UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

 

x Quarterly Report under Section 13 or 15 (D) of the

Securities and Exchange Act of 1934

 

For The Quarterly Period Ended December 31, 2012

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE

EXCHANGE ACT

 

Commission File Number 0 - 52724

 

FIRST CORPORATION

(Exact name of small business issuer as specified in its charter)

 

Colorado		90-0219158
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

 

Maranello, Watch House Green, Felsted, Essex, CM6 3EF, United Kingdom Address of Principal Executive Office (Street and Number)

 

(403) 461-7283

(Issuer’s telephone number)

 

         Indicate by check mark whether the registrant (1) filed all reports  required to be filed by Section  13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or 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 during the preceding 12 months.

 

                                Yes ¨   No ¨

 

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See 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

 

 Indicate by check mark whether the issuer is a "shell company" as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes ¨ No x

 

 State the number of shares outstanding of each of the issuer's classes of common equity as of February 11, 2013: 263,852,500 shares.

 

 

 

---

 

FIRST CORPORATION

 

TABLE OF CONTENTS

 

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Balance Sheets as of December 31, 2012 (unaudited) and September 30, 2012	2
	Condensed Statements of Operations for the Three Months Ended December 31, 2012 and 2011, and from December 27, 1995 (date of inception) through December 31, 2012 (unaudited)	3
	Condensed Statements of Changes in Stockholders’ Deficit for the Three Months Ended December 31, 2012 (unaudited)	4
	Condensed Statements of Cash Flows for the Three Months Ended December 31, 2012 and 2011, and from December 27, 1995 (date of inception) through December 31, 2012 (unaudited)	5
	Notes to Condensed Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4T.	Controls and Procedures	16
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 2.	Recent Sales of Unregistered Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 5.	Other Information	18
Item 6.	Exhibits	18
Signatures		19

 

 

Item 1. Financial Statements.

 

  

FIRST CORPORATION

(A DEVELOPMENTAL STAGE COMPANY)

CONDENSED BALANCE SHEETS

 

		December 31, 2012				September 30, 2012
		(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	9,695			$	4,475
Prepaid insurance			6,584				9,102
TOTAL CURRENT ASSETS			16,279				13,577
Investment in Gecko Landmarks Ltd, at fair value			1,000,000				1,000,000
TOTAL ASSETS		$	1,016,279			$	1,013,577
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable		$	8,671			$	5,135
Accrued expenses			83,480				50,064
Due to stockholders			27,300				27,300
Convertible notes payable, net of debt discount of $86,697 and $142,499			1,369,563				1,271,261
TOTAL CURRENT LIABILITIES			1,489,014				1,353,760
COMMITMENTS AND CONTINGENCIES-See note
STOCKHOLDERS' DEFICIT
Preferred Stock, $ .001 par value, authorized 10,000,000 none issued			-				-
Common Stock, $ .001 par value, 1,000,000,000 shares authorized
263,852,500 shares issued and outstanding at December 31, 2012
and September 30, 2012			263,853				263,853
Additional paid-in capital			843,641				843,641
Accumulated deficit during developmental stage			(1,580,229	)			(1,447,677	)
TOTAL STOCKHOLDERS' DEFICIT			(472,735	)			(340,183	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	1,016,279			$	1,013,577

 

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

 

 

FIRST CORPORATION

(A DEVELOPMENTAL STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

										From
		For the three				For the three				December 27, 1995
		months ended				months ended				(Date of Inception) to
		December 31, 2012				December 31, 2011				December 31, 2012
Revenue		$	-			$	-			$	-
Total revenue			-				-				-
Operating Expenses
Mineral exploration costs			-				-				30,700
Write off mineral claim			-				-				15,000
General and administrative			48,334				16,464				710,070
Total operating expenses			48,334				16,464				755,770
Net income (loss) from operations			(48,334	)			(16,464	)			(755,770	)
Other expenses
Loss from extinguishment of debt			-				-				417,055
Interest and amortization of debt			84,218				50,270				407,404
Total other expenses			84,218				50,270				824,459
Net loss		$	(132,552	)		$	(66,734	)		$	(1,580,229	)
Weighted average common shares			263,852,500				259,015,440
Net Loss Per Share
(Basic and Fully Dilutive)		$	-			$	-

 

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

 

 

FIRST CORPORATION

(A DEVELOPMENTAL STAGE COMPANY)

CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT

FOR THE THREE MONTHS

ENDED DECEMBER 31, 2012

(Unaudited)

