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EX-32 - 906 CERTIFICATION - THC Farmaceuticals, Inc.ex32.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 10-Q

______________


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

[  ] 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: 333-171488


CITY MEDIA, INC.

(Exact Name of Registrant as specified in its charter)



Utah

26-1805170

(State or other jurisdiction of incorporation)

(I.R.S. Employer I.D. No.)



4685 S. Highland Drive, Suite 202

Salt Lake City, UT  84117

(Address of Principal Executive Office)


(801) 278-9424

(Registrant’s Telephone Number, including Area Code)


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]


Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [X]   No [  ]  (The Registrant does not maintain a website.)


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 definition 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 Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]


APPLICABLE ONLY TO CORPORATE ISSUERS


Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:


The number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:


 

 

 

 

 

 

Class

 

Outstanding as of May 12, 2014

Common Capital Voting Stock, $0.001 par value per share

 

8,968,000 shares


FORWARD LOOKING STATEMENTS


This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contains forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management’s existing beliefs about present and future events outside of management’s control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended.


PART I - FINANCIAL STATEMENTS


Item 1. Financial Statements.


March 31, 2014

C O N T E N T S


Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Condensed Consolidated Financial Statements

6






2





CITY MEDIA, INC.

Condensed Consolidated Balance Sheets

March 31, 2014 and September 30, 2013

(Unaudited)


 

 

3/31/2014

 

9/30/2013

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

Cash

 

 $                      755

 

 $                      579

Accounts Receivable

 

                      1,800

 

                      1,741

Total Current Assets

 

                      2,555

 

                      2,320

Property plant & equipment net of accumulated depreciation

 

 

 

 

of $9,771 and $9,472, respectively

 

                    12,383

 

                    12,682

Intangible Assets

 

                    33,677

 

                    33,677

 

 

 

 

 

TOTAL ASSETS

 

 $                 48,615

 

 $                 48,679

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

Related Party Accounts Payable

 

 $                      900

 

 $                   1,400

Current portion of long term debt - Related Party

 

                             3

 

                      1,842

Total Current Liabilities

 

                         903

 

                      3,242

Long Term Liabilities:

 

 

 

 

Accrued Interest Related Party

 

                      8,853

 

                      5,854

Notes Payable to Related Parties

 

                    74,001

 

                    56,901

Total Long Term Liabilities

 

                    82,854

 

                    62,755

Total Liabilities

 

                    83,757

 

                    65,997

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

Preferred Stock 10,000,000 shares authorized having a

 

 

 

 

par value of $0.001 per share; with no shares issued and

 

 

 

 

outstanding as of March 31, 2014 and September 30, 2013,

 

 

 

 

respectively

 

                              -

 

                              -

Common Stock 90,000,000 shares authorized having a

 

 

 

 

par value of $0.001 per share; 8,968,000 shares issued and

 

 

 

 

outstanding as of March 31, 2014 and September 30, 2013,

 

 

 

 

respectively

 

                      8,968

 

                      8,968

Additional Paid-in Capital

 

                    83,875

 

                    83,875

Accumulated Deficit

 

                (127,985)

 

                (110,161)

Total Stockholders' Deficit

 

                  (35,142)

 

                  (17,318)

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 $                 48,615

 

 $                 48,679

 

 

 

 

 


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



3






CITY MEDIA, INC.

Condensed Consolidated Statements of Operations

For the Three and Six Month Periods Ended March 31, 2014 and 2013

(Unaudited)


 

For the

 

For the

 

For the

 

For the

 

Three Months

 

Three Months

 

Six Months

 

Six Months

 

Ended

 

Ended

 

Ended

 

Ended

 

March 31,

 

March 31,

 

March 31,

 

March 31,

 

2014

 

2013

 

2014

 

2013

Revenues

 

 

 

 

 

 

 

Revenues from transaction fees

 $             4,878 

 

 $             6,302 

 

 $        9,881

 

 $      12,605

Total Revenues

  4,878

 

6,302

 

9,881

 

12,605

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

General and Administrative

                4,036

 

                3,400

 

         17,453

 

         15,970

Depreciation

                   148

 

                   296

 

              299

 

              598

Service, related party

                2,700

 

                4,200

 

