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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

(Mark One)

þ	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2014

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 0-5667

Le@P Technology, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

(954) 771-1772

(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.  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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant has been required to submit and post such files). þ Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

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

Class A Common Stock, par value $0.01 per share:  65,195,909 shares outstanding at August 1, 2014

Class B Common Stock, par value $0.01 per share:  25,000 shares outstanding at August 1, 2014

 

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LE@P TECHNOLOGY, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

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PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

Le@P Technology, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

See notes to condensed consolidated financial statements.

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Le@P Technology, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(continued)

 

See notes to condensed consolidated financial statements.

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Le@P Technology, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Operations

 

(Unaudited)

 

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Le@P Technology, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

See notes to condensed consolidated financial statements

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Le@P Technology, Inc. and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements

 

June 30, 2014
(Unaudited)

 

1.	The Company

 

Le@P Technology, Inc. (the “Company”) currently has no business operations, and has no revenues or revenue-producing activities (with the limited exception that, as noted below in this Note 1, the Company currently leases the Real Property (as defined below) pursuant to the Short-Term Lease (as defined below).  As further discussed below, the Company has ongoing expenses as well as substantial indebtedness and liabilities.

 

As previously reported initially on the Company’s Current Report on Form 8-K dated December 27, 2012 (the “December 2012 8-K”), the M. Lee Pearce Living Trust (the “Majority Stockholder Trust”), of which the Company’s indirect and beneficial majority stockholder, M. Lee Pearce, M.D. (“Dr. Pearce”), is the 100% beneficial owner (Dr. Pearce, together with entities owned or controlled by him that own capital stock of the Company are collectively referred to as the “Majority Stockholder”), provided the Company with a $1,200,000 loan in December 2012 (the “December 2012 Loan”), on the terms disclosed (including a 3.75% interest rate and maturity date for principal and all accrued interest of March 31, 2015).  Based on the Company’s year-to-date and anticipated operating expenses and management’s internally prepared cash budget for the 15-month period ended March 31, 2015 (the “15-month Cash Budget”), management believes that the Company’s current cash and cash equivalents will be sufficient to fund the Company’s working capital requirements at least through March 31, 2015.

 

The Company’s Board of Directors (the “Board” or “Board of Directors”) plans to continue to focus on, consider and  pursue (subject to budget and cash constraints) potential investment, joint venture and acquisition opportunities (particularly those in the health care technology, products and services and life sciences arenas) (“Opportunities”) that come to the attention of Board members or management.  This may include Opportunities introduced by Dr. Pearce or his network of contacts.  The Board is also evaluating other alternatives with respect to the Company and its future.  Despite planning discussions regarding the Company’s pursuit of Opportunities held during 2013 and early 2014 with both management and, through a Board representative, with Dr. Pearce, the Company has not identified and was not, as of June 30, 2014, pursuing any specific Opportunities.  The Company has very limited management and financial resources available to consider and pursue Opportunities.  The Company’s 15-month Cash Budget includes an allocation of $175,000 for limited funding of the investigation and initial pursuit of possible Opportunities (including due diligence, investigation and initial/preliminary legal expenses, but not including purchase price or legal or accounting expenses associated with preparing, negotiating, reaching a definitive agreement regarding or consummating any such transaction), of which approximately $37,700 was expended through June 30, 2014.  The ability of the Company to identify and reach (preliminary or definitive) agreement on and/or ultimately consummate any such Opportunities is dependent upon, among other things, its ability to source and perform due diligence on available and appropriate Opportunities, and to obtain additional funding and financing for, and to negotiate, document and execute on, such Opportunities (and to fund and provide for post-transaction personnel, support, working capital and other needs as applicable).

