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EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - SWORDFISH FINANCIAL, INC.swrf10q03312014ex32_1.htm
EXCEL - IDEA: XBRL DOCUMENT - SWORDFISH FINANCIAL, INC.Financial_Report.xls
EX-31.2 - CERTIFICATIONS - SWORDFISH FINANCIAL, INC.swrf10q03312014ex31_2.htm
EX-31.1 - CERTIFICATIONS - SWORDFISH FINANCIAL, INC.swrf10q03312014ex31_1.htm

 

 

 

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

 

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF

THE EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number:  000-7475

____________________________

 

SWORDFISH FINANCIAL, INC.

 (Exact name of registrant as specified in its charter)

 

Minnesota 41-0831186
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

 

6125 Airport Freeway; Suite 211 Haltom City, TX 76119

(Address of principal executive offices)

 

(817) 845-6244

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 requirements for the past 90 days.

þ Yes   o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   o No   o

 

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 definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ   No

 

The number of shares of issuer’s common stock, par value $0.0001 per share, outstanding as of May 23, 2013 was 1,074,513,863.   

 

 

  

 
 

SWORDFISH FINANCIAL, INC.

INDEX

 

PART I   FINANCIAL INFORMATION

Page

Number

           
    Item 1 :   Condensed Financial Statements  
           
        Condensed Balance Sheets – March 31, 2014 (Unaudited) and December 31, 2013 1
           
        Condensed Statements of Operations - Three Months Ended March 31, 2014 and 2013 (Unaudited) 2
           
        Condensed Statements of Cash Flows - Three Months Ended March 31, 2013 and 2013   (Unaudited) 3
           
        Notes to Consolidated Financial Statements   (Unaudited) 4
           
    Item 2:   Management's Discussion and Analysis of Financial Condition and Results of Operations 11
           
    Item 3:   Quantitative and Qualitative Disclosures About Market Risk 13
           
PART II   OTHER INFORMATION  
           
    Item 1A:   Legal Proceedings 13
    Item 1A:   Risk Factors 13
    Item 2:   Unregistered Sales of Equity Securities and Use of Proceeds 13
    Item 3:   Defaults Upon Senior Securities 13
    Item 4:   Submission of Matters to a Vote of Security Holders 13
    Item 5:   Other Information 13
         
    Item 6 :   Exhibits 13
           
        Signatures 14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

Part I – FINANCIAL INFORMATION

 

Item 1: Financial Statements

 

Swordfish Financial, Inc. and Subsidiaries

Condensed Balance Sheets

March 31, 2014 and December 31, 2013

 

    Unaudited        
    March 31,     December 31,  
    2014     2013  
 ASSETS            
             
CURRENT ASSETS            
Cash   $ -     $ -  
Total Current Assets     -       -  
                 
              -  
TOTAL ASSETS   $ -      $ -  
                 
 LIABILITIES AND STOCKHOLDERS’ DEFICT                
                 
CURRENT LIABILITIES                
Term Notes Payable    $ 441,421      $ 441,421  
Note Payable – Affiliates     1,250,000       1,250,000  
Judgments Payable     1,030,999       1,030,999  
Convertible Notes Payable, net of discounts of $131,409 and $98,945     194,300       70,554  
Derivative Liability     332,383       189,871  
Deferred Retirement Benefits     438,782       438,782  
Accounts Payable     820,182       820,182  
Advances from shareholders     149,185       149,185  
Accrued Expenses     2,166,037       2,261,743  
Total Current Liabilities             6,690,493  
                 
Total Liabilities     6,814,289       6,690,493  
                 
 COMMITMENTS AND CONTINGENCIES                
                 
STOCKHOLDERS’ DEFICT                

    Preferred Stock, $0.0001 Par Value Per Share, 50,000,000 Shares Authorized, Issued and Outstanding at March 31, 2014 and December 31, 2013 were 20,000,000, respectively

    2,500       -  

Common Stock, $0.0001 Par Value per Share 1,000,000,000 Shares Authorized, Issued and Outstanding at March 31, 2014 and December 31, 2013 were 1,074,513,863 and 843,399,545, respectively

    107,451       84,339  
Additional Paid-In Capital     4,699,490       4,607,541  
Accumulated Deficit     (11,623,730)       (11,382,375)  
Total Stockholders’ Equity     (6,814,289)       (6,690,493)  
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $       $ --  

 

See accompanying notes to condensed financial statements. 