           6,900

 

           8,400

Total Operating Expense

                6,884

 

                7,896

 

         24,652

 

         24,968

Operating Loss

              (2,006)

 

              (1,594)

 

       (14,771)

 

       (12,363)

Interest Expense, finance of ATMs

                     16

 

                        -

 

                55

 

                   -

Interest Expense, related party

                1,608

 

                1,025

 

           2,998

 

           1,831

Net Loss

 $           (3,630)

 

 $           (2,619)

 

 $    (17,824)

 

 $    (14,194)

Loss per Common Share - Basic & Diluted

 $             (0.01)

 

 $             (0.01)

 

 $        (0.01)

  

 $        (0.01)

Weighted Average Shares Outstanding -  Basic & Diluted

8,968,000 

 

8,968,000 

 

8,968,000

 

8,968,000

 

 

 

 

 

 

 

 




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





4





CITY MEDIA, INC.

Condensed Consolidated Statements of Cash Flows

For the Six Month Periods Ended March 31, 2014 and 2013

(Unaudited)


 

 

For the

 

For the

 

 

Six Months

 

Six Months

 

 

Ended

 

Ended

 

 

March 31,

 

March 31,

 

 

2014

 

2013

 

 

 

 

 

Cash Flows From Operating Activities

 

 

 

 

Net Loss

 

 $               (17,824)

 

 $                (14,194)

Adjustments to reconcile net loss to net cash

 

 

 

 

from operating activities:

 

 

 

 

Depreciation

 

                         299

 

                          598

(Increase)/Decrease in accounts receivable

 

                         (59)

 

                            15

Increase/(Decrease) in accounts payable

 

                       (500)

 

                        (963)

Accrued interest on related party loan

 

                      2,999

 

                       1,831

Net Cash from Operating Activities

 

                  (15,085)

 

                   (12,713)

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

Principal payments on notes payable

 

                    (1,839)

 

                     (1,667)

Proceeds from notes payable to related parties

 

                    17,100

 

                     13,000

Net Cash from Financing Activities

 

                    15,261

 

                     11,333

 

 

 

 

 

Net Increase/(Decrease) in Cash

 

                         176

 

                     (1,380)

Beginning Cash Balance

 

                         579

 

                       2,309

Ending Cash Balance

 

 $                      755

 

 $                       929

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

Cash paid during the period for interest

 

 $                        55

 

 $                       229

Cash paid during the period for taxes

 

 $                      100

 

 $                           -

Assets acquired in exchange for related party debt

 

 $                           -

 

 $                           -

 

 

 

 

 




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



5





CITY MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2014


NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2014, and for all periods presented herein, have been made.


Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2013.  The results of operations for the three or six month periods ended March 31, 2014 are not necessarily indicative of the operating results for the full year.


NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES


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 of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.


Recent Accounting Pronouncements


The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position or cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its condensed consolidated financial statements.


NOTE 3 – RELATED PARTY TRANSACTIONS / SERVICE AGREEMENT


The Company has a Service Agreement with Wasatch ATM (“Wasatch”), a Utah limited liability corporation owned and managed by a Company stockholder.  The agreement provides for Wasatch to provide all maintenance, repair and service work along with distribution of vault cash.  Wasatch is compensated at a set rate of $1,400 per month, which was reduced by $500 effective January 1, 2014.  The term of the agreement will be for a period of two (2) years from the date of the agreement, and will automatically renew for additional one (1) year periods, unless either party gives the other written notice of termination thirty (30) days prior to any renewal term, and provides for an additional one-time $500 payable upon the placement of each additional ATM and an allowance of $500 per quarter for expenses.  


As of March 31, 2014 and September 30, 2013, $900 and $1,400, respectively, was due to Wasatch, which is included in the “Related Party Accounts Payable” line item.




6





NOTE 4 - RELATED PARTY TRANSACTIONS / LONG-TERM DEBT


In conjunction with new ADA compliance regulations that took effect on March 15, 2012, requiring certain costly upgrades be made to all Hantle/Tranax and Hyosung ATM machines, the Company’s Board of Directors gave their unanimous consent on March 1, 2012, to purchase three new ATM machines that comply with the new ADA compliance regulations.  The Board agreed that the new machines should be purchased and financed through our servicing partner, Wasatch ATM.  The balance of $6,800 began accruing interest of 10% APR on April 1, 2012.  Monthly payments of $316 are due on the first of every month, commencing on May 1, 2012, until the loan is paid in full on March 1, 2014.  The balance owed as of March 31, 2014 remains $3.