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The only material asset of the Company (other than cash and cash equivalents and prepaid expenses) is certain real property located in Broward County, Florida (the “Real Property”), which is owned by the Company’s wholly-owned subsidiary, Parkson Property LLC (“Parkson”).  The Real Property is zoned light industrial, consists of approximately one and one-third acres and is currently undeveloped.  As previously reported on the Company’s Quarterly Report on Form 10-Q dated November 1, 2013, the Company entered into a month-to-month lease of the Real Property to a third party tenant on August 12, 2013, under which lease the Company received rental income of $1,000 per month (which is included as a reduction of other expenses in the accompanying consolidated statements of operations).  This month-to-month lease ended on or about May, 2014, and the tenant under that lease vacated the Real Property.  On June 30, 2014 the Company entered into a two month lease of the Real Property to an unrelated third party tenant at the lease rate of $1,500 per month (the “Short-Term Lease”).  The Real Property is encumbered by a note (as discussed and defined further in Note 3 below, the “December 2012 Parkson Replacement Note”) and related mortgage in the aggregate principal amount as of June 30, 2014 of $821,184; the December 2012 Parkson Replacement Note bears interest at the rate of 3.75% per annum and matures (both principal and all accrued interest) on March 31, 2015.  The indebtedness evidenced by the December 2012 Parkson Replacement Note substantially exceeds the value of the Real Property, and the operating, financing and insurance costs associated with the Real Property exceed the amount the Company currently receives under the Short-Term Lease.  The Company’s 15-month Cash Budget includes an allocation of $25,000 for the limited funding of initial, modest development of the property, including limited architectural fees and permitting/development expenses, but not including actual construction costs, regarding the Real Property, none of which was expended through June 30, 2014.  The Company is exploring options with respect to the continued lease and/or sale of the Real Property.

 

Operating Losses and Cash Flow Deficiencies

 

As noted above, the Company currently has no business operations, has no revenues or revenue-producing activities (with the limited exception that, as noted above, the Company currently leases the Real Property pursuant to the Short-Term Lease) and has ongoing expenses as well as substantial indebtedness and liabilities.  The Company has relied entirely upon the Majority Stockholder Trust (and other affiliates of Dr. Pearce) to fund working capital and expenses (and to extend maturities on indebtedness owing to the Majority Stockholder Trust and affiliates), acting in its (and their) discretion.  The Company has received no loans, advances or funding, from the Majority Stockholder Trust or any other party, since December 2012, and neither the Majority Stockholder Trust nor any other party has made any commitment or undertaken any obligation to provide additional funding or financing to the Company (or to extend the maturity dates on existing indebtedness), including in connection with working capital needs, preparing, negotiating, reaching a definitive agreement with respect to or consummating any Opportunities or furthering the commercial development of the Real Property.  All of the Company’s existing outstanding indebtedness is schedule to mature on March 31, 2015.  There can be no assurance that the Majority Stockholder Trust (or any other affiliate of Dr. Pearce or any other party) will provide further funding or financing to the Company, or that the Majority Stockholder Trust (or any other affiliate of Dr. Pearce) will agree to extend the maturity dates on any existing indebtedness.  In addition, if the Majority Stockholder Trust (or any affiliate of Dr. Pearce), in its discretion, were to provide or facilitate any such additional funding or financing, there can be no assurance that the Majority Stockholder Trust would continue to do so (or extend maturity dates on existing indebtedness) in the future, or regarding the amount, terms, restrictions or conditions of any such funding or financing.  The Company’s efforts to obtain additional funding or financing to fund its continued existence beyond March 31, 2015 may require significant effort, costs and expenditures, and if the Company succeeds in obtaining such financing, the amount and terms of such financing could be onerous and result in substantial dilution of existing capital stock (particularly Class A Common Stock) ownership interests as well as increased borrowings and interest expense.

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2.	Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial information have been included.  Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

 

The condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements.

 

For further information, refer to the consolidated financial statements and footnotes thereto included in the Le@P Technology, Inc. Annual Report on Form 10-K for the year ended December 31, 2013.

 

Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Recent Accounting Pronouncements

 

Refer to the consolidated financial statements and footnotes thereto included in the Le@P Technology, Inc. Annual Report on Form 10-K for the year ended December 31, 2013 for recent accounting pronouncements.  Other pronouncements have been issued but the Company does not believe that their adoption will have a significant impact on the financial position or results of operations.

3.	Notes Payable to Related Parties

 

As noted above, the Company’s wholly-owned subsidiary, Parkson, owns the Real Property.  Parkson purchased the Real Property on September 28, 2001 from Bay Colony Associates, Ltd., an entity wholly-owned by Dr. Pearce, in exchange for a two-month note in the amount of $37,500, and a five-year note (the “Long Term Note”) and related mortgage in the amount of $712,500.  The purchase price was based on an independent third-party appraisal.  As previously reported initially on the Company’s December 2012 8-K, the Long Term Note was replaced a number of times and is currently evidenced by a Renewal Promissory Note (“Parkson Property”) dated December 27, 2012 in the principal amount of $821,184 (the “December 2012 Parkson Replacement Note”).  The December 2012 Parkson Replacement Note bears interest at the rate of 3.75% per annum, with both principal and all accrued interest due in one lump sum on March 31, 2015.  The indebtedness evidenced by the December 2012 Parkson Replacement Note substantially exceeds the current estimated value of the Real Property.

