UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended:    June 30, 2013 (First Quarter)
		or
o		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 000-1273988

  

 Date of Report (date of earliest event reported):   August 14, 2013

 

FUTUREWORLD ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE	000-1273988	81-0562883
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

6365 53 rd . Street North, Pinellas Park, Florida	33781
(Address of principal executive offices)	(Zip Code)

 

Registrant's telephone number, including area code:   (813) 321-7862

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class		Name of Each Exchange on Which Registered
None		None
Securities registered pursuant to section 12(g) of the Act: Common Stock, $0.0001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.		o Yes	x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.		o Yes	x No
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.	o 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).				o Yes			x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.				o Yes			x No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
o  Large accelerated filer	o  Accelerated filer	o  Non-accelerated filer	x  Smaller reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).					o Yes	x No

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:

 

Voting Common Equity	Non-voting Common Equity
$135,000	None

 

The number of shares outstanding of each of the registrant’s classes of common stock, as of June 30, 2013:

 

Common stock, par value $0.0001 per share	416,373,966
Other	None

 

 

 

 

 

 

FuttureWorld Energy, Inc.

 Annual Report on Form 10-Q

For the First Quarter Ended June 30, 2013

 

INDEX

 

PART I	FINANCIAL INFORMATION		PAGE
Item 1	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2013 (unaudited) and June 30, 2013 (unaudited)		3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 (unaudited)		5
	Condensed Consolidated Notes to Financial Statements (unaudited)		6
Item 2	Management's Discussion and Analysis or Plan of Operation		16
Item 3	Quantitative and Qualitative Disclosures About Market Risk		23
Item 4	Controls and Procedures		23
Item 4 T	Controls and Procedures		23
PART II	OTHER INFORMATION
Item 1	Legal Proceedings		24
Item 1A	Risk Factors		24
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3	Defaults Upon Senior Securities		24
Item 4	Removed and Reserved		24
Item 5	Other Information		24
Item 6	Exhibits		24
Signatures			25

 

 

 

 

 

 

DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or portions thereof) are incorporated by reference into the Parts of this Form 10-Q noted:

NONE

 

Forward-Looking Statements

 

This Annual Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” “estimates” or similar language, and among other things:  (i) events that may occur in the future, (ii) implementation of our business model; development and marketing of our products and services and (iii) prospects for revenues and profitability.  All forward-looking statements included in this document are based on information available to us on the date hereof.  We caution investors that our business and financial performance and the matters described in these forward-looking statements are subject to substantial risks and uncertainties.  Because of these risks and uncertainties, some of which may not be currently ascertainable and many of which are beyond our control, actual results could differ materially from those projected in the forward-looking statements. Deviations between actual future events and our estimates and assumptions could lead to results that are materially different from those expressed in or implied by the forward looking statements. We do not intend to update these forward looking statements to reflect actual future events. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FUTUREWORLD ENERGY, INC.
Consolidated Balance Sheets
				June 3,			March 31,
				2013			2013
				(unaudited)			(unaudited)
Assets
Current assets
	Cash		$	0		$	0
	Accounts receivable			0			0
	Inventory			0			0
	Note receivable			0			0
Total current assets				0			0
Property & equipment, net of accumulated - net				0			1,523
Intangible property, net of accumulated - net				1,343,906			1,343,438
Deposits				0			0
Total Assets			$	1,343,906		$	1,343,961
Liabilities and Stockholders' Equity
Current liabilities
	Accounts payable		$	5,330		$	1,922
	Accrued expenses			692,289			652,658
	Deferred revenue			0			0
	Notes payable			0			0
	Loans and notes payable, related parties			581,000			581,000
Total current liabilities				1,278,619			2,275,008
Notes payable to shareholder				0			0
Total liabilities				1,278,619			1,235,504
Stockholders' Equity
	Preferred stock, 100,000,000 authorized, $.0001 par value:
	None issued and outstanding
	Common stock, $.0001 par value, 1000,000,000 shares
	authorized; 416,373,966 and 416,373,966 shares
	issued and outstanding, respectively			34,436			34,436
	Additional paid-in capital			6,045,567			6,045,567
	Minority interest in subsidiary
	Accumulated deficit			(6,014,716)			(5,960,546)
Total stockholders' equity				65,287			119,457
Total Liabilities and Stockholders' Equity			$	1,343,907		$	1,354,960
.
The accompanying notes are an integral part of these financial statements.

 

 

 

 

 

 

 

 

FUTUREWORLD ENERGY, INC.