-1-
 

  Swordfish Financial, Inc. and Subsidiaries

Condensed Statements of Operations (Unaudited)

For the Three Months Ended March 31, 2014 and 2013

 

   2014  2013
       
       
OPERATING EXPENSES      
       
General and Administrative  $61,534    56,883 
           
Total Operating Expenses   61,534    56,883 
           
LOSS FROM OPERATIONS   (61,534)   (56,883)
           
           
 OTHER INCOME (EXPENSE)          
Interest expense   (167,407)   (115,537)
Interest income   —      —   
Gain/(Loss) on Derivatives   (60,026)   18,401 
           
Net Other Expenses   (241,355)   (97,136)
           
           
LOSS FROM OPERATIONS BEFORE TAXES   (241,355)   (154,019)
           
PROVISION FOR INCOME TAX BENEFIT   —      —   
           
NET LOSS  $(241,355)  $(154,019)
           
           
Net loss per common share          
Basic and Diluted  $(0.00)  $(0.00)
   $(0.00)  $(0.00)
           
Weighted average common shares          
Basic and Diluted   1,074,513,863    764,962,300 
           

 

See accompanying notes to condensed financial statements

 

 

 

 

 

 

 

 

 

-2-
 

 Swordfish Financial, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Three Months Ended March 31, 2014 and 2013

 

    2014     2013  
             
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES            
Net loss   $ (241,355)     $ (154,019)  
Adjustments to reconcile net loss to net cash flows from operating activities                
Amortization of debt discount     36,388       14,332  
        Non cash interest expense     113,434       31,430  
        Unrealized gain on change in value of derivative     (12,414)       (18,401)  
Discounts on convertible notes payable             -  
Changes in operating assets and liabilities              
Judgments payable     8,939       8,939  
Accrued expenses     (19,992)       60,836  
                 
Net Cash Flows from (Used In) Operating Activities     (115,000)       (56,883)  
                 
                 
 CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES                
Purchases of property and equipment     -       -  
                 
Net Cash Flows from (used in) Investing Activities     -       -  
                 
                 
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES                
Advances from shareholders     -       -  
Proceeds from Convertible Notes Payable     115,000       64,000  
                 
Net Cash Flows from (used in) Financing Activities     115,000       64,000  
                 
                 
Net Change in Cash             7,117  
                 
CASH - BEGINNING     -       -  
                 
                 
CASH - ENDING   $       $ 7,117  

 

 

See accompanying notes to condensed financial statements.

 

 

 

 

 

 

 

-3-
 

SWORDFISH FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

REFERENCE TO THE COMPANY

 

References to “we”, “us”, “our”, “Swordfish” or the “Company” in these notes to the consolidated financial statements refer to Swordfish Financial, Inc., a Minnesota corporation, and its subsidiaries.

 

NATURE OF OPERATIONS

 

Swordfish Financial, Inc., (a Texas corporation), acquired 80% of the outstanding common stock of Nature Vision, Inc. pursuant to a stock acquisition/merger agreement on August 14, 2009.   Based on a review of these factors, the August 2009 stock acquisition agreement with Swordfish Financial, Inc., the merger was accounted for as a reverse acquisition (i.e. Nature Vision, Inc. was considered as the acquired company and Swordfish Financial, Inc., was considered as the acquiring company).  As a result, Nature Vision, Inc.’s assets and liabilities as of August 14, 2009, the date of the Merger closing, have been incorporated into Swordfish’s balance sheet based on the fair values of the net assets acquired. Further, the Company’s operating results (post-Merger) include Swordfish Financial, Inc., operating results prior to the date of closing and the results of the combined entity following the closing of the Merger. Swordfish Financial, Inc. Also as a result of the merger the Company changed its name from Nature Vision to Swordfish Financial, Inc.

 

Until approximately June 2009, the Company operated as an outdoor recreation products company which designed and marketed primarily outdoor recreation products for the sport fishing and sport hunting markets throughout the United States and Canada. Effective approximately in September 2009, the Company changed its operations to concentrating on diversified financial asset recovery for high net worth individuals and companies with orphaned or dormant assets held in financial institutions around the world.

 

Effective in approximately December 2013, the Company changed its business focus to the pursuit of the acquisition of Internet media companies which provide services to home entertainment and cable business.