 

		Preferred Stock								Common Stock
		Number of Shares				Par Value Amount				Number of Shares				Par Value Amount				Additional Paid-In Capital				Accumulated Deficit During Developmental Stage				Total
Balance, September 30, 2012			-			$	-				263,852,500			$	263,853			$	843,641			$	(1,447,677	)		$	(340,183	)
Net loss			-				-				-				-				-				(132,552	)			(132,552	)
Balance, December 31, 2012			-			$	-				263,852,500			$	263,853			$	843,641			$	(1,580,229	)		$	(472,735	)

 

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

  

 

FIRST CORPORATION

(A DEVELOPMENTAL STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the three				For the three				From December 27, 1995
		months ended				months ended				(Date of inception) to
		December 31, 2012				December 31, 2011				December 31, 2012
Cash flows from operating activities:
Net loss		$	(132,552	)		$	(66,734	)		$	(1,580,229	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of debt discount			55,802				45,229				313,617
Issuance of stock for services rendered			-				-				15,750
Write off mineral claims			-				-				15,000
Loss on extinguishment of debt			-				-				417,055
Changes in operating assets and liabilities:
Prepaid expenses			2,518				(7,051	)			(6,584	)
Accounts payable			3,537				(8,330	)			8,672
Accrued expenses			33,415				5,040				107,119
Net cash used in operating activities			(37,280	)			(31,846	)			(709,600	)
Investing activities:
Acquisition of mineral claims			-				-				(15,000	)
Net cash used in investing activities			-				-				(15,000	)
Cash flows from financing activities:
Proceeds from convertible promissory notes			42,500				-				392,500
Proceeds from note payable to related party			-				-				15,000
Repayment of note payable to related party			-				-				(15,000	)
Issuance of common stock for cash			-				18,500				172,650
Advances from shareholder			-				-				208,560
Repayments to shareholder			-				-				(39,415	)
Net cash provided by financing activities			42,500				18,500				734,295
Net increase (decrease) in cash and cash equivalents			5,220				(13,346	)			9,695
Cash and cash equivalents at the beginning of period			4,475				27,793				-
Cash and cash equivalents at the end of period		$	9,695			$	14,447			$	9,695
Supplemental disclosure of cash flow information:
Cash paid for:
Interest		$	-			$	-
Taxes		$	-			$	-
Non-cash investing and financing activities:
Issuance of stock for services		$	-			$	-			$	15,750
Issuance of stock for shareholder advances		$	-			$	-			$	101,725
Beneficial conversion feature of convertible notes payable		$	-			$	-			$	221,148
Issuance of convertible notes payable for investment		$	-			$	-			$	1,000,000
Issuance of convertible notes payable in settlement
of accrued interest		$	-			$	-			$	23,640
Reclass from shareholder advance into convertible notes
payable		$	-			$	-			$	40,120

 

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

 

 

FIRST CORPORATION

(A DEVELOPMENTAL STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

December 31, 2012
(Unaudited)

 

NOTE 1 – Description of Business

 

First Corporation (the "Company") was incorporated under the laws of the State of Colorado on December 27, 1995. The Company's activities to date have been limited to organization and capital formation. The Company was originally "an exploration stage company" and had acquired a series of mining claims for exploration and formulated a business plan to investigate the possibilities of a viable mineral deposit. However, due to difficulty securing financing, the board of directors voted to discontinue operations of mineral claims, and pursue other investment opportunities. The company is a development stage entity, as defined by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 915.

 

To date, the Company has generated no sales revenues, and has incurred significant expenses and has sustained losses. Consequently, the Company's operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception on December 27, 1995 (Date of Inception) through December 31, 2012, the Company has accumulated losses of $1,580,229.

  

NOTE 2- Summary of Significant Accounting Policies

 

(A) Basis of Presentation

  

The accompanying unaudited condensed financial statements have been prepared in accordance with Rule S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, the results from operations for the three month period ended December 31, 2012 are not necessarily indicative of the results that may be expected for the year ending September 30, 2013. The unaudited condensed financial statements should be read in conjunction with the September 30, 2012 financial statements and footnotes thereto included in the Company’s Form 10-K filed with the SEC.

 

(B)

Going Concern

 

As reflected in the accompanying unaudited condensed financial statements, the Company is in the development stage. The accompanying unaudited condensed financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying unaudited condensed financial statements, the Company has no sales and has incurred a net loss of $1,580,229 since inception.

 

 

This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan.