Consolidated Statements of Operations

(unaudited)

 

 

			For the Three Months Ended
			June 30 & Year End March 31
				2013			2013
Revenues			$	-		$	-
Direct costs				-			-
Gross Profit				-			-
Operating expenses:
	Salaries and benefits			36,514			146,055
	Consulting			-			-
	Professional fees			3,977			38,949
	General and administrative			-			-
	Amortization and depreciation			11,054			42,810
	Total operating expenses			51,545			190,312
Other income (expense):
	Interest expenses			(2,624)			(18,365)
	Sale of assets, net			-			-
	Total other (expense)						-
Loss from operations before income taxes				(54,169)			(18,365)
Provision for income taxes				-			-
			$	(54,169)		$	(18,365)
Minority Interest				-			-
Net loss			$	(54,169)		$	(208,677)
Earnings (loss) per share:
	Basic		$	(0.0012)		$	(0.0003)
Weighted average shares outstanding
	Basic			416,373,966			416,373,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FUTUREWORLD ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
				For the three Months Ended
				June 30, March 31
					2013				2013
Cash Flows from Operating Activities:
	Net (loss) income			$	(54,169)			$	(208,677)
	Adjustment to reconcile Net Income to net
	cash provided by operations:
	Depreciation and amortization				11,054				42,810
	Amortization of deferred revenue
	Loss on sale of assets
	Issuance of stock in settlement of services
	Minority interest
	Changes in assets and liabilities:
	Accounts receivable
	Inventory
	Due from affiliate
	Related party  loans				(181,000)				(175,182)
	Prepaid and other
	Accounts payable				(5,330)				(1,922)
	Accrued expenses				(77,455)				(76,848)
	Customer deposits and deferred revenue								-
	Net Cash (Used) Provided by Operating Activities				(306,900)				(419,819)
Cash Flows from Financing Activities:
	Proceeds from issuance of stock
	Proceeds from issuance of note payable
	Repayments of notes payable
	Proceeds from sale of assets
	Related party advances				5,818				175,182
	Net Cash (Used) Provided by Financing Activities				5,818				175,182
Net increase/decrease in Cash					(301,082)				(244,637)
Cash at beginning of period					-				-
Cash at end of period				$	-			$	-
Supplemental cash flow information:
	Interest paid			$	-			$	-
	Taxes paid			$	-			$	-
The accompanying notes are an integral part of these financial statements.

 

 

 

 

 

FUTUREWORLD ENERGY, INC.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of June 30, 2013

(Unaudited)

 

 

1. History of the Company and Nature of the Business

 

OUR HISTORY

 

“We”, “us” and “our” refer to FutureWorld Energy, Inc., a Delaware corporation.

 

The history of our incorporation and our ownership, in chronological order, is as follows:

 

●	We were incorporated in Delaware on June 23, 2002.
●	J. Marshall Batton, Jeffrey A. Hoke, Jacques Laurin and Douglass W. Wright were our founders and original stockholders, each then owning twenty-five percent of our common stock.
●	On July 29, 2005, FutureTech Capital LLC, a company entirely owned by Saeed Talari, acquired eighty percent of our common stock as a result of our acquisition of the Opticon Network Manager software (see below) from FutureTech and the stock ownership of each of our founders was reduced to five percent.
●	Also on July 29, 2005, following our acquisition of the Opticon Network Manager software, FutureTech and our founders exchanged all of our issued and outstanding common stock for an aggregate of sixty-six percent of FutureWorld Energy, Inc., (formerly Isys Medical) issued and outstanding common and all of its preferred stock; and, as a result of the exchange, we became a wholly owned subsidiary of FutureWorld Energy.
●	Before the exchange of our shares for FutureWorld Energy’s shares, Mr. Talari legally and beneficially owned eighty-eight percent of FutureWorld Energy’s common stock and beneficially owned through FutureTech eighty percent of our common stock.
●	After the exchange, our founders each owned directly four percent of FutureWorld Energy’s common stock and Mr. Talari, directly and indirectly, owned eighty percent of FutureWorld Energy’s common stock.
●	On April 4, 2006, we consolidated (reverse split) our issued and outstanding common stock by a factor of 0.30107143.
●	In connection with FutureWorld Energy’s announcement to spin off OptiCon Systems, our Board of Directors approved a stock dividend of 99,118 of our common stock payable to our sole shareholder, FutureWorld Energy.
●	On May 29, 2008, FutureWorld Energy paid a stock dividend to its stockholders consisting of 100% of our outstanding common.  As of this date, we ceased being a subsidiary of FutureWorld Energy.
●	On May 2008, we changed our name from Hathaway Corporation to Isys medical.
●	On May 29, 2008, we consolidated (reverse split) our issued and outstanding common stock by a factor of 0.05 (1 for 20).  Statement of all share amounts, whether before or after May 29, 2008 in this annual report have been adjusted for the share consolidation.
●	On April 2009, we changed our name from Isys Medical to FutureWorld Energy.
●	On May 13, 2009, Mr. Talari converted the principal amount and accrued interest of one convertible note, and the accrued interest and a portion of the principal amount of a second note into 50,000,000 shares of our common stock respectively.  After these conversions, Mr. Talari legally and beneficially owned eighty-four percent of our common stock.
●	June 10, 2009, FutureWorld Energy acquires SeaTech Energy Inc., a Nevada corporation, for 150M shares in Common Stock or $1,500,000.