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As previously reported on the Company’s December 2012 8-K, and as noted above, the Majority Stockholder Trust, of which Dr. Pearce is the 100% beneficial owner, provided the Company with the $1,200,000 December 2012 Loan in December 2012.

In addition to the December 2012 Loan, the Majority Stockholder Trust previously made other working capital loans to the Company which were, prior to their extension and combination (as described below), evidenced by two promissory notes made by the Company in favor of the Majority Stockholder Trust and dated February 7, 2012 (in the original principal amount of $777,062) and April 9, 2012 (in the original principal amount of $500,000) (collectively referred to as the “Working Capital Notes”).  The maturity date of these Working Capital Notes was, prior to their agreed extension (as described below), June 30, 2013.

As previously reported initially on the Company’s December 2012 8-K, on December 27, 2012, the Majority Stockholder Trust, as holder of and payee under the Working Capital Notes, agreed: (i) to extend the maturity date of the total outstanding indebtedness under the Working Capital Notes from June 30, 2013 to March 31, 2015 (the “Extended Maturity Date”), and (ii) to combine the total outstanding indebtedness evidenced by and under the December 2012 Loan and the Working Capital Notes (including their outstanding principal amounts and accrued interest through December 27, 2012) into a single note, thereby replacing these notes with a Renewal Promissory Note (Working Capital) dated December 27, 2012 in the principal amount of $2,516,467 (the “December 2012 Le@P Combined Renewal Note”).  The principal and all accrued interest – at the agreed rate of 3.75% per annum – under the December 2012 Le@P Combined Renewal Note are due in one lump sum on the Extended Maturity Date (of March 31, 2015).  Other than the new (combined) principal amount, which includes the principal amount of the December 2012 Loan, and the extension of the maturity date, in each case as noted above, the terms of the Working Capital Notes were not changed and these notes (and the obligations thereunder) are now incorporated in and replaced and evidenced by the December 2012 Le@P Combined Renewal Note.

All of the Company’s existing outstanding indebtedness is schedule to mature on March 31, 2015.  The total amount of such indebtedness (principal and interest), all due to related parties, as of June 30, 2014 was $3,523,252.

4.	Financial Instruments and Fair Values

 

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.  Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.

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The carrying amount of cash and cash equivalents, prepaid expenses and other assets approximates fair value due to the short-term maturities of these instruments.

 

The fair values of all other financial instruments, including debt, approximate their book values as the instruments are short-term in nature or contain market rates of interest.

 

Item 2.

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

 

Forward-Looking Statements

Certain statements in Management’s Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, forecasts, statements relating to the plans, objectives and expected or anticipated business, operations, development, pursuits, liquidity, capital resources, financial condition or operating results of the Company, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).  These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “seek”, “estimate,” “budget,” “intend,” “strategy,” “plan,” “objective,” “goal,” “propose,” “pursuit,” “may,” “should,” “will,” “would,” “will be,” “can”, “could,” “will continue,” “will likely result,” and similar words, statements and expressions.  Forward-looking statements are based on current beliefs, expectations and assumptions that are subject to risks and uncertainties that can be difficult to predict or ascertain and which may cause the actual results to differ materially from the forward-looking statements.  In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of the Company, the inclusion of such information should not be regarded as a statement by the Company or any other person that these forward-looking statements (or the Company’s goals, objectives, plans, pursuits, intentions, or other forward-looking information derived therefrom) will be achieved.  Factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements herein include, without limitation, the items listed below:

 

•	Other risks referenced from time to time in the Company’s filings with the Securities and Exchange Commission.

 

The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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Business Strategy

 

As noted above, the Company currently has no business operations, has no revenues or revenue-producing activities (with the limited exception that, as noted above, the Company currently leases the Real Property pursuant to the Short-Term Lease), and has ongoing expenses as well as substantial indebtedness and liabilities.

 

During 2014, the Company’s Board of Directors plans to continue to focus on, consider and pursue potential investment, joint venture and acquisition Opportunities that come to the attention of Board members or management.  The Board is also evaluating other alternatives with respect to the Company and its future.  This may include Opportunities introduced by Dr. Pearce or his network of contacts.  Despite planning discussions regarding the Company’s pursuit of Opportunities held during 2013 and early 2014 with both management and, through a Board representative, with Dr. Pearce, the Company has not identified and was not, as of June 30, 2014, pursuing any specific Opportunities.  The Company has very limited management and financial resources to identify or pursue Opportunities.  As noted above, the Company’s internally prepared 15-month Cash Budget includes an allocation of (i) $25,000 for initial and limited commercial development plans (including limited architectural fees and permitting/development expenses, but not including actual construction costs) regarding the Real Property, and (ii) $175,000 for limited funding of the investigation and initial pursuit of possible Opportunities.  The ability of the Company to identify and reach (preliminary or definitive) agreement on and/or ultimately consummate any such Opportunities is dependent upon, among other things, its ability to source and perform due diligence on available and appropriate Opportunities, and to obtain additional funding and financing for, and to negotiate, document and execute on, such Opportunities (and to fund and provide for post-transaction personnel, support, working capital and other needs as applicable).

