists of approximately 82,723 shares of common stock as of September 30, 2012 representing no more than approximately 3% of the total shares outstanding as ofthat date.

 

c)Epec Biofuels Holdings, Inc.

 

Epec Biofuels ("Epec") is a privately held company that is pursuing the development of ethanol production facilities which utilize sweet sorghum as a feedstock rather than corn or sugarcane. The investment consists of 8,000,000 shares of common stock as of September 30, 2012 representing no more than approximately 12% of the total shares outstanding on a fully diluted basis as of that date.

 

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Under the terms of the Epec investment agreement dated May 21, 2012:

 

i)The Company agreed to purchase 20,000,000 shares of common stock of Epec for the following consideration:

 

a)$150,000 cash;

 

b)2,250,000 shares of the Company's common stock; and

 

c)A commitment to pay an additional $600,000 in cash on or before August 15, 2012;

 

The terms of this commitment were modified on August 23, 2012 and the Company made payment aggregating $50,000 through that date. The new terms provided for the remaining $550,000 to be paid in twenty-two weekly installments of $25,000 beginning on September 7, 2012 and ending on February 1, 2013. In connection with the modification of the terms of this agreement, the Company agreed to issue an additional 7,750,000 shares of the Company's common stock which has been valued at fair market value and recorded as an additional cost of the investment in Epec. The Company has made three of the installment payments described above and is not in compliance with the investment agreement. However, Epec has not issued the Company a formal notice of default and the parties are currently negotiating a resolution to this situation.

 

ii)8,000,000 of the 20,000,000 shares of Epec were issued to the Company and the balance of 12,000,000 shares will be issued upon payment of the $600,000 described above; and

 

iii)The Company has the right through May 2015 to elect one seat on Epec's Board of Directors and a second seat upon payment of the $600,000 described above. Effective July 6, 2012, the Company appointed its President and Chief Executive Officer to Epec's Board of Directors.

 

The Company accounted for this investment at cost as follows:

 

Cash  $275,000 
Issuance of 10,000,000 shares of common stock at fair value   100,000 
      
Total  $375,000 

 

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5)Notes Payable

 

Notes payable as of September 30, 2012 and December 31, 2011 consisted of the following:

 

   2012   2011 
         
Convertible note payable  $1,666,667   $1,666,667 
           
Note payable due to related party   688,893    374,382 
           
Other   1,018    10,019 
           
Total  $2,356,578   $2,051,068 

 

The notes payable described above were classified as current liabilities as of September 30, 2012 and December 31, 2011.

 

a)Convertible note payable

 

On December 8, 2010, the Company issued the convertible note payable in connection with the acquisition of rights to a royalty stream related to the sales of the Myself pelvic muscle trainer

 

This note accrues interest at the rate of 10% per annum and such interest is payable monthly. The principal amount was due in five equal installments at the end of each quarter through June 30, 2012 and matured on that date. Principal and accrued interest is convertible into common stock at the rate of $0.167 per share at any time at the option of the holder. The Company has the option at any time to pay principal and accrued interest with common stock in lieu of cash at the rate of $0.111 per common share.

 

On March 31, 2011, the Company elected to pay principal of $333,333 and accrued interest of $60,821 through the issuance of 3,547,386 shares of common stock at the rate of $0.111 per share as permitted under the terms of the note.

 

As of September 30, 2012, the Company is not in compliance with the terms of this note due to non-payment of principle and interest. However, the note holder has not issued the Company a formal notice of default.

 

On November 1, 2012 and November 20, 2012 as more fully described in Note 12(b), the note holder purchased shares of the Company's common stock for cash payments aggregating $15,000.

 

b)Note payable due to a related party

 

On various dates from December 16, 2010 through September 30, 2012, the Company entered into a series of short term notes with the Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors in the aggregate principal amount of $581,447. During that period, principal and interest due for all these notes were consolidated into one note in the principal amount of $688,893which accrues interest at the rate of 15% per annum and matures on December 31, 2012.