 

Before our acquisition of the Opticon Network Manager software, both FutureWorld Energy (formerly Isys Medical) and FutureTech were under the direct, common control of Mr. Talari. Prior to our acquisition of the Opticon Network Manager software, Mr. Talari had no control over us. With that acquisition, however, we also came under Mr. Talari’s indirect control. Although Mr. Talari may be deemed to have determined or had a controlling influence on the terms of the exchange of stock between our stockholders and FutureWorld Energy, because he owned (a) all the stock of FutureTech which was our then eighty-percent stockholder and (b) eighty-eight percent of FutureWorld Energy’s common stock, Mr. Talari did not control the decision of our founders who owned twenty percent of our common stock and who have advised us they made independent, individual decisions to enter into the exchange of their stock in us for FutureWorld Energy common stock. See the following table which details the aggregate of Mr. Talari’s direct and indirect stock ownership of each entity at each stage of the history described above.

 

 

 

 

  Nature of Business

 

FutureWorld Energy, Inc., a Delaware corporation, is a U.S. diversified energy company, listed on the Over the Counter exchange, which was formed to capitalize on the burgeoning markets in renewable and alternative energy technologies. FutureWorld Energy, together with its subsidiaries, focused on the identification, acquisition, development, and commercialization of renewable and alternative energy technologies globally. Through established relationships with universities, research centers and government agencies, we strive to identify technologies on the leading edge of innovation that would contribute immensely to the global energy needs while protecting the future for our children and theirs.

 

2.   Basis of Presentation, Business and Summary of Significant Accounting Policies

 

(a) Basis of Presentation

 

The accompanying balance sheets as of June 30, 2013 and 2012, and the statements of operations, statements of cash flows, and statement of stockholders’ equity for the years ended June 30, 2013 and 2012 of FutureWorld Energy, Inc., have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in financial position at June 30, 2013 and 2012 and for all periods presented, have been made.

 

(b) Nature of the Business, and History of the Company and its Subsidiaries

 

The nature of the business and the history of the Company and its subsidiaries is as follows:

  

The Company was organized as Hathaway Corporation on July 23, 2002 as a Delaware corporation.  Since its inception, the Company has been in the development stage.  On May 6, 2008, the Company changed its name to Isys Medical, Inc., and again on April 9, 2009, the Company changed its name to FutureWorld Energy, Inc. (“FutureWorld’ or “the Company”).

 

Infrax Systems, Inc. (formerly OptiCon Systems, Inc.), organized as a Nevada corporation on October 22, 2004, was in the development stage and in the business of selling and/or licensing a fiber optic management software system under the name OptiCon Network Manager, originally developed, and acquired from Corning Cable System, Inc. through a related company, FutureTech Capital, LLC ("FutureTech").

 

On July 29, 2005, FutureWorld acquired 100% of the outstanding common stock of Infrax from their shareholders in exchange for common and preferred stock of FutureWorld, at on that date Infrax became a wholly owned subsidiary of FutureWorld.

 

On August 31, 2007, The Company paid a stock dividend to its stockholders, consisting of 100% of the outstanding common stock of Infrax, at the rate of one share of Infrax stock for every two shares they own of FutureWorld.  As of August 31, 2007, Infrax ceased being a subsidiary of FutureWorld.

 

Diabetes Detection, Inc. (“DDI”), was organized March 1, 2006, and since its inception was in the development stage, and dedicated to developing the next generation medical device company focused on the practical needs of healthcare practitioners at the point of care.  DDI was developing a suite of medical diagnostic and healthcare information tools that would reside on standard PDA cellular communication devices, beginning with their patented solution for diagnosing and monitoring diabetic neuropathy.

 

On March 1, 2006, the Company acquired 100% of the outstanding common stock of DDI from thier shareholders in exchange for common stock of FutureWorld, at which time DDI became a wholly owned subsidiary of FutureWorld.

 

On December 14, 2007, Saeed (Sam) Talari, one of Company’s directors and major shareholders, exercised his option under a 5% convertible debenture due December 31, 2008 of DDI, and converted the outstanding amount of the debenture into 7,000,000 shares of the DDI’s common stock.  After the conversion, Mr. Talari owed approximately 90% of DDI’s issued and outstanding common stock, and therefore DDI ceased being a wholly owned subsidiary of FutureWorld.  

 

(b) Nature of the Business, and History of the Company and its Subsidiaries (Continued)

 

Effective June 15, 2009, the Company entered into a Stock Exchange Agreement with SeaTech Energy, Inc., a Nevada corporation and its stockholders, whereby the Company received 1,000,000 common shares of SeaTech, representing 100% of its outstanding shares, in exchange for 150,000,000 shares of common stock. On that dated, Sea Tech became a wholly owned subsidiary of Future World.

 

 

(c) Development Stage Enterprise

 

FutureWorld Energy, a development stage company, has devoted substantially all of its efforts to establishing and raising necessary capital, developing its accounting system, hiring employees, acquiring and developing assets, developing markets, etc. Therefore, the Company has not generated any revenues and is still a development stage corporation.

 

The Company's ability to eliminate operating losses and to generate positive cash flow from operations in the future will depend upon a variety of factors, many of which it is unable to control.  If the Company is unable to implement the Company’s business plan successfully, it may not be able to eliminate operating losses, generate positive cash flow, or achieve or sustain profitability, which would materially adversely affect its business, operations, and financial results, as well as its ability to make payments on its debt obligations.