 

Competition

 

In considering, approaching and pursuing Opportunities, the Company faces a highly competitive, rapidly evolving and difficult environment.  Potential competitors for Opportunities include a wide variety of venture capital, private equity, investment and other funds, as well as individual, private and public investors, joint venture partners and acquirers, and other organizations (including strategically positioned operating companies pursuing the same or similar investment, joint venture and/or acquisition opportunities), most of which enjoy capital, access to capital and significantly greater financial, management, operational, technology and technical resources than the Company.

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Liquidity and Capital Resources

 

The Company’s cash and cash equivalents as of June 30, 2014 aggregated $805,347 which management believes, based on the Company’s recent and expected operating expenses and internally prepared 15-month Cash Budget, will be sufficient to fund the Company’s working capital requirements at least through March 31, 2015.  As previously reported initially in the Company’s December 2012 8-K and as discussed above under Note 1 (“Notes Payable to Related Parties”), in December 2012, (i) the Majority Stockholder Trust provided the Company with a $1,200,000 loan, and (ii) the maturity dates (principal and all accrued interest) on all of the Company’s existing outstanding indebtedness were extended to March 31, 2015.  In the event (a) the Company does not generate revenue or income sufficient to fund its operations, activities and expenses, or (b) third-party funding or financing does not become available to the Company on terms acceptable to the Company prior to the Company exhausting its existing cash and cash equivalents, the Company will not be able to fund its working capital or operations and would be entirely dependent upon the continued funding, loans and working capital advances from the Majority Stockholder Trust (which are provided in the Majority Stockholder Trust’s sole discretion).  The Company has received no loans, advances or funding, from the Majority Stockholder Trust or any other party, since December 2012, and neither the Majority Stockholder Trust nor any other party has made any commitment or undertaken any obligation to provide additional funding or financing to the Company (or to extend the maturity dates on existing indebtedness), including in connection with working capital needs, preparing, negotiating, reaching a definitive agreement with respect to or consummating any Opportunities or furthering the commercial development of the Real Property.  All of the Company’s existing outstanding indebtedness is schedule to mature on March 31, 2015.  There can be no assurance that the Majority Stockholder Trust (or any other affiliate of Dr. Pearce or any other party) will provide further funding or financing to the Company, or that the Majority Stockholder Trust (or any other affiliate of Dr. Pearce) will agree to extend the maturity dates on any existing indebtedness.  In addition, if the Majority Stockholder Trust (or any affiliate of Dr. Pearce), in its discretion, were to provide or facilitate any such additional funding or financing, there can be no assurance that the Majority Stockholder Trust would continue to do so (or extend maturity dates on existing indebtedness) in the future, or regarding the amount, terms, restrictions or conditions of any such funding or financing.  The Company’s efforts to obtain additional funding or financing to fund its continued existence beyond March 31, 2015 may require significant effort, costs and expenditures, and if the Company succeeds in obtaining such financing, the amount and terms of such financing could be onerous and result in substantial dilution of existing capital stock (particularly Class A Common Stock) ownership interests as well as increased borrowings and interest expense.

 

The Majority Stockholder Trust is the sole owner of the outstanding shares of the Company’s Series B Preferred Stock.  Dividends on the Series B Preferred Stock are cumulative and accrue at a rate of 10% per annum on the preferred stock’s stated liquidation value of $1,000 per share and must be paid before any dividends may be paid on any other class or series of common or preferred stock; in addition, no other class or series of common or preferred stock may be redeemed or repurchased nor may the Series B Preferred Stock be altered or modified without the approval of the holder(s) of the Series B Preferred Stock.  As of June 30, 2014, dividends of $3,213,000 were accumulated and unpaid on the Company’s Series B Preferred Stock.  The accumulated amount, in addition to any additional amounts that may accrue, will be charged to retained earnings, if any, or additional paid-in capital, if and/or when declared by the Company’s Board of Directors.