 

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6)Common and Preferred Stock

 

a)On March 30, 2012, the Company's the Board of Directors approved a resolution implementing a nine-for-one forward stock split of the Company's Common Stock and increasing the total number of authorized shares of Common Stock to 750,000,000. Those actions became effective on May 15, 2012. Consequently, all earnings per share and other share related amounts and disclosures have been retroactively adjusted to reflect such actions.

 

b)On various dates from February 10, 2012 through May 16, 2012, the Company issued 3,515,940 shares of common stock at $0.111 per share to private investors in connection with the exercise of warrants and received proceeds of $390,308.

 

c)On May 15, 2012, the Company issued 18,032,166 shares of common stock pursuant to the exercise of warrants by the holders for the purchase 27,000,000 shares of common stock utilizing the cashless exercise provision of those instruments. This transaction was accounted for as an increase to common stock of $1,803, representing the par value of the shares issued, with a corresponding decrease to additional paid-in capital.

 

d)On May 21, 2012 and August 23, 2012, the Company issued an aggregate of 10,000,000 shares of common stock in connection with an investment in Epec Biofuels Holdings, Inc. as more fully described in Note 4(c).

 

e)On July 18, 2012, the Company issued 2,800,000 shares of common stock at $0.05 per share to a private investor and received proceeds of $14,000.

 

f)On July 25, 2012, the Company issued 5,000,000 shares of common stock at $0.05 per share to the Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors, and received proceeds of $25,000.

 

g)On August 31, 2012, the Company issued 18,000,000 shares of common stock and 1,500,000 shares of Series B Convertible Preferred Stock pursuant to the terms of an agreement dated December 9, 2010 for the acquisition of a royalty stream related to the Myself pelvic muscle trainer. Under the terms of that agreement, the Company was obligated to issue these additional shares as the average closing stock price during the month of July 2012 did not meet certain thresholds specified in the agreement. Terms of that agreement are more fully described in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2011 as filed with the Commission on May 11, 2012, financial statement footnote 11(a),

 

These shares of common stock and Series B Preferred Stock were valued at $0.01 and $0.45 per share, respectively, for total amounts of $180,000 and $675,000, respectively, based upon the most recent closing price of the Company's shares on the date of issuance. During the year ended December 31, 2011, the Company recorded an impairment charge which represented the full carrying value of the Myself pelvic muscle trainer intangible asset. Therefore, the $855,000 aggregate value of these shares was recorded as an expense charge to expenses during the three months ended September 30, 2012.

 

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h)On various dates during the nine months ended September 30, 2012 and 2011, the Company issued 1,110,024 and 1,124,586 shares of common stock, respectively, under the terms of a service agreement. Such shares were valued at an average of $0.23 and $0.25 per share, respectively, based upon the most recent closing price of the Company's shares. During the three months ended September 30, 2012 and 2011, the Company recorded expense in this connection of $33,301 and $140,989, respectively. During the nine months ended September 30, 2012 and 2011, the Company recorded expense in this connection of $259,006 and $276,714, respectively. All such amounts were classified in general and administrative expense.

 

7)Warrants

 

The Company utilized the Black-Scholes option pricing model to estimate the fair value of such instruments. The stock price on the date of issuance was based upon the most recent price per share realized in the private placement of common shares as there is no established public market for the Company's common stock. The risk-free interest rate assumption was based upon the observed interest rates appropriate for the expected term of the equity instruments. The expected volatility assumption was based upon the historical volatility of the common stock of comparable companies. The expected dividend yield was assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future.