 

2.  Summary of Significant Accounting Policies

 

(a) Principles of Consolidation

 

The consolidated financial statements include the accounts and operations of FutureWorld Energy, Inc., and its wholly owned subsidiary, SeaTech Energy, Inc. (collectively referred to as the “Company”).  Accordingly, the assets and liabilities, and expenses of this company have been included in the accompanying consolidated financial statements, and intercompany transactions have been eliminated.

 

(b)Basis of Accounting

 

The Company maintains its financial records and financial statements on the accrual basis of accounting, in conformity with generally accepted accounting principles in the United States of America. The accrual basis of accounting provides for matching of revenues and expenses in the period they were earned and incurred.

 

(c) Cash and Cash Equivalents

 

For purposes of reporting cash flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or designated for assets acquisitions, and certificates of deposit that have an original maturity of three months or less when purchased, to be cash equivalents. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

 

(d) Fair Value of Financial Instruments

 

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

	•	Cash and Cash Equivalents, Accounts Receivable, Prepaid Expenses, Accounts Payable,  and  Accrued Expenses :
		The carrying amount reported in the balance sheets for these items approximates fair value because of the short maturity of these instruments.
	•	Loans and Notes Payable to Related Parties:
		The carrying value of loans and notes payable to related parties approximates fair value as each of the notes payable carries an interest rate commensurate with commercial borrowing rates available to the Company.
		As of June 30, 2013 and 2012, the fair values of the Company’s financial instruments approximate their historical carrying amount.

 

(e) Property and Equipment

 

Property and equipment are recorded at historical cost.  Depreciation is computed on the straight-line method over estimated useful lives of the respective assets, ranging from three to seven years.  The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation periods or the unamortized balance is warranted.  Based upon the Company's most recent analysis, management believes that no impairment of property and equipment exists at June 30, 2013 and 2012.

 

(f) Stock Based Compensation

 

On January 1, 2006, the Company adopted Statements of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”).  In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).

 

The Company adopted SFAS 123(R) using the modified prospective transition method. The Company’s financial statements as of and for the years ended June 30, 2013 and 2012 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, the Company’s financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R).  Stock-based compensation expense recognized under SFAS 123(R) for employee and directors for the years ended June 30, 2013 and 2012 was $0 and $1,000 respectively.

 

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards to employees and directors on the date of grant using an option-pricing model. For stock-based awards issued to employees and directors, stock-based compensation is attributed to expense using the straight-line single option method, which is consistent with how the prior-period pro-forma were provided.   Stock-based compensation expense recognized in the Statements of Operations for the years ended June 30, 2013 and 2012 included compensation expense for share-based payment awards granted prior to, but not yet vested based on the grant date fair value estimated in accordance with the pro-forma provisions of SFAS 123 and compensation expense for the share-based payment awards granted subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R).

 

The Company’s determination of fair value of share-based payment awards to employees and directors on the date of grant using the Black-Scholes model, which is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

 

(g) Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

(h) Income Taxes

 

The Company records federal and state income tax liability in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109 – Accounting for Income Taxes .  Deferred income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.

  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes , which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, Accounting for Income Taxes . FIN No. 48 provides that a tax benefit from an uncertain tax position may be recognized in the financial statements when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN No. 48 and in subsequent periods. This interpretation also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

In May 2007, the FASB issued FASB Staff Position FIN 48-1 , Definition of a Settlement in FASB Interpretation No. 48 ("FSP FIN 48-1"). FSP FIN 48-1 provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. In determining whether a tax position has been effectively settled, entities must evaluate (i) whether taxing authorities have completed their examination procedures; (ii) whether the entity intends to appeal or litigate any aspect of a tax position included in a completed evaluation; and (iii) whether it is remote that a taxing authority would examine or re-examine any aspect of a taxing position. FSP FIN 48-1 is to be applied upon the initial adoption of FIN 48.

 

The Company adopted the provisions of FIN No. 48 on January 1, 2007 with no cumulative effect adjustment required. The Company believes that their income tax filing positions and deductions will be sustained upon examination and, accordingly, have not recorded any reserves, or related accruals for interest and penalties, at June 30, 2013 or 2012 for uncertain income tax positions pursuant to FIN No. 48. In accordance with FIN No. 48, the Company adopted a policy under which, if required to be recognized in the future, they will classify interest related to

the underpayment of income taxes as a component of interest expense and will classify any related penalties in selling, engineering, general and administrating expenses in the statement of operations.

 

Advertising Costs

 

Advertising costs are charged to operations as incurred.

 

(j) Earnings (Loss) Per Share

 

Basic EPS is calculated by dividing earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during each period.  Diluted EPS is similarly calculated, except that the denominator includes common shares that may be issued subject to existing rights with dilutive potential, except when their inclusion would be anti-dilutive.

 

Based on an estimated current value of the Company’s stock being equal to or less than the exercise price of the warrants, none of the shares assumed issued upon conversion of the warrants, nor any of the stock assumed issued under the Company's Incentive Stock Plan are included in the computation of fully diluted loss per share, since their inclusion would be anti-dilutive.