The Company utilizes office and storage space of its executive officers, for which no incremental costs are incurred.  No monetary value has been placed on this, nor have any accruals or payments been made.  Additionally, the Company has no employees who are not executive officers.  There are no amounts due to or from these parties as of the balance sheet date.


As of September 30, 2013, the Company had issued $81,000 in convertible promissory notes with various shareholders.  The Company had borrowed a total of $56,901 in principal against these notes.  On January 28, 2014, the Company signed additional convertible promissory notes with certain shareholders that provided for additional liquidity resources in the amount of $15,000, with $15,000 available to be used at the Company’s discretion.  Of these notes, $90,000 in face value convertible promissory notes were consolidated into aggregate convertible promissory notes on February 7, 2014, in the aggregate principal amount of $90,000, with accrued and unpaid interest thereon in the amount of $7,767, as of January 31, 2014.  The Company and the holders of such notes agreed to modify the Notes by: (i) issuing new notes dated as of February 7, 2014 in which the accrued and unpaid interest for each note through January 31, 2014 has been included in the principal balance of the new notes; (ii) extending the due date for the notes to December 31, 2015; (iii) providing that the Notes shall be convertible into shares of the Company's common stock at the option of the Company as previously set forth in the notes or at the holder’s option as set forth in the notes.  All Company notes, with a total face value of $96,000, are now payable on December 31, 2015, accrue interest at a rate of 8.5% per annum, and are convertible at the option of the Company for a conversion price of $0.10 per share.


During the six month periods ending March 31, 2014 and 2013, the Company borrowed additional funds of $17,100 and $13,000, respectively, on these notes.  As of March 31, 2014, the principal outstanding on the consolidated convertible promissory notes was $74,001.


Accrued interest on all loans from shareholders at March 31, 2014 was $8,853, with $7,767 of this amount being applied to a reduction of the available principal amount as a result of the aggregation.  Total interest expense from these notes for the six months ended March 31, 2014 and 2013 was $2,998 and $1,831, respectively.


Current available funds pursuant to outstanding promissory notes as of March 31, 2014 is $14,232.



7





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


Forward-looking Statements


Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.


Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.


Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.


Plan of Operations


Our primary focus for 2014 is the continued placing, managing, and servicing of ATM machines for public utilization along the Wasatch Front in the State of Utah.  


Results of Operations


Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013


During the three months ended March 31, 2014, we recognized $4,878 in revenues.  During the three months ended March 31, 2013, we recognized $6,302 in revenues.  The decrease in revenue for the period ended 2014 over the same period in 2013 can be attributed to the addition of other merchant service processing options offered in our locations that reduce consumer dependence on cash transactions.


We had a net loss for the three months ended March 31, 2014, of $3,630 and a net loss of $2,619 for the three months ended March 31, 2013.  The loss for 2014 is the result of decreased revenue due to increased competition from other merchant service processing options offered at our locations.  As we pursue opportunities to expand our operations by placing more machines in lucrative locations, we are hopeful our revenues should start to increase.  We will need additional capital to expand operations and anticipate seeking equity capital in 2014.  


Currently our biggest expenses are related to general and administrative costs consisting mainly of accounting and legal fees, which were $4,036 for the three months ended March 31, 2014 and $3,400 for the three months ended March 31, 2013.  Our service fee to maintain ATM cash levels and operating functionality is $900 per month, resulting from a reduction of $500 per month as of January 1, 2014.  We anticipate these fees remaining constant during 2014; however, they may rise in the future if we deploy more machines.


Six Months Ended March 31, 2014 Compared to Six Months Ended March 31, 2013


During the six months ended March 31, 2014, we recognized $9,881 in revenues.  During the six months ended March 31, 2013, we recognized $12,605 in revenues.  The decrease in revenue for the period ended 2014 over the same period in 2013 can be attributed to new regulations governing surcharge fees, downtime due to technical and setup issues as well as other merchant service processing options offered in our locations that reduce consumer dependence on cash transactions.