 

Assumptions made in calculating the fair value of warrants during the nine months ended September 30, 2012 and 2011 were as follows:

 

   2012   2011 
         
Risk free interest rate   0.3% - 1.7%   0.8% - 2.1%
Dividend yield   Zero    Zero 
Volatility   100%   100%
Expected term (in years)   1.6 - 10.0    3.0 - 3.7 

 

On April 13, 2012 and May 14, 2012, the Company entered into warrant repricing agreements wherein the exercise price for Series C, D, and E Warrants of $0.56, $0.44, and $0.33 per share, respectively, were collectively revised to $0.056 per share. The Company recorded no expense during the three months ended June 30, 2012 in connection with such repricing as the incremental value was determined to be de minimus.

 

On May 15, 2012, as previously described in Note 6(b), warrants for the purchase 27,000,000 shares of common stock were exercised by the holders utilizing the cashless exercise provision of those instruments.

 

On July 20, 2012, the Company granted warrants to officers and members of management for the purchase of 23,500,000 shares of common stock at prices ranging from $0.12 to $0.30 per share. Such warrants vest in equal amounts on February 1, 2013, August 1, 2013, and February 1, 2014.

 

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A summary of the changes in warrants outstanding during the nine months ended September 30, 2012 is as follows:

 

       Weighted   Weighted     
       Average   Average     
       Exercise   Remaining   Aggregate 
   Number of   Price   Contractual   Intrinsic 
   Shares   Per Share   Term (Years)   Value 
                 
Outstanding at December 31, 2011   47,496,330   $0.33    2.1    - 
Granted   23,500,000   $0.21           
Exercised - Cash   (3,515,940)  $0.06           
Exercised - Cashless exercise   (27,000,000)  $0.06           
Forfeited   -                
Outstanding at September 30, 2012   40,480,390   $0.14    6.1    - 
                     
Warrants exercisable at September 30, 2012   16,980,390   $0.18    1.3    - 

 

8)Commitments and Contingencies

 

a)In connection with the Company's investment in Epec as more fully described in Note 4(c)(i)(c), the Company committed to pay an additional $475,000 in cash. Upon such payment, Epec will deliver an additional 12,000,000 shares of its common stock to the Company.

 

b)The Company is subject to litigation in the ordinary course of business. Management believes that the Company has adequate insurance coverage and accrues loss contingencies for all known matters that are probable and can be reasonably estimated and that the resolution of any such items will not have a material effect upon the Company's financial position or results of operations.

 

9)Licensing/Sale Agreement

 

One June 7, 2012, the Company entered into an agreement with Biopack Environmental, Inc. ("Biopack") granting it in exchange for the payment of a licensing fee of $10,000 the exclusive right to develop and market for a one year period beginning with the date of the agreement a novel medical applicator owned by the Company that is capable of delivering medicants and internal devices into the human body in an atraumatic fashion.

 

Terms of this agreement permit Biopack to acquire ownership of this product during the one year period beginning with the date of this agreement by assuming certain liabilities incurred by the Company related to the development of this product. Additionally, under certain terms and conditions during that period, the Company has the right to require Biopack to acquire ownership of this product.

 

The licensing fee is being amortized to income ratably over the term of the agreement.

 

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Biopack is a related party as it is controlled by the Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors.

 

10)Discontinued Operations

 

On March 22, 2011 and as more fully described in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2011 as filed with the Commission on May 11, 2012, financial statement footnote 11(c), the Company acquired the operations of iSafe and on November 22, 2011, sold it to a company controlled by the Company's majority shareholder. Consequently, the operating results of that entity are presented in these financial statements as discontinued operations.

 

Summarized financial information for discontinued operations for the three and nine month periods ended September 30, 2011 is a follows:

 

   Three   Nine 
   Months   Months 
   Ended   Ended 
   September 30, 2011   September 30, 2011 
         
Revenues  $109,129   $283,025 
Cost of revenues   176,984    365,679 
Gross profit (loss)   (67,855)   (82,654)
General and administrative expenses   119,416    293,194 
Interest expense   1,922    3,286 
Net loss from discontinued operations  $(189,193)  $(379,134)

 

11)Related Party Transactions

 

a)As more fully described in Note 8, on November 22, 2011, the Company sold iSafe to an entity that is controlled by one of the Company's Directors. That individual also controls the Rockland Group, the Company's majority shareholder.