 

(k) Impact of Recently Issued Accounting Pronouncements

 

We have reviewed accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. We believe that the following impending standards may have an impact on our future filings. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

 

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (“Codification”). The Codification is the single source for all authoritative Generally Accepted Accounting Principles (“GAAP”) recognized by the FASB to be applied for financial statements issued for periods ending after September 15, 2009.  The implementation of the Codification did not impact our financial statements or disclosures other than references to authoritative accounting literature are now made in accordance with the Codification.

 

In May 2009, the FASB issued guidance under ASC 855 “Subsequent Events” which established general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance requires the Company to disclose the date through which the Company has evaluated subsequent events and the basis for the date. The guidance was effective for interim periods which ended after June 15, 2009. See Note 1, “Basis of Presentation,” for disclosure of the date to which subsequent events are disclosed.

 

In June 2008, the FASB issued authoritative guidance as required by the “Derivative and Hedging” ASC Topic 815-10-15-74 in Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock , The objective is to provide guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock and it applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative, for purposes of determining whether that instrument or embedded feature qualifies for the first part of the scope exception. This Issue also applies to any freestanding financial instrument that is potentially settled in an entity’s own stock, regardless of whether the instrument has all the characteristics of a derivative. We currently have warrants that embody terms and conditions that require the reset of their strike prices upon our sale of shares or equity-indexed financial instruments at amounts less than the conversion prices. These features will no longer be treated as “equity” once it becomes effective.  Rather, such instruments will require classification as liabilities and measurement at fair value. Early adoption is precluded. This standard did not have a material impact on the financial statements.

 

 In March 2008, the FASB issued guidance under ASC 815 “Derivatives and Hedging”. The guidance is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged.  This standard did not have a material impact on the financial statements.

 

In December 2007, the FASB issued revised guidance under ASC 805 “Business Combinations”, which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. ASC 805 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of ASC 805 did not have a material impact on the Company’s financial position, results of operations or cash flows because the Company has not

been involved in any business combinations during the six months ended December 31, 2009.

 

In December 2007, the FASB issued guidance under ASC 810 “Consolidation”.  This guidance establishes new accounting and reporting standards for the Non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance will change the classification and reporting for minority interest and non-controlling interests of variable interest entities. The guidance requires the minority interest and non-controlling interest of variable interest entities to be carried as a component of stockholders’ equity. Accordingly we will reflect non-controlling interest in our consolidated variable interest entities as a component of stockholders’ equity. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and earlier adoption is prohibited. The Company adopted this guidance beginning July 1, 2009. The Company does not have Variable Interest Entities consolidated in its financial statements.  Disclosure of a non-controlling interest has been made on the Company’s financial statements.

 

In July 2006, the FASB issued guidance under ASC 740 “Income Taxes”. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements. It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on a tax return. The adoption of this guidance did not have any impact on our financial statements.

 

Other recent accounting pronouncements issued by the FASB, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.

 

3.  Going Concern

 

For the first quarter June 30, 2013, the Company incurred a net loss of $0 and a cumulative net loss since inception of $5,730,706.  As of June 30, 2013, the Company had a negative working capital of $0 and $-0- in cash with which to satisfy any future cash requirements.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.  The Company depends upon capital derived from future financing activities such as loans from its officers and directors, subsequent offerings of its common stock or debt financing in order to operate and grow the business either directly or through its subsidiary.  There can be no assurance that the Company will be successful in raising such capital.  The key factors that are not in the Company's control and that may have a direct bearing on operating results.  These factors include, but are not limited to, acceptance of the Company’s business plan, the ability to raise capital in the future, the ability to expand its customer base, and the ability to hire key employees to grow the business.  There may be other risks and circumstances that management may be unable to predict.

 

4.  Property and Equipment

 

 

Property and equipment as of June 30, 2013 and 2012 consists of the following:

 

		2013				2012
Computer equipment		$	9,873			$	9,873
Furniture and fixtures			17,070				17,070
			26,943				26,943
Accumulated depreciation			24,369				20,730
Net		$	2,574			$	6,213

 

5.   Stock Issuances

 

N/A

 

6.     Related Parties Transactions

 

N/A

 

 

7.  Accrued Expenses

 

 

 

 

 

 

 

 

Accrued expenses at June 30, 2013 and 2012 were as follows:

		2013				2012
Accrued salaries		$	831,527			$	698,399
Payroll tax liabilities			41,576				37,073
Accrued interest			0				26,848
Accrued penalties			0				-
		$	873,103			$	771,958

 

 

8.   Related Parties Disclosures

 

(a) Loan from Saeed (Sam) Talari

 

On April 1, 2008, the Company agreed to allow Mr. Talari to convert the remaining amounts due to him by the Company of $247,201, into a $500,000 Master Convertible Promissory Note, with interest at the rate of 5% per annum, based on amounts advanced from time to time, payable annually.  The Mr. Talari agreed to continue making advances to the Company on an interim basis under a Master Convertible Promissory Note to a maximum of $1,000,000. On January 2012 Mr. Talari assigned a portion of his master note to Certainty Financial, an unrelated individual.