 

The unaudited condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

  

(C)

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.

 

(D)

Use of Estimates

 

The preparation of unaudited condensed financial statements in conformity with generally accepted accounting principles 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 unaudited condensed financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from these estimates.

 

(E)

Fair Value of Financial Instruments

 

Fair Value Measurements under GAAP clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy. It only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments.

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets): or model-derived calculations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

 

The carrying value of the Company's cash and cash equivalents, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed, otherwise only available information pertinent to fair value has been disclosed.

 

The Company considers its investment in Gecko Landmarks Ltd to be level 3, and accounting guidance requires a reconciliation of the beginning and ending balances for each major category of assets. The reconciliation is as follows:

 

		Fair Value Measurements Using Significant
		Unobservable Inputs (Level 3)
		As of				As of
		December 31, 2012				September 30, 2012
Beginning balance of investments in Level 3		$	1,000,000			$	-
Total unrealized gains included in comprehensive income			-				-
Purchases in and/or sales out of Level 3			-				1,000,000
Transfers in/out of Level 3			-				-
Ending balance of investments in Level 3		$	1,000,000			$	1,000,000

 

(F)

Per Share Data

 

Basic and diluted net loss per common share for all periods presented is computed based on the weighted average number of common shares outstanding as defined by ASC 260, “Earnings Per Share”. The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company's common stock at the average market price during the period. For the period ended December 31, 2012 and the year ended September 30, 2012, any common stock equivalents were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.

 

(G)

Provision for Income Taxes

 

The Company uses the asset and liability method of accounting for income taxes. This method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of certain assets and liabilities. Deferred income tax assets and liabilities are computed annually for the difference between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period, plus or minus the change during the period in deferred tax assets and liabilities.

 

 

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The Company had no significant deferred tax items arise during any of the periods presented.

 

(H)

Impairment of Long-Lived Assets

 

In accordance with Accounting Standards Codification (“ASC”) Topic 350, “Intangibles – Goodwill and others”, the Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. In such circumstances, the Company will estimate the future cash flows expected to result from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company will recognize an impairment loss to adjust to the fair value of the asset. At December 31, 2012, the Company does not believe its long term asset requires an impairment loss.

 

(I)

Concentration of Credit Risk

 

The Company maintains its temporary cash investments in high credit quality financial institutions. At times, such amounts may exceed federally insured limits.

 

(J)

Recent Accounting Pronouncements

 

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management will have, a material impact on the Company's present or future financial statements.

 

NOTE 3- Investment in Gecko Landmarks, Ltd

 

Effective June 4, 2012, The Company conducted the closing of its Securities Subscription and Option Agreement with Gecko Landmarks Limited, a limited liability company formed under the laws of Finland. First Corporation purchased a 10% equity interest in Gecko for an aggregate purchase price of $1,000,000. The purchase was funded by issuance of convertible notes in the original principal amount of $1,000,000. (Note 6).

 

 

The Company has the option to acquire an additional 23% of the share capital of Gecko through March 31, 2013 for an amount of 3.45 million dollars ($3,450,000). As of December 31, 2012, the Company has not exercised the option for additional ownership in Gecko.

 

NOTE 4 – Common Stock

 

Preferred Stock

 

The Company has authorized the issuance of 10,000,000 shares of preferred stock, with a par value of $.001 per share. The Company’s Board of Directors has broad discretion to create one or more series of preferred stock and to determine the rights, preferences, and privileges of any such series. As of December 31, 2012, none have been issued.

 

Common Stock

 

Effective October 2012, the Company amended its articles of incorporation to increase the authorized stock from one hundred million shares, par value $.001 per share, to 1,000,000,000 shares, par value $.001 per share. The board also approved a 10-for-1 split of the issued and outstanding shares which took effect in October 2012 and effectively increased the issued and outstanding common shares increased from 26,385,250 to 263,852,500. All references in the unaudited condensed financial statement and notes thereto have been retroactively restated to reflect the stock split.

 

As of December 31, 2012, there were 263,852,500 shares of common stock issued and outstanding.

 

NOTE 5 – Related Party Transactions

 

During the year ended September 30, 2012, the Company re-classed $40,120 of a shareholder/officer or a company controlled by the shareholder/office of the Company into the convertible note. (refer note 6).

 

As of December 31, 2012 and September 30, 2012, the Company owed two separate shareholders the sum of $27,300. These advances do not carry a stated interest rate and are payable to the shareholders on demand.