 

b)As more fully described in Note 9, on June 7, 2012, the Company entered into a licensing/sale agreement for a novel medical product owned by the Company with an entity that is controlled by one of the Company's Directors. That individual also controls the Rockland Group, the Company's majority shareholder.

 

c)As more fully described in Note 6(f), on July 25, 2012 the Company sold shares of common stock to the Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors.

 

d)As more fully described in Note 5(b), as of September 30, 2012, the Company has a note payable due to the Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors.

 

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e)Accounts payable due to related parties as of September 30, 2012 consists of $11,500 due to the Rockland Group, the Company's majority shareholder and an entity controlled by one of the Company's Directors, and $27,300 due to Rivercoach Partners, LP, an entity controlled by the Company's Vice President of Investments.

 

12)Subsequent Events

 

a)The Company is currently performing due diligence in connection with the potential acquisition of an operating company in the energy field. Consummation of such a transaction is subject to the completion of such due diligence and the negotiation and execution of a stock purchase agreement and other related agreements that are satisfactory to all concerned parties. The Company can make no assurances or representations as to the probability of the consummation of this transaction.

 

b)On November 1, 2012 and November 20, 2012, the Company issued an aggregate of 4,500,000 shares of common stock at $0.034 per share to the holder of the convertible note payable described in Note 5(a) and received aggregate proceeds of $15,000.

 

c)On November 6, 2012, the Company issued 4,900,000 shares of common stock at $0.034 per share to private investors and received aggregate proceeds of $16,500.

 

Management has evaluated subsequent events to determine if events or transactions occurring after the balance sheet date require potential adjustment to or disclosure in such financial statements.

 

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ITEM 2Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability 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 risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.

 

The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

 

Summary Overview

 

We were incorporated on April 29, 2010 as I-Web Media, Inc. to pursue a website development and internet marketing business. In connection with a change of control on November 3, 2010, we appointed new management and directors, changed our name to Heartland Bridge Capital, Inc., and changed our business focus to investments and acquisition opportunities primarily in products and companies involved in the market segments of clean and renewable energy, medical technology, nanotechnology, and environmentally-friendly (green) waste management.

 

On March 30, 2012, we decided to further intensify our focus in the energy sector and the related opportunities within and, to that end, we elected to change the name of the Company to InterCore Energy, Inc. While operating as Heartland Bridge Capital, Inc. and as more fully described in our Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the Commission on May 11, 2012, we have assembled an excellent portfolio of investments in the life sciences arena and look forward to maximizing their value to our shareholders. During the three months ended March 31, 2012, we invested an additional $185,000 in those entities, but do not expect to make any additional investments of that nature in the long term.

 

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During the six months ended September 30, 2012, we invested $375,000 in Epec Biofuels Holdings, Inc. This entity is developing alternative manufacturing technologies and distribution methods for ethanol and represents our first investment in the energy sector. Epec's technology allows sweet sorghum to be used to replace corn as the feedstock for bioethanol production. Sweet sorghum is abundant in supply, has a lower cost than corn, is tolerant of drought conditions, and allows for multiple annual harvests. Using Epec's integrated approach, bioethanol should be produced with dramatically higher yields on a pound-for-pound basis with significant valuable co-products.

 

For the long term, we believe that the more intense focus under our new name on the many exciting opportunities in the energy sector will provide returns at least as attractive but with better marketplace understanding and response.

 

These financial statements were prepared under the assumption that we will continue as a going concern. Our ability to do so is dependent upon our ability to obtain additional equity or debt financing, reduce expenditures, and/or generate revenue. These financial statements do not include any adjustments that might result from the outcome of that uncertainty.