 

On August 12, 2008, the Company allowed Mr. Talari to converted $1,080 of the principal amount of the Master Promissory Note into 10,800,000 shares of the Company’s common stock. On March 11, 2009, the Company allowed Talari to converted $240,000 of the principal amount of the Master Promissory Note into 60,000,000 shares of the Company’s common stock.  On January 23, 2010, the Company allowed Mr. Talari to convert $19,599 in principal amount and $5401 in accrued interest on the convertible note due to FutureTech Capital in exchange for 50,000,000 shares of the Company’s common stock.  The shares were issued to Mr. Talari as principal of FutureTech Capital.

 

Mr. Talari has the option to convert any part of the principal and/or interest outstanding under its respective Master Convertible Promissory Note, as amended, into the Company’s common stock at the lower of $.0005 or a 30% discount of the last five (5) days’ average bid price.

 

Mr. Talari has the option to convert his entire owed salary into a convertible debenture into the Company’s common stock at the lower of $.0005 or a 30% discount of the last five (5) days’ average bid price.

 

At June 30, 2013 and 2012, the remaining amount due to Mr. Talari on the Master Promissory Note and his note on his salary is $1,014,399 and $316,151 respectively, and the accrued interest thereon at June 30, 2013 is $11,221.

 

(b) Loan from FutureTech Capital, LLC

 

Since January 20, 2006, FutureTech Capital, LLC, a company partially owned by Mr. Talari has made unsecured loans to the Company, not evidenced by promissory notes, in the aggregate amount of $59,553.    On April 1, 2008, the Company agreed to allow FutureTech to convert the amounts due to them by the Company into a $100,000 Master Convertible Promissory Note, with interest at the rate of 5% per annum, based on amounts advanced from time to time, payable annually.  FutureTech agreed to continue making advances to the Company on an interim basis under a Master Convertible Promissory Note to a maximum of $100,000.  The remaining amount due to FutureTech on the Master Promissory Note at June 30, 2013 and 2012 is $100,000 and $59,553 respectively.

 

FutureTech Capital, LLC has the option to convert any part of the principal and/or interest outstanding under its respective Master Convertible Promissory Note, as amended, into the Company’s common stock at the lower of $.0005 per shares or at a 30% discount of the last five (5) days’ average bid price.

 

On January 2012 FutureTech Capital, LLC assigned a portion of the master note to Certainty Financial, an unrelated individual.

 

 

 (c) Employment Agreements

 

Sam Talari

 

On March 14, 2003, the Company entered into a three-year Employment Agreement with Mr. Talari, the Company’s Acting Chief Executive Officer, and one of the Company's directors. The Agreement is automatically extended for additional one-year periods without further action from the Company or the executive, unless notice of termination is given by either party within 90 days of the end of any periods. The Agreement provides for (a) a base salary of $8,500 per month, with a 5% increase per annum (currently $11,094 per month), and (b) all group insurance plans and other benefit plans and programs made available to the Company’s management employees.

 

 

(b) Office Space

 

During the Company's initial stage, it has limited need for use of office space or equipment.  The Company operates out of office space provided by the principals at no cost to the Company in Saint Petersburg, Florida.

 

 

Item 2.   Management’s discussion and analysis of financial condition and results of operations

 

Our significant accounting policies are more fully described in Note 1 to the financial statements. However, certain accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management; as a result they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on knowledge of our industry, historical operations, terms of existing contracts, and our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

 

 

Our critical accounting policies include:

 

●

Revenue Recognition.   We recognize revenue from licensing our software upon the installation and acceptance of the software by customers in accordance with Statement of Position 97-2, Software Revenue Recognition.  When a software sales arrangement includes rights to customer support, the portion of the license fee allocated to such support is recognized ratably over the term of the arrangement, normally one year.  Revenue from professional services arrangements will be recognized in the month in which services are rendered over the term of the arrangement.

●

Long-Lived Assets - We depreciate property and equipment and amortize intangible assets, including software development costs over the respective assets’ estimated useful life and periodically review the remaining useful lives of our assets to ascertain that our estimate is still valid. If we determine a useful life has materially changed, we either change the useful life or write the asset down or if we determine the asset has exhausted its useful life, we write the asset off completely.

 

●

Stock Based Compensation -   We account for stock based compensation under the provisions of Statement of Financial Accounting Standards No. 123, (revised 2004) Share-Based Payments.  Under the fair value recognition provisions of SFAS 123R, we recognize stock-based compensation expense net of an estimated forfeiture rate and therefore only recognize compensation cost for those shares expected to vest over the service period of the award.  Calculating stock-based compensation expense requires the input of subjective assumptions, including the expected term of the option grant, stock price volatility, and the pre-vesting option forfeiture rate.  We estimate the expected life of options granted based on historical exercise patterns.  We estimate stock price volatility based on historical implied volatility in our stock.  In addition, we are required to estimate the expected volatility rate and only recognize expense for those shares expected to vest.  We estimate the forfeiture rate based on historical experience of our stock-based awards that are granted, exercised or cancelled.