 

The Company believes that the Internet’s direct connection to homes has provided the opportunity to build out an infrastructure that is uniquely suited to deliver high quality, high definition (HD), standard definition (SD) and creatively produced TV and Radio networks with programming at a dramatically reduced price to the network creators, TV and movie producers and of course subscribers. We believe that these programs could benefit the growing community who have recognized the sincere demand for quality, entertaining, and family friendly and clean moral lifestyle.

 

Management believes that acquisitions in this “space” could compete with the major cable systems by providing alternative programming that the cable community does not provide and does not desire to provide, especially when combined with the top networks that the cable community does provide.  Such acquisitions could function as an addition to the present cable system in homes or as a standalone subscription service.

 

BASIS OF PRESENTATION

 

The accompanying condensed balance sheet at March 31, 2014 and the condensed statements of operations and cash flows for the three months ended March 31, 2014 and 2013 are unaudited. The unaudited interim condensed balance sheet and condensed statements of operations and cash flows have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly they do not include all of the footnotes required by generally accepted accounting principles for the year-end financial statements. In the opinion of management,  all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and its cash flows for the three months ended March 31, 2014 and 2013 have been included.

 

-4-
 

The results of the Company’s operations for the quarter ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The condensed consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2013 included in the Annual Report on Form 10-K of the Company filed with the Securities and Exchange Commission.

 

Business Operations

 

Effective December 2012, the Company changed its business focus to the pursuit of the acquisition of Internet media companies which provide services to home entertainment and cable business.

 

The Company believes that the Internet’s direct connection to homes has provided the opportunity to build out an infrastructure that is uniquely suited to deliver high quality, high definition (HD), standard definition (SD) and creatively produced TV and Radio networks with programming at a dramatically reduced price to the network creators, TV and movie producers and of course subscribers. We believe that these programs could benefit the growing community who have recognized the sincere demand for quality, entertaining, and family friendly and clean moral lifestyle.

 

Management believes that acquisitions in this “space” could compete with the major cable systems by providing alternative programming that the cable community does not provide and does not desire to provide, especially when combined with the top networks that the cable community does provide.  Such acquisitions could function as an addition to the present cable system in homes or as a standalone subscription service.

 

Acquisition - iPoint Television

 

On January 15, 2014, the Company completed the acquisition of 90% of the issued and outstanding membership interests of

iPoint. Pursuant to the Securities and Exchange Agreement the Company issued Clark Ortiz, the Company’s CEO and Chairman 25,000,000 shares of Swordfish’s Series A Preferred Stock, which has voting rights equal to 100 shares of the Company’s common stock and is

convertible into the Company’s common stock at the rate of 10 shares of common stock for each share of Series A Preferred Stock. In addition to issuance of the Series A Preferred Stock the Company agreed as part of the Purchase Price to issue 50,000,000 shares of its common stock to Mr. Ortiz. At present the Company has no authorized and unissued shares available to be issued, however in order to close the transaction, Mr. Ortiz has agreed to close the transaction pending the Company increasing authorized shares of common stock. As a result of the transaction the Company owns 90% of issued and outstanding membership interests in iPoint Television LLC and therefor a majority owned subsidiary of the Company and the Company will be able to report the results of iPoint on a consolidated basis in the Company’s financial statements. iPoint Television, also known as iPoint TV, is a Smart media and entertainment company, which holds development licenses from Apple, Android, Google, Roku, Kindle and most every smart device. iPoint is a full service Internet Protocol television (IPTV), media entertainment company which develops applications for mobile and TV smart devices.

 

GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  We incurred net losses of $ 241,355 in 2014 and $154,019 in 2013 respectively, for the three months ended March 31, 2014 and 2013 and had an accumulated deficit of $11,623,730as of March 31, 2014.  We have managed our liquidity during the fourth quarter of 2013 and first quarter of 2013 through cost reduction initiatives and the proceeds from the sale of common stock and issuances of convertible notes.  The Company is in default on notes payable and outstanding judgments totaling $1,250,000 and $1,030,999 respectively, and expects to repay the notes payable, judgments and accrued interest plus all of its other liabilities from the proceeds derived from the operations of acquired companies, sell of stock, or a combination of both. These factors raise substantial doubt about the Company’s abilities to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

-5-
 

LOSS PER COMMON SHARE

 

Net loss per common share was based on the weighted average number of common shares outstanding during the periods when computing the basic net loss per share. When dilutive, stock options and warrants are included as equivalents using the treasury stock market method when computing the diluted net loss per share.  There were 2,500,000,00 and zero dilutive common stock equivalents, options and warrants, for the three months ended March 31, 2014 and March 31, 2013, respectively. Diluted net loss per share for the quarter ended March 31, 2014 and 2013 excluded the potentially dilutive effect of the 200,000,000 share of common stock upon the conversion of the Company’s preferred stock.