 
NOTE 6 – Convertible Notes Payable

 

On April 8, 2011, the Company issued an 8% convertible note payable in the principal face amount of $250,000 in exchange for cash proceeds of the same amount. The note provides for the payment of eight percent (8%) interest per annum with an initial due date of April 8, 2012. The note also provides for potential conversion into common stock of the Company at a price of $.060 per share. Based upon the intrinsic value on the date of issuance, the note has a beneficial conversion feature, for which the Company has recorded a debt discount in the amount of $179,166. This debt discount has been fully amortized. On April 26, 2012, the note holders agreed to extend the note to April 26, 2013, including accrued interest in the amount of $23,640, plus shareholder loan amount of $40,120. The new note amounts to $313,760 and has a beneficial conversion feature, for which the Company has recorded a debt discount in the amount of in the amount of $26,147. As of December 31, 2012, the Company has accrued interest payable on the face amount of the note in the amount of $17,222. The Company has also recognized $6,591 and $45,229 as interest expense from the amortization of the debt discount for the three months ended December 31, 2012 and 2011, respectively.

 

 

On March 1, 2012, the Company issued an 8% convertible note payable in the principal face amount of $100,000 in exchange for cash proceeds of the same amount. The notes provides for the payment of 8% interest per annum with a due date of March 1, 2013. The note also provides for potential conversion into common stock of the Company at a price of $.060 per share. Based upon the intrinsic value of the date of issuance the note has a beneficial conversion feature, for which the Company has recorded a debt discount in the amount of $20,000. The debt discount is being amortized to the maturity date of the note, which is twelve months from the date of issuance. At December 31, 2012, the Company has accrued interest payable on the face amount of the note in the amount of $6,711. The Company has also recognized $5,101 and $-0- as interest expense from the amortization of the debt discount for the three months ended December 31, 2012 and 2011, respectively.

 

On June 1, 2012, and June 11, 2012 the Company issued 8% convertible notes payable in the aggregate principal face amounts of $1,000,000 in exchange for cash proceeds of the same amount. The notes provide for the payment of 8% interest per annum with due dates of June 1, 2013 and June 11, 2013. The notes also provides for potential conversion into common stock of the Company at a price of $.60 per share. Based upon the intrinsic value of the date of issuance the note has a beneficial conversion feature, for which the Company has recorded debt discounts in the amount of $175,000. The debt discount is being amortized to the maturity date of the notes, which is twelve months from the dates of issuance. At December 31, 2012, the Company has accrued interest payable on the face amount of the note in the amount of $45,224. The Company has also recognized $44,110 and $-0- as interest expense from the amortization of the debt discount for the three months ended December 31, 2012 and 2011, respectively.

 

On December 20, 2012, the Company issued 8% convertible notes payable in the principal face amount of $42,500 in exchange for cash proceeds of the same amount. The notes provides for the payment of 8% interest per annum with a due date of December 20, 2013. The notes also provides for potential conversion into common stock of the Company at a price of $.03 per share. Based upon the intrinsic value of the date of issuance the note does not have a beneficial conversion feature. At December 31, 2012, the Company has accrued interest payable on the face amount of the note in the amount of $104.

 

NOTE 7 – Material Agreements

 

On July 8, 2009 the Company entered into a letter of intent containing a binding agreement for a share exchange whereby the Company would acquire 1.6 million shares of Acquma Holdings Limited (Acquma) from Louis Consulting in exchange for 4.8 million shares of the Company's restricted common stock. Upon closing of the agreement, the Company would own 10% of the issued and outstanding shares of Acquma. The closing was scheduled to take place on or before September 15, 2009. As of the date of issuance of these financial statements, the Company had not closed on this agreement.

 

On October 16, 2009, the Company replaced the above agreement with a new agreement that specified that the Company would acquire all of the issued and outstanding shares of Acquma for the Acquma shareholders in exchange for the issuance of 64,437,848 shares of the Company's common stock. Upon closing of this agreement, Acquma will become a wholly-owned subsidiary of First Corporation. The Company has paid $40,000 in legal fees with regards to this potential acquisition. As of the date of issuance of these financial statements, the Company had not closed on this agreement.

 

 

NOTE 8-COMMITMENTS AND CONTINGENCIES

 

Consulting agreements

 

In August, 2012 the Company entered into a consulting agreement with an individual who will join the Board of Gecko Landmarks Ltd. and provide feedback and recommendations regarding investment and development initiatives, at an annual expense of $50,000, plus expenses. Consulting expense for the period ended December 31, 2012 relating to this agreement is $12,500 and is included in general and administrative expense.