8





We had a net loss for the six months ended March 31, 2014, of $17,824 and a net loss of $14,194 for the six months ended March 31, 2013.  Our net loss for the 2014 period was the result of costs of service for maintaining our ATM machines, as well as general and administrative expenses.


Liquidity and Capital Requirements


We had $755 cash or cash equivalents on hand as of March 31, 2014. As of September 30, 2013, the Company had issued $81,000 in convertible promissory notes with various shareholders.  The Company had borrowed a total of $56,901 in principal against these notes.  On January 28, 2014, the Company signed additional convertible promissory notes with certain shareholders that provided for additional liquidity resources in the amount of $15,000, with $15,000 available to be used at the Company’s discretion.  Of these notes, $90,000 in face value convertible promissory notes were consolidated into aggregate convertible promissory notes on February 7, 2014, in the aggregate principal amount of $90,000, with accrued and unpaid interest thereon in the amount of $7,767, as of January 31, 2014.  The Company and the holders of such notes agreed to modify the Notes by: (i) issuing new notes dated as of February 7, 2014 in which the accrued and unpaid interest for each note through January 31, 2014 has been included in the principal balance of the new notes; (ii) extending the due date for the notes to December 31, 2015; (iii) providing that the Notes shall be convertible into shares of the Company's common stock at the option of the Company as previously set forth in the notes or at the holder’s option as set forth in the notes.  All Company notes, with a total face value of $96,000, are now payable on December 31, 2015, accrue interest at a rate of 8.5% per annum, and are convertible at the option of the Company for a conversion price of $0.10 per share.


During the six month periods ending March 31, 2014 and 2013, the Company borrowed additional funds of $17,100 and $13,000, respectively, on these notes.  As of March 31, 2014, the principal outstanding on the consolidated convertible promissory notes was $74,001.


Accrued interest on all loans from shareholders at March 31, 2014 was $8,853 with $7,767 being applied to a reduction in the principal amount of the loan face amount as a result of aggregating.  Total interest expense from these notes for the six months ended March 31, 2014 and 2013 was $2,998 and $1,831, respectively.


Current available funds pursuant to outstanding promissory notes as of March 31, 2014 is $14,232.


The Company has an accumulated deficit of $127,985.  Currently, management’s plans include placing more ATMs in retail locations in order to improve our cash flows.  The Company through shareholder loan commitments has an availability of funds sufficient for the next 12 months.


Off-balance Sheet Arrangements


Neither City Media nor its wholly-owned subsidiary have had any off balance sheet arrangements from their respective periods to the date hereof.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.


Not required.


Item 4.  Controls and Procedures.


Evaluation of Disclosure Controls and Procedures


Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including the President and Secretary, to allow timely decisions regarding required disclosures.




9




Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.


Changes in Internal Control Over Financial Reporting


During the fiscal quarter covered by this Quarterly Report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION


Item 1. Legal Proceedings


We are not a party to any pending legal proceeding.  To the knowledge of management, no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more than five percent of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.


Item 1A. Risk Factors


Not required.


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


None.


Item 3. Defaults Upon Senior Securities


None.


Item 4. Mine Safety Disclosure


We have no mining activities.


Item 5. Other Information


None.



10






Item 6. Exhibits


Exhibit No.

Identification of Exhibit

31

Certification of Thomas J. Howells Pursuant to Section 302 of the Sarbanes-Oxley Act.

32

Certification of Thomas J. Howells pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS

XBRL Instance Document*

101.SCH

XBRL Taxonomy Extension Schema*

101.CAL

XBRL Taxonomy Extension Calculation Linkbase*

101.DEF

XBRL Taxonomy Extension Definition Linkbase*

101.LAB

XBRL Taxonomy Extension Label Linkbase*

101.PRE

XBRL Taxonomy Extension Presentation Linkbase*



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


SIGNATURES


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


CITY MEDIA, INC.

(Issuer)


Date:

May 14, 2014

  

By:

  /s/ Thomas J. Howells

  

  

  

  

Thomas J. Howells, Director, President and Chief Executive Officer, Principal Financial Officer





11