 

Current cash and working capital resources, including funds recently received from the sale of equity securities, are not sufficient to support our activities. We plan to fund our activities through the sale of equity securities as more fully described in the Liquidity and Capital Resources section in the following paragraphs.

 

Liquidity and Capital Resources

 

We had cash of $3,000 at September 30, 2012 compared to $52,000 at December 31, 2011. This net decrease of $49,000 consisted of:

 

$671,000   Proceeds from financing activities
 (460,000)  Cash used in investing activities
 (260,000)  Cash used in operating activities
$(49,000)  Net decrease

 

We have incurred significant losses and negative cash flows from operations since our inception in April 2010. We have an accumulated deficit of $7,636,000 and a working capital deficiency of $3,433,000 as of September 30, 2012. These conditions raise substantial doubt about our ability to continue as a going concern. We have historically financed our activities through the private placement of equity securities. To date, we have dedicated most of our financial resources to general and administrative expenses in the pursuit of the business plan described in the preceding paragraphs.

 

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We plan to fund our development and commercialization activities beyond September 30, 2012 primarily through the sale of debt and/or equity securities. We cannot be certain that such funding will be available on acceptable terms or available at all. To the extent that we secure additional debt or raise funds by issuing equity securities, our stockholders may experience significant dilution. If we are unable to raise funds when required or on acceptable terms, we may have to: a) Significantly delay, scale back, or discontinue the development and/or commercialization of one or more product candidates; b) Seek collaborators for product candidates at an earlier stage than would otherwise be desirable and/or on terms that are less favorable than might otherwise be available; or c) Relinquish or otherwise dispose of rights to technologies, product candidates, products, or services that we would otherwise seek to develop or commercialize ourselves.

 

We can give no assurance that such financing will be available on reasonable terms or available at all or that it can generate revenue. Should we not be successful in obtaining the necessary financing or generate revenue to fund our operations, we would need to curtail or cease operational activities. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

 

Critical Accounting Policies

 

The following accounting policies are critical in fully understanding and evaluating our financial statements:

 

a)Valuation and recovery of intangible and investment assets; and
b)Stock-based compensation.

 

Our accounting policies are described in Note 3 to the condensed financial statements for the nine months ended September 30, 2012 contained elsewhere in this report and in Note 3 to the audited financial statements contained in our Annual Report on Form 10-K/A for the year ended December 31, 2011.

 

Results of Operations

 

For the three months ended September 30, 2012 compared to the three months ended September 30, 2011

 

Revenues and Cost of Revenues

 

Our financial statements for the three months ended September 30, 2012 and 2011 do not report revenues and cost of revenues for iSafe as it was sold in November 2011 and, consequently, all such amounts have been reclassified to discontinued operations.

 

Revenues of $3,000 reported for the three months ended September 30, 2012 are attributable to the licensing of development and marketing rights to a novel medical applicator.

 

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Research and Development Expense

 

Research and development expense for the three months ended September 30, 2012 was $30,000 compared to $37,000 for the comparable period in the prior year. Such expenditures were comparable and are attributable to research and development activity associated with the novel medical applicator owned by us.

 

General and Administrative Expense

 

General and administrative expense for the three months ended September 30, 2012 was $194,000 compared to $448,000 for the comparable period in the prior year. This decrease of $254,000 consisted primarily of decreases of $129,000 in professional fees and $135,000 in stock based compensation expenses associated with activities necessary to establish our operations and implement our business plan. The former was attributable to the absence of unusual and non-recurring activity in 2012 that was present in 2011 associated with the establishment of the business and the ownership of iSafe. Professional fees consist of management, legal, financial advisory, audit, and other professional fees while stock-based compensation is a non-cash charge related to equity incentives for management and financial advisors.