 

Litigation

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as described, we are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

  

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

Corporate Background

 

First Corporation is a corporation formed under the laws of the State of Colorado on December 27, 1995. Our principal executive offices are located in England. Our original business was the exploration of mineral claims for commercially viable deposits of precious and base metals. However, on May 18, 2008, our board of directors voted unanimously to discontinue exploration of our mineral claims due to the difficulty in securing adequate financing. We have since pursued other opportunities.

 

Overview

 

We are a company with a 10% interest in Gecko Landmarks Ltd., a Finnish company, as well as an option to acquire a further interest in Gecko Landmarks Ltd., which option has been extended to March 31, 2013 by mutual consent of the parties.

 

Effective October 2012, First Corporation amended its Articles of Incorporation to increase the authorized stock from one hundred million shares, par value $.001 per share, to 1,000,000,000 shares, par value $.001 per share. The board also approved a 10-for-1 split of the issued and outstanding shares, which took effect in October 2012 and effectively increased the issued and outstanding common shares from 26,385,250 to 263,852,500. All references in the unaudited condensed financial statement and notes thereto have been retroactively restated to reflect the stock split.

 

Results of Operations

 

For the period from inception on December 27, 1995 to December 31, 2012 we have had no revenues.

 

General and Administrative Expenses

 

For the three months ended December 31, 2012, we had general and administrative expenses of approximately $48,000 compared with approximately $16,000 for the three months ended December 31, 2011. The increase resulted from increased professional and consulting fees following our purchase of 10% of Gecko Landmarks Ltd. and the related option and our increase in authorized shares and related stock split. Other expenses in both quarters consisted primarily of legal and accounting fees in connection with our quarterly and annual reports and shareholder approval and related SEC filings.

 

Interest Expense

 

For the quarter ended December 31, 2012, we had interest expenses of approximately $84,000 compared with approximately $50,000 for the quarter ended December 31, 2011. The increase resulted from an increase in convertible notes payable borrowings and amortization of debt discount.

  

Net Loss

 

As a result of the foregoing, we incurred a net loss of approximately $133,000 for the quarter ended December 31, 2012, compared with a net loss of approximately $67,000 for the quarter ended December 31, 2011.

 

Liquidity and Capital Resources

 

As of December 31, 2012, we had a deficit in working capital (current liabilities exceeded current assets) of $1,472,735 as reflected in the table below. We will require additional funding to exercise our option to purchase an additional interest in Gecko Landmarks Ltd. and for any future operations. We cannot be certain that such funding will be available.

 

 

Working Capital

 

		At December 31, 2012				At September 30, 2012				Percentage Increase / (Decrease)
Current Assets		$	16,279			$	13,577				20	%
Current Liabilities			1,489,014				1,353,760				10	%
Working Capital (Deficit)		$	(1,472,735	)		$	(1,340,183	)			(10	)%

 

Cash Flows

 

		Three Months Ended December 31
		2012				2011
Net Cash Used in Operating Activities		$	37,280			$	31,846
Net Cash Used in Investing Activities			-				-
Net Cash Provided by Financing Activities		$	42,500			$	18,500

 

Outstanding Convertible Notes

 

As of December 31, 2012, First Corporation was indebted to the holders of its 8% Convertible Notes in the aggregate principle amount of $1,456,260 plus accrued interest, without giving account to the discount reflected in our financial statement for the notes’ beneficial conversion feature.

 

On December 20, 2012, the company issued 8% convertible notes payable in the aggregate principal face amounts of $42,500 in exchange for cash proceeds of the same amount. The notes provide for the payment of 8% interest per annum with a due dates of December 20, 2013. The notes also provides for potential conversion into common stock of the Company at a price of $0.03 per share. Based upon the intrinsic value of the date of issuance the note does not have a beneficial conversion feature.

 

Reliance on Future Financings

 

As of December 31, 2012, we had no cash on hand beyond what we require for short term expenses. From our inception, we have used our common stock and loans from our shareholders, officers and directors to raise money for our operations and for our anticipated acquisition. We have not attained profitable operations and are dependent upon obtaining financing to pursue our plan of operation. For these reasons, our auditors stated in their report to our audited financial statements for the year ended September 30, 2012, that there is substantial doubt that we will be able to continue as a going concern.