 

●

Income Taxes - We record federal and state income tax liability in accordance with Statement of Financial Accounting Standards No. 109 – Accounting for Income Taxes .  Deferred income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

Recent Accounting Pronouncements:

 

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS 157 Fair Value Measurements . SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expanded disclosures about fair value measurements. The adoption of the applicable provisions of SFAS 157 on July 1, 2008 did not have an impact on the Company’s financial statements.    SFAS 157 provides an exception of the application of the statement to the determination of fair value of nonfinancial assets and liabilities that are recognized or disclosed on a nonrecurring basis, which is effective for fiscal years beginning after November 15, 2008.  We are evaluating the effect that adoption of the remaining provisions of this statement will have on our financial statements.

 

In February 2008, the FASB issued FASB Staff Position (“FSP”) No. 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” .  FSP 157-1 provides a scope exception from FASB No. 157, “Fair Value measurements” for the evaluation criteria on lease classification and capital lease measurement under FASB No. 13, Accounting for Leases and other related accounting pronouncements. The Company does not have any capital leases, accordingly, the Company did not apply the provisions of FSB 157-1.

   

In February 2008, the FASB issued FASB Staff Position 157-2 (FSP 157-2), which delayed the effective date by which companies must adopt the provisions of SFAS 157.  FSP 157-2 defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We implemented SFAS 157-2 on April 1, 2009 and determined the adoption of this statement did not have an effect on our financial statements.

 

In December 2007, the FASB issued SFAS 160, Noncontrolling Interest in Consolidated Financial Statements. This Statement amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008. Early adoption is prohibited.  We implemented SFAS 160 on April 1, 2009 and determined the adoption of this statement did not have an effect on our financial statements.

 

In December 2007, the FASB issued SFAS 141R, Business Combinations, which replaces SFAS 141. This Statement applies to all transactions or other events in which an entity obtains control of one or more businesses and requires that all assets and liabilities of an acquired business as well as any non-controlling interest in the acquiree be recorded at their fair values at the acquisition date. Among other things, SFAS 141R requires the expensing of direct transaction costs, including deal costs and restructuring costs as incurred.  Contingent consideration arrangements are to be recognized at their acquisition date fair values, with subsequent changes in fair value generally reflected in earnings. Pre-acquisition contingencies will also typically be recognized at their acquisition date fair values. In subsequent periods, contingent liabilities will be measured at the higher of their acquisition date fair values or the estimated amounts to be realized. In addition, material adjustments made to the initial acquisition purchase accounting will be required to be recorded back to the acquisition date. This will cause companies to revise previously reported results when reporting comparative financial information in subsequent filings. The Statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We implemented SFAS 141R on April 1, 2009 and determined the adoption of this statement did not have an effect on our financial statements.

 

On January 1, 2008, FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.   SFAS 159 permits entities to elect to measure eligible financial instruments at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  This statement became effective for the Company’s current fiscal year.  We did not elect the fair value option, therefore, the adoption of the Statement did not have an impact on our financial statements.

 

In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.    The Statement establishes enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS 133, Accounting for Derivative Instruments and Hedging Activities , and its related interpretations, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We implemented SFAS 141R on April 1, 2009 and determined the adoption of this statement did not have an effect on our financial statements.

 

Effective April 1, 2008, the Company adopted EITF 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities, EITF 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. The adoption of EITF 07-3 did not have a material impact on our financial statements.

 

In April 2008, the FASB issued FASB Staff Position 142-3, Determination of the Useful Life of Intangible Assets , (FSP 142-3) which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, Goodwill and Other Intangible Assets . The intent of FSP 142-3 is to improve the consistency between the useful life of a recognized intangible asset under FASB 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other U.S. generally accepted accounting principles. FSP 142-3 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and early adoption is prohibited. We implemented the statement on April 1, 2009 and determined the adoption of this statement did not have a material effect on our financial statements Management expects that FSP 142-3 could have an impact on the Company’s future financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions, if any, the Company consummate after the effective date.

 

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles . The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. The new standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.  We implemented SFAS 162 on April 1, 2009 and determined the adoption of this statement did not have an effect on our financial statements.

 

In May 2008, FASB issued Staff Position APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1).  This FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, and shall be applied retrospectively to all periods presented.  Early adoption is not permitted.  We implemented APB 14-2 on April 1, 2009 and determined the adoption of this statement did not have an effect on our financial statements.

 

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities , (FSP EITF 03-6-1). This FSP EITF 03-6-1 states that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 became effective for the Company on April 1, 2009, however, the adoption of this statement did not have a material effect on our financial statements.

 

In May 2009, the FASB issued SFAS 165, Subsequent Events. The objective of this Statement is to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statement sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. In accordance with this Statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. The Company adopted SFAS 165 for first quarter June 30, 2013, and determined that the adoption of SFAS 165 did not have a material impact on the Company’s financial statements.