 

Charge for Shares Issued in Connection With the Myself Acquisition

 

During the three months ended September 30, 2012, the Company issued 18,000,000 shares of common stock and 1,500,000 shares of Series B Convertible Preferred Stock pursuant to the terms of the agreement dated concerning the acquisition of the Myself pelvic muscle trainer royalty stream in December 2010. Under the terms of that agreement, the Company was obligated to issue these additional shares if the average closing stock price of the Company's common stock during the month of July 2012 did not meet certain specified price thresholds. The fair value of these additional shares were determined to be $855,000 and the Company recorded an expense in that amount during the three months ended September 30, 2012. There was no similar expense during the comparable period in the prior year.

 

Interest Expense

 

Interest expense for the three months ended September 30, 2012 was $65,000 compared to $46,000 for the comparable period in the prior year. These amounts are attributable to the increase in the various notes payable outstanding during that period.

 

Loss From Discontinued Operations

 

On March 22, 2011 and as more fully described in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the Commission on May 11, 2012, financial statement footnote 11(c), the Company acquired the operations of iSafe and on November 22, 2011, sold it to a company controlled by the Company's majority shareholder. Consequently, the operating results of that entity are presented in these financial statements as discontinued operations.

 

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Summarized financial information for discontinued operations for the three months ended September 30, 2011 is a follows:

 

Revenues  $109,000 
Cost of revenues   177,000 
Gross profit (loss)   (68,000)
General and administrative expenses   119,000 
Interest expense   2,000 
Net loss from discontinued operations  $(189,000)

 

For the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011

 

Revenues and Cost of Revenues

 

Our financial statements for the nine months ended September 30, 2012 and 2011 do not report revenues and cost of revenues for iSafe as it was sold in November 2011 and, consequently, all such amounts have been reclassified to discontinued operations.

 

Revenues of $3,000 reported for the nine months ended September 30, 2012 are attributable to the licensing of development and marketing rights to a novel medical applicator owned by us.

 

Research and Development Expense

 

Research and development expense for the nine months ended September 30, 2012 was $121,000 compared to $141,000 for the comparable period in the prior year. Such expenditures were generally comparable and are attributable to research and development activity associated with the novel medical applicator.

 

General and Administrative Expense

 

General and administrative expense for the nine months ended September 30, 2012 was $773,000 compared to $1,263,000 for the comparable period in the prior year. This decrease of $490,000 consisted primarily of decreases of $223,000 in professional fees and $278,000 in stock based compensation expenses associated with activities necessary to establish our operations and implement our business plan. The former was attributable to the absence of unusual and non-recurring activity in 2012 that was present in 2011 associated with the establishment of the business and the ownership of iSafe. Professional fees consist of management, legal, financial advisory, audit, and other professional fees while stock-based compensation is a non-cash charge related to equity incentives for management and financial advisors.

 

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Charge for Shares Issued in Connection With the Myself Acquisition

 

During the nine months ended September 30, 2012, the Company issued 18,000,000 shares of common stock and 1,500,000 shares of Series B Convertible Preferred Stock pursuant to the terms of the agreement dated concerning the acquisition of the Myself pelvic muscle trainer royalty stream in December 2010. Under the terms of that agreement, the Company was obligated to issue these additional shares if the average closing stock price of the Company's common stock during the month of July 2012 did not meet certain specified price thresholds. The fair value of these additional shares were determined to be $855,000 and the Company recorded an expense in that amount during the three months ended September 30, 2012. There was no similar expense during the comparable period in the prior year.

 

Interest Expense

 

Interest expense for the nine months ended September 30, 2012 was $181,000 compared to $143,000 for the comparable period in the prior year. These amounts are attributable to the increase in the various notes payable outstanding during that period.

 

Loss From Discontinued Operations

 

On March 22, 2011 and as more fully described in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the Commission on May 11, 2012, financial statement footnote 11(c), the Company acquired the operations of iSafe and on November 22, 2011, sold it to a company controlled by the Company's majority shareholder. Consequently, the operating results of that entity are presented in these financial statements as discontinued operations.