 

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

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

Management does not believe that any other recently issued, but not yet effective, accounting standards or pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

 

Reclassification

 

Certain prior period immaterial amounts have been reclassified to conform with the current period presentation.

 

NOTE 2 – TERM NOTES PAYABLE

 

Term notes payable consisted of the following at March 31, 2014 and December 31, 2013:

 

   

March  31,

 2014

   

December 31,

 2013

 
             

Unsecured Note Payable – former Chief  Executive Officer – payable August 17, 2010 –   at 15% interest.

  $ 290,000     $ 290,000  
                 

Unsecured Note Payable – Castaic -  annual installments of $17,171, including interest at

8%, from January 2009 through January 2011

    30,620       30,620  
                 

Unsecured Note Payable – Castaic -  monthly installments of $1,175, including interest at

8%, from February 2008 through January 2011

    20,246       20,246  
                 

Unsecured Note Payable – Innovative Outdoors – monthly installments of $4,632,

including interest at 7% from August 2008 through July 2011

    100,555       100,555  
                 
Totals Term Notes Payable   $ 441,421     $ 441,421  

 

The Company is in default on all of the notes payable.

  

 

 

-6-
 

NOTE 3 – CONVERTIBLE PROMISSORY NOTES

 

As of March 31, 2014, The Company has outstanding eight (8) Security Purchase Agreements with accredited investors for the sale of convertible promissory notes bearing interest at 8.0% per annum. Pursuant to the convertible promissory notes the investor may convert the amount paid towards the Securities Purchase Agreements into common stock of the Company at a conversion price equal to 50% of the average of the 3 lowest volume weighted average trading prices during the 10 day period ending on the latest complete trading day prior to the conversion date. Trading price means the closing bi d price on the OTC Market Over-the-Counter Bulletin Board Pink Sheets.

 

The conversion rights embedded in the 8% Notes are accounted for as a derivative financial instruments because of the down round feature of the conversion price. The beneficial conversion feature was valued at the date of issuance using the Black-Scholes-Merton options pricing model with the following assumptions: risk free interest rates ranging from .11%, contractual expected life of nine (9) months, expected volatility of 236%, calculated using the historical closing price of the Company’s common stock, and dividend yield of zero, resulting in fair market value.

 

As of March 31, 2014

 

August 6, 2013 convertible promissory note $22,500

Less: Unamortized discounts (2,500)

Balance at year end $20,000

 

September 9, 2013 convertible promissory note $27,500

Less: Unamortized discounts (6,110)

Balance at year end $21,390

 

October 8, 2013 convertible promissory note $26,500

Less: Unamortized discounts (8,834)

Balance at year end $17,666

 

October 8, 2013 convertible promissory note $15,700

Less: Unamortized discounts (6,243)

Balance at year end $9,457

 

November 11, 2013 convertible promissory note $4,000

Less: Unamortized discounts (1,778)

Balance at year end $2,222

 

December 3, 2013 convertible promissory note $32,500

Less: Unamortized discounts (24,556)

Balance at year end $7,944

 

January 29, 2014 convertible promissory note $40,000

Less: Unamortized discounts (33,216)

Balance at year end $6,784

 

January 29, 2014 convertible promissory note $16,500

Less: Unamortized discounts (13,702)

Balance at year end $2,798

 

-7-
 

February 29, 2014 convertible promissory note $16,500

Less: Unamortized discounts (12,833)

Balance at year end $3,667

 

February 29, 2014 convertible promissory note $40,000

Less: Unamortized discounts (31,111)

Balance at year end $8,889

 

Total Net Convertible Note Balance as of March 31, 2014 $100,816

 

 

NOTE 4 – ACCRUED EXPENSES

 

Accrued expenses consisted of the following at March 31, 2014 and December 31, 2013:

 

   

March 31,

 2014

   

December 31,

 2013

 
                 
Accrued consulting fees   $ 835,379     $ 834,345  
                 
Accrued commissions     71,033       71,033  
                 
Accrued interest expense     1,179,447       1,200,473  
                 
Accrued royalties     11,589       11,589  
                 
Accrued miscellaneous expenses     144,303       144,303  
                 
                                Total Accrued Expenses   $ 2,241,751     $ 2,261,743  

 

 

 

NOTE 5 – STOCKHOLDERS’ EQUITY

 

Preferred Stock

The Company is authorized to issue of up to 50,000,000 shares of preferred stock, $0.0001 par value ("Preferred Stock"). The Board of Directors authorized to fix the designations, rights, preferences, powers and limitations of each series of the Preferred Stock. The Company’s CEO Clark Ortiz currently holds 25,000,000 shares of the company’s preferred stock.