As noted above under Note 1, other than a relatively small amount of lease income currently deriving from the Short-Term Lease, the Company has no operating revenues and, even though the Company has decided to continue to focus on, consider and (as applicable and as the Board deems appropriate) pursue potential Opportunities, there can be no assurance that this strategy will be successful or that it will generate any operating revenues or income in the future.

 

The Company’s total assets decreased from approximately $1,452,000 at the end of 2013 to approximately $1,232,000 on June 30, 2014, primarily reflecting the decrease of cash and cash equivalents used for payments of operating expenses, offset by an increase of prepaid expenses.

 

The Company’s total liabilities increased from approximately $3,521,000 at the end of 2013 to approximately $3,564,000 at June 30, 2014, primarily due to increased (i) accounts payable and accrued expenses of approximately $5,000 and (ii) an increase in accrued interest payable to a related party of approximately $62,000, offset by a decrease in accrued professional fees of approximately $23,000.

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The Company’s working capital decreased from approximately $995,000 at the end of 2013 to a deficit of approximately $2,732,000 at June 30, 2014, primarily reflecting the decrease of approximately $226,000 of cash used for payments of operating expenses and a decrease in accrued professional fees of approximately $23,000, offset by an increase in short-term notes payable and short-term accrued interest of approximately $3,526,000 (due on a maturity date of March 31, 2015), $3,464,000 of which was previously classified as long-term notes payable and long-term accrued interest as of December 31, 2013, and an increase of prepaid expenses of approximately $6,000 and an increase in accounts payable and accrued expenses of approximately $5,000.

 

 

The Company’s net loss before income taxes decreased from approximately $143,000 for the three months ended June 30, 2013 to approximately $132,000 for the three months ended June 30, 2014.  The variance primarily reflects a decrease in professional fees of approximately $16,000 offset by an increase in general and administrative fees of approximately $4,000.

 

 

The Company’s net loss before income taxes decreased from approximately $293,000 for the six months ended June 30, 2013 to approximately $263,000 for the six months ended June 30, 2014.  The variance primarily reflects a decrease in general and administrative fees of approximately $27,000.

 

Off-Balance Sheet Arrangements

As of June 30, 2014, the Company did not have any off-balance sheet arrangements that have or are reasonably likely to have a material effect on the current or future financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources.

Note that this MD&A discussion contains forward-looking statements that involve risks and uncertainties.  Please see the section entitled “Forward-Looking Statements” on page 13 for important information to consider when evaluating such statements and related notes included under Item 1 hereof.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not required.

Item 4.

Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

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The Company maintains a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).   As required by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of the Company’s Acting Principal Executive Officer and Acting Principal Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2014, the end of the period covered by this report.  Based on that review and evaluation, the Acting Principal Executive Officer and Acting Principal Financial Officer, along with the management of the Company, have determined that as of June 30, 2014, the disclosure controls and procedures are effective.

 

Changes in Internal Controls Over Financial Reporting During Last Fiscal Quarter

 

Our Acting Principal Executive Officer and Acting Principal Financial Officer have identified no change in the Company’s “internal control over financial reporting” (as defined in Exchange Act Rule 13a-15(f)) that occurred during the period covered by this quarterly report on Form 10-Q (this “Report”) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

 

OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

As of June 30, 2014, the Company was not involved in any material claims, lawsuits or legal proceedings.

Item 1A.

Risk Factors

 

As a “smaller reporting company,” as defined by the Securities and Exchange Commission regulations promulgated under the Exchange Act, the Company is not required to provide the information required by this item.  Notwithstanding this, this Report contains certain forward-looking statements that involve risks and uncertainties, and the Company’s business, operations and future are subject to certain risks and uncertainties.  Please see the section entitled “Forward-Looking Statements” on pages 13 for important information to consider when evaluating such statements (and related notes) included in, and when considering risks and uncertainties, in connection with this Report and the future of the Company, its business and value.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not have any unregistered sales of equity securities during the fiscal quarter ending June 30, 2014.

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Item 3.

Defaults Upon Senior Securities

 

As of June 30, 2014, the Company did not experience any defaults with respect to any outstanding indebtedness of the Company.  As of the date of filing this Report, dividends of $3,213,000 were accumulated and unpaid on the Series B Preferred Stock.

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

 

31.1	Certification of Acting Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

 

31.2	Certification of Acting Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

 

32.1	Certification of Acting Principal Executive Officer relating to Periodic Financial Report Pursuant to 18 U.S.C. Section 1350.*

 

32.2	Certification of Acting Principal Financial Officer relating to Periodic Financial Report Pursuant to 18 U.S.C. Section 1350.*

 

* Filed herewith

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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.

 

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Exhibit Index

 

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