 

Summarized financial information for discontinued operations for the nine months ended September 30, 2011 is a follows:

 

Revenues  $283,000 
Cost of revenues   366,000 
Gross profit (loss)   (83,000)
General and administrative expenses   293,000 
Interest expense   3,000 
Net loss from discontinued operations  $(379,000)

 

ITEM 3Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

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ITEM 4Controls and Procedures

 

(a)Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2012,

 

The purpose of such controls is to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2012, our disclosure controls and procedures were not effective at the reasonable assurance level due lack of financial and personnel resources necessary to support the financial reporting function. Management will be taking measures to remediate this deficiency during the balance of 2012 as additional financial and other resources become available.

 

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or internal controls will prevent all error and all fraud. No matter how well conceived and operated, our disclosure controls and procedures can provide only a reasonable level of assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

 

(b)Changes in Internal Control over Financial Reporting

 

There are no changes to report during the three month period ended September 30, 2012.

 

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PART II – OTHER INFORMATION

 

ITEM 1Legal Proceedings

 

We are not a party to or otherwise involved in any legal proceedings.

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

ITEM1A Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds

 

On August 23, 2012, we issued 7,750,000 shares of our common stock with a restrictive legend to Epec Biofuels Holdings, Inc. in connection with the modification of an agreement related to our investment in that company. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and the investors were sophisticated, familiar with our operations, and there was no solicitation.

 

ITEM 3Defaults Upon Senior Securities

 

There have been no events which are required to be reported under this Item.

 

ITEM 4Mine Safety Disclosures

 

There have been no events which are required to be reported under this Item.

 

ITEM 5Other Information

 

Name Change and Forward Stock Split

 

Effective March 30, 2012, we decided to intensify our focus in the energy sector and the related opportunities within and, to that end, we elected to change the name of the Company to InterCore Energy, Inc. Simultaneously, our Board unanimously adopted, and stockholders holding a majority of the common stock approved, a resolution to effect a nine-for-one (9:1) forward stock split of our outstanding common stock and to increase the number of authorized shares of Common Stock from 250,000,000 to 750,000,000. During the period in which we operated as Heartland Bridge Capital, Inc., we assembled an excellent portfolio of investments in the life sciences arena look forward to maximizing the value of these investments to the benefit of our shareholders. For the longer term, though, we believe that a more intense focus under our new name on the many exciting opportunities in the energy sector will provide comparable or better returns with better marketplace understanding and response.

 

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The corporate actions described in the preceding paragraph went effective on May 16, 2012. Detailed information regarding these corporate actions can be found in our Definitive Information Statement on Schedule 14-C, filed with the Commission on April 20, 2012.

 

ITEM 6Exhibits

 

(a)Exhibits

 

2.1 (1)   Plan of Reorganization of AP Corporate Services, Inc.
     
3.1 (1)   Articles of Incorporation of I-Web Media, Inc. filed April 29, 2010
     
3.2 (5)   Amendment to Articles of Incorporation of I-Web Media, Inc., filed December 8, 2010 (effective December 29, 2010)
     
3.3 (5)   Restated Articles of Incorporation of Heartland Bridge Capital, Inc., filed December 8, 2010 (effective December 29, 2010)
     
3.4*   Amend to Articles of Incorporation of Heartland Bridge Capital, Inc. filed November 26, 2012 (effective May 16, 2012)
     
3.5 (1)   Bylaws of I-Web Media, Inc.
     
3.6 (5)   Restated Bylaws of Heartland Bridge Capital, Inc.
     
10.1 (1)   Form of “A” Warrant
     
10.2 (1)   Form of “B” Warrant
     
10.3 (1)   Form of “C” Warrant
     
10.4 (1)   Form of “D” Warrant
     
10.5 (1)   Form of “E” Warrant
     
10.6 (2)   Agreement to Purchase Common Stock by and between Kenneth S. Barton, Rockland Group, LLC, and I-Web Media, Inc., dated November 3, 2010
     
10.7 (2)   Securities Purchase Agreement by and between I-Web Media, Inc. and Rockland Group, LLC, dated November 4, 2010

 

30
 

 

10.8 (3)   Asset Purchase Agreement with New Horizon, Inc. dated December 9, 2010
     
10.9 (6)   Amendment No. 1 to Asset Purchase Agreement with New Horizon, Inc.
     