 

 

NOTE 6 – FAIR VALUE MEASUREMENTS

 

The Company follows the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”.  This Topic defines fair value, establishes a measurement framework and expands disclosures about fair value measurements.

 

 

 

 

-8-
 

The Company measures financial assets in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  These levels are:

 

Level 1 – Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value (“NAV”) on a daily basis.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds

 

Level 2 – Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active

 

Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, such as options pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions.  Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

 

The availability of observable inputs can vary from instrument to instrument and in certain cases the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement of an instrument requires judgment and consideration of factors specific to the instrument.

 

Recurring Fair Value Measurement Valuation Techniques

 

The fair value for certain financial instruments is derived using pricing models and other valuation techniques that involve significant management judgment.  The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments.  Financial instruments for which actively quoted prices or pricing parameters are available will generally have a higher degree of price transparency than financial instruments that are thinly traded or not quoted.  In accordance with ASC Topic 820, the criteria used to determine whether the market for a financial instrument is active or inactive is based on the particular asset or liability.  As a result, the valuation of these financial instruments included significant management judgment in determining the relevance and reliability of market information available.

 

Derivative Financial Instruments

 

The Company’s derivative financial instruments consist of conversion options embedded in 8% convertible notes.  These instruments are valued with pricing models commonly used by the financial services industry using inputs generally observable in the financial services industry.  These models require significant judgment on the part of management, including the inputs utilized in its pricing models.  The Company’s derivative financial instruments are categorized in Level 3 of the fair value hierarchy.  The Company estimates the fair value of derivatives utilizing the Black-Scholes-Merton option pricing model and the following assumptions:

 

Level 3 Assets and Liabilities

 

Level 3 liabilities include instruments whose value is determined using pricing models and for which the determination of fair values requires significant management judgment or estimation.  As of March 31, 2014 instruments measured at fair value on a recurring basis categorized as Level 3 represented approximately 1.25% of the Company’s total liabilities.

 

-9-
 

Fair values of liabilities measured on a recurring basis at as follows:

 

Liabilities Fair value Level 1 Level 2 Level 3
Derivative financial instruments – March 31, 2014 $ 332,383     $332,383

 

 

NOTE 7 – NOTES PAYABLE - Affiliate

 

Former Member of Board of Directors

 

The Company has borrowed $1,250,000 for a former member of the Board of Directors.  The two of the notes totaling $1,200,000 are unsecured.  The third note totaling $50,000 is secured by a second is lien on the Company’s assets.  The notes are default and the Company has included approximately $ 867,498 of accrued interest in accrued expenses.

 

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

Various creditors have brought suit for collections of their claims against the Company.  These liabilities are recorded above in Note 5 – Judgments Payable.  Management is of the opinion that the outcome will not have a material adverse effect on our business, financial condition, or results of operation.

 

NOTE 9 - SUPPLEMENTAL CASH FLOWS

 

    2014     2013  
Supplemental Cash Flow Disclosures            
Cash paid for interest   $ 80,000     $ 0  
Cash paid for income taxes     0       0  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-10-
 

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

 

Forward Looking Statements

 

Some of the statements made in this Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to the safe harbor provisions of the reform act. Forward-looking statements may be identified by the use of the terminology such as may, will, expect, anticipate, intend, believe, estimate, should or continue or the negatives of these terms or other variations on these words or comparable terminology. To the extent that this report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of our business, you should be aware that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in the forward-looking statements. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from their current expectations. These differences may be caused by a variety of factors including, but not limited to, adverse economic conditions, intense competition, including entry of new competitors, inability to obtain sufficient financing to support our operations, progress in research and development activities, variations in costs, fluctuations in foreign currencies against the U.S. dollar in countries where we source products, adverse federal, state and local government regulation, unexpected costs, lower sales and net income (or higher net losses, than forecasted), price increases for equipment, inability to raise prices, failure to obtain new customers, the possible fluctuation and volatility of our operating results and financial condition, inability to carry out marketing and sales plans, loss of key executives and other specific risks that may be alluded to in this report.