 

In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162 (SFAS 168). SFAS 168 provides for the FASB Accounting Standards Codification (the “Codification”) to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification did not change GAAP but reorganizes the literature. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company adopted SFAS 168 for first quarter June 30, 2013, and determined that the adoption of SFAS 168 did not have a material impact on the Company’s financial statements.

 

Other recent accounting pronouncements issued by the FASB, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.

 

PLAN OF OPERATIONS

 

As more fully described in “LIQUIDITY AND CAPITAL RESOURCES”, we had $0 in cash at June 30, 2013, and 60,047 respectively, remaining on the lines of credit from Mr. Talari and FutureTech Capital with which to satisfy our future cash requirements. Our management believes that the credit lines will support only limited activities for the next twelve months. We are attempting to secure other sources of financing to develop our business plan, and to implement our sales and marketing plan. We have no assurance we will be able to obtain additional funding to sustain even limited operations beyond twelve months based on the available lines of credit with Mr. Talari and FutureTech. If we do not obtain additional funding, we may need to cease operations until we do so and, in that event, may consider a sale of our technology. Our plan of operations set forth below depends entirely upon obtaining additional funding.

 

We do not have any ongoing discussions, arrangements, understandings, commitments or agreements for additional funding. We will consider equity funding, either or both of a private sale or a registered public offering of our common stock; however, it seems unlikely that we can obtain an underwriter. We will consider a joint venture in which the joint venture partner provides funding to the enterprise. We will consider debt financing, both unsecured and secured by a pledge of our technology. As noted above, we may be forced to cease operations without additional funding, after our limited cash and line of credit with Mr. Talari are exhausted.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

For the first quarter June 30, 2013, the Company incurred a net loss of $0 and a cumulative net loss since inception of $5,730,706.  As of June 30, 2013, the Company had a working capital of $0 and $-0- in cash with which to satisfy any future cash requirements.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.  The Company depends upon capital derived from future financing activities such as loans from its officers and directors, subsequent offerings of its common stock or debt financing in order to operate and grow the business either directly or through its subsidiary.  There can be no assurance that the Company will be successful in raising such capital.  The key factors that are not in the Company's control and that may have a direct bearing on operating results.  These factors include, but are not limited to, acceptance of the Company’s business plan, the ability to raise capital in the future, the ability to expand its customer base, and the ability to hire key employees to grow the business.  There may be other risks and circumstances that management may be unable to predict.

 

As of June 30, 2013, we had $60,047remaining on the lines of credit from Mr. Sam Talari and FutureTech Capital, respectively to pay normal operating expenses, while we attempt to secure other sources of financing to develop our business plan, and to start implementation of our marketing plan. We had no other contractual obligation or material commercial commitments for capital expenditures.

 

Off-Balance Sheet Arrangements

 

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as special purpose entities or variable interest entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

 

We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 4.  Controls and Procedures.

 

Not applicable.

 

 

 

Item 4(T).  Controls and Procedures

 

As of June 30, 2013 we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. This evaluation was done under the supervision and with the participation of our management, including our President and Chief Financial Officer. Based on this evaluation of our disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15e), our President and Chief Financial Officer have concluded that as of June 30, 2013 such disclosure controls and procedures were not effective.

 

·	We do not have adequate personnel and other resources to assure that significant and complex transactions are timely analyzed and reviewed.
·	We have limited personnel and financial resources available to plan, develop, and implement disclosure and procedure controls and other procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.
·	Our limited financial resources restrict our employment adequate personnel needed and desirable to separate the various receiving, recording, reviewing and oversight functions for the exercise effective control over financial reporting.

 

·	Our limited resources restrict our ability to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

 

Pursuant to Rule 13a-15d of the Exchange Act, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (1992) and Internal Control Over Financial Reporting Guidance for Smaller Public Companies (2006), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of June 30, 2013.

 

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

 

Changes in Controls and Procedures

 

There were no significant changes made in our internal controls over financial reporting during the first quarter June 30, 2013 that have materially affected or are reasonably likely to materially affect these controls. Thus, no corrective actions with regard to significant deficiencies or material weaknesses were necessary.

 

Limitations on the Effectiveness of Internal Control

 

Our management, including the President, does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal 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 on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include 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, and/or by management override of the control. The design of any system of internal control is also 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 circumstances, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.

 

 

 

PART II - OTHER INFORMATION

 

Item 1

Legal Proceedings.

 

None

 

Item 1A

Risk Factors.

 

There have been no material changes to the risk factors previously disclosed in our Fiscal year Report on Form 10-K for the first quarter March 31, 2013 filed on March 30, 2013 with the Securities and Exchange Commission.

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

Item 3

Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4

Removed and Reserved.

 

Not applicable

 

 

Item 5

Other Information.

 

We are in the process of a merger agreement with an associated company. We will complete the merger after the filing of the June 30, 2013 10Q.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	FutureWorld Energy, Inc.
Date:       August 12, 2013	By:	/s/ Sam Talari
		Saeed (Sam) Talari, Acting Principal Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature, Name and Position:		Date:
/s/ Sam Talari		August 12, 2013
Saeed (Sam) Talari, Acting Principal Executive Officer and Director