10.10 (3)   Convertible Promissory Note Held by New Horizon, Inc. dated December 9, 2010
     
10.11 (3)   Assignment of Rights Agreement with New Horizon, Inc. dated December 9, 2010
     
10.12 (3)   Asset Purchase Agreement with RWIP, LLC dated December 10, 2010
     
10.13 (3)   Convertible Promissory Note Held by RWIP, LLC dated December 10, 2010
     
10.14 (3)   Warrant Agreement with RWIP, LLC dated December 10, 2010
     
10.15 (3)   Consulting Agreement with RWIP, LLC dated December 13, 2010
     
10.16 (4)   Development Services Agreement with NorthStar Partners Consulting, LLC, dated December 22, 2010
     
10.17 (4)   Warrant Agreement with NorthStar Partners Consulting, LLC, dated December 22, 2010
     
10.18 (5)   Promissory Note Held by Rockland Group, LLC, dated December 16, 2010
     
10.19 (5)   Promissory Note Held by Rockland Group, LLC, dated December 27, 2010
     
10.20 (5)   Form of Warrant Issued to Officers, Directors and Consultants on December 29, 2010
     
10.21 (7)   Common Stock Purchase Warrant issued to Wexford Partners, L.P. dated March 21, 2011
     
10.22 (7)   Reorganization and Stock Purchase Agreement with the iSafe Entities and iSafe Holders dated March 21, 2011
     
10.23 (7)   Employment Agreement with Joseph W. Tischner dated March 22, 2011
     

 

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10.24 (8)   Promissory Note Held by Rockland Group dated December 29, 2010
     
10.25 (9)   Series A Preferred Stock Purchase Agreement by and between Heartland Bridge Capital, Inc. and HepatoChem, Inc. dated September 15, 2011
     
10.26 (9)   Purchase Agreement by and between Heartland Bridge Capital, Inc. and Digisort, LLC dated November 18, 2011
     
10.27 (10)   Letter of Intent with Legends & Heroes, Inc. dated December 31, 2011
     
10.28 (11)   Form of Warrant Repricing Agreement
     
10.29 (11)   Form of Repriced Warrant
     
10.30 (12)   Common Stock Purchase Agreement with Epec Biofuels Holdings, Inc. dated May 21, 2012
     
10.31 (12)   Form of Note with Epec Biofuels Holdings, Inc.
     
31.1*   Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
     
31.2*   Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
     
32.1*   Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2*  

Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS**   XBRL Instance Document
     
101.SCH**   XBRL Taxonomy Extension Schema Document
     
101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document

 

32
 

 

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 herewith.

 

**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

 

(1)Incorporated by reference from our Registration Statement on Form 10-12G/A filed with the Commission on August 12, 2010.
(2)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on November 8, 2010.
(3)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 15, 2010.
(4)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 23, 2010.
(5)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 30, 2010.
(6)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on January 14, 2011.
(7)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on March 24, 2011.
(8)Incorporated by reference from our Annual Report on Form 10-K filed with the Commission on April 15, 2011.
(9)Incorporated by reference from our Quarterly Report on Form 10-Q filed with the Commission on November 21, 2011.
(10)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on December 8, 2011.
(11)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on May 29, 2012.
(12)Incorporated by reference from our Current Report on Form 8-K filed with the Commission on May 29, 2012.

 

33
 

 

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. 

 

  InterCore Energy, Inc.
   
Dated:  November 26, 2012   /s/         James F. Groelinger
  By: James F. Groelinger
  Its: Chief Executive Officer

 

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