 

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with our audited consolidated financial statements and notes thereto appearing elsewhere in this report, which have been prepared assuming that we will continue as a going concern, and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2011.  As discussed in Note 1 to the condensed consolidated financial statements, our recurring net losses and inability to generate sufficient cash flows to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern.  Management’s plans concerning these matters are also discussed in Note 1 to the condensed consolidated financial statements.  This discussion contains forward-looking statements that involve risks and uncertainties, including information with respect to our plans, intentions and strategies for our businesses. Our actual results may differ materially from those estimated or projected in any of these forward-looking statements.

 

Overview

 

Despite the cost reduction initiatives, the Company will be unable to pay its obligations in the normal course of business or service its debt in a timely manner throughout 2014 without raising additional debt and/or equity capital.

 

The Company is currently evaluating strategic alternatives that include the following: (i) raising of capital, or (ii) issuance of debt instruments.  This process is ongoing and can be lengthy and has inherent costs.  There can be no assurance that the exploration of strategic alternatives will result in any specific action to alleviate the Company’s 12 month working capital needs or result in any other transaction.  The Company can give no assurances that it will be able to raise any equity or debt or on terms acceptable to the Company.

 

 

 

 

 

 

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Results of Operations

 

Plan of Operations

 

Effective in approximately December 2012, the Company changed its business focus to the pursuit of the acquisition of Internet media companies which provide services to home entertainment and cable business.

 

 

The Company believes that the Internet’s direct connection to homes has provided the opportunity to build out an infrastructure that is uniquely suited to deliver high quality, high definition (HD), standard definition (SD) and creatively produced TV and Radio networks with programming at a dramatically reduced price to the network creators, TV and movie producers and of course subscribers. We believe that these programs could benefit the growing community who have recognized the sincere demand for quality, entertaining, and family friendly and clean moral lifestyle.

 

Management believes that acquisitions in this “space” could compete with the major cable systems by providing alternative programming that the cable community does not provide and does not desire to provide, especially when combined with the top networks that the cable community does provide.  Such acquisitions could function as an addition to the present cable system in homes or as a standalone subscription service.

 

Operating Expenses

 

Total operating expenses were $227,433 for the three months ended March 31, 2014 compared to $182,056 for the three months ended March 31, 2013.  The primary expenses for the three months ended March 31, 2014 were interest expense of approximately $167,407 and management fees of approximately $26,535.

 

Liquidity and Capital Resources

 

The Company’s cash flow from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, is summarized in the following table for the three months ended March 31:

 

 (thousands)   2014     2013  
Cash provided by (used for):            
Operating activities   $ (115,000)     $ (56,883)  
Investing activities             -  
Financing activities     115,000       64,000  
Increase (decrease) in cash and cash equivalents   $ -     $ 7,177  

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  We incurred net losses of $241,355 and $154,019 respectively, for the three months ended March 31, 2014 and 2013 and had an accumulated deficit of $ 11,623,730 as of March 31, 2014.  We have managed our liquidity during the first quarter of 2013 through the issuance of convertible notes.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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Off-Balance Sheet Financing Arrangements

 

As of March 31, 2014, there were no off-balance sheet arrangements, unconsolidated subsidiaries and commitments or guaranties of other parties.

 

Critical Accounting Policies and Estimates

 

 

Item 3: Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable for small reporting company.

 

Part II – OTHER INFORMATION

 

Item 1.  Legal Proceedings.

 

Various creditors have brought suit for collections of their claims against the Company.  

 

Item 1A.  Risk Factors

 

Not required by small reporting company.

 

Item 3.  Defaults Upon Senior Securities.   Not applicable.

 

Item 4.  Submission of Matters to a Vote of Security Holders.   Not applicable.

 

Item 5.  Other Information.   Not applicable.

 

 Item 6.   Exhibits.

 

  Listing of Exhibits:
     
  31.1    Certification of Chief Executive Officer.
  31.2    Certification of Chief Financial Officer.
  32.1    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  101     Interactive data files pursuant to Rule 405 of Regulation S-T.

 

 

 

 

 

 

 

 

 

 

 

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 Signatures

 

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

 

 

  SWORDFISH  FINANCIAL,  INC.  
       
       
Date:  May 20,  2014 By:  /s/ Clark Ortiz  
    Its:  Chief Executive Officer and President  
       
Date:  May 20,  2014 By:  /s/ K. Bryce Toussaint  
    Its:  Acting Chief Financial Officer  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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