 

Going Concern

 

As reflected in the accompanying unaudited condensed financial statements, First Corporation is in the development stage. The accompanying unaudited condensed financial statements have been prepared assuming we will continue as a going concern. As shown in the accompanying unaudited condensed financial statements, we have no sales and have incurred a net loss of $1,580,229 since inception.

 

This raises substantial doubt about First Corporation’s ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to raise additional capital and implement its business plan.

 

The unaudited condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Critical Accounting Policies and Estimates

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.

 

 

Use of Estimates

 

The preparation of audited financial statements in conformity with generally accepted accounting principles 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 audited financial statements and the reported amounts of revenues and expenses during the year. Accordingly actual results could differ from these estimates.

 

Fair Value of Financial Instruments

 

Fair Value Measurements under GAAP clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy. It only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments.

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets): or model-derived calculations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

The carrying value of the Company's cash and cash equivalents, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed, otherwise only available information pertinent to fair value has been disclosed.

 

Per Share Data

 

Basic and diluted net loss per common share for all periods presented is computed based on the weighted average number of common shares outstanding as defined by Accounting Standard Codification 260-10, “Earnings Per Share” (“ASC 260-10). The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company's common stock at the average market price during the period. For the period ended December 31, 2012 and the year ended September 30, 2012, any common stock equivalents were excluded from the shares used to calculate diluted earnings per share as their inclusion would reduce net loss per share.

 

Provision for Income Taxes

 

The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of certain assets and liabilities. Deferred income tax assets and liabilities are computed annually for the difference between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period, plus or minus the change during the period in deferred tax assets and liabilities.

 

 

Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The Company had no significant deferred tax items arise during any of the periods presented.

 

Impairment of Long-Lived Assets

 

In accordance with Accounting Standards Codification (“ASC”) Topic 350, “Intangibles – Goodwill and others”, the Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. In such circumstances, the Company will estimate the future cash flows expected to result from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company will recognize an impairment loss to adjust to the fair value of the asset. At December 31, 2012, the company does not believe its long term asset requires an impairment loss.

 

Concentration of Credit Risk

 

The Company maintains its temporary cash investments in high credit quality financial institutions. At times, such amounts may exceed federally insured limits.

 

Reclassification

 

Certain reclassifications have been made to prior periods' data to conform to the current period's presentation. These reclassifications had no effect on reported income or losses.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources be charged to operations as incurred.

 

ACCOUNTING PRONOUNCEMENTS

  

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management will have, a material impact on the Company's present or future financial statements.

 

Item 3. - Quantitative and Qualitative Disclosures about Market Risk.

 

The Company is a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and is not required to provide the information required under this item.

 

Item 4T. Controls and Procedures.

 

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal 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 Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are, as of the date covered by this Quarterly Report, not effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

 

 

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the quarter, we received a letter from our auditor in connection with its audit of our financial statements for the year ended September 30, 2012, indicating a material weakness in our internal controls over financial reporting. We plan to discuss this with our accounting professionals and work with them to develop appropriate controls.

 

Limitations on Effectiveness of Controls and Procedures

 

Our management, including our Principal Executive Officer and Principal Accounting and Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 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, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Controls over Financial Reporting

 

In connection with the evaluation of our internal controls during our last fiscal quarter, our principal executive officer and principal financial officer has determined that there have been no changes to our internal controls over financial reporting that occurred during the last quarter and materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 

PART II

 

OTHER INFORMATION

 

Item 1.    Legal Proceedings

 

None

 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

 

On December 20, 2012, the company issued 8% convertible notes payable in the aggregate principal face amounts of $42,500 in exchange for cash proceeds of the same amount. The notes provide for the payment of 8% interest per annum with a due dates of December 20, 2013. The notes also provides for potential conversion into common stock of the Company at a price of $0.03 per share. The notes were issued pursuant to Section 4(2) of the Securities Act to accredited, sophisticated investors and not in connection with any public offering.

 

Item 3.    Defaults Upon Senior Securities

 

None.

 

Item 4, Submission of Matters to a Vote of Security Holders

 

None.

 

Item 5.  Other Information

 

None.

 

 

Item 6.  Exhibits

 

 

(a) Exhibits.

 

10           Form of 8% Convertible Note issued to ISI Nominees Ltd.

31           Rule 13a-14(d) Certification

32           Section 1350 Certification

 

  

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

	FIRST CORPORATION
Dated: February 14, 2013
	By:	/s/ Andrew Clarke
		Director, Chief Executive and Financial Officer

 

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