UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

  Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One) 

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

 

For the quarterly period ended August 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 333-136663

 

THE RADIANT CREATIONS GROUP, INC. 

(Exact name of registrant as specified in its charter)

 

NEVADA		45-2753483
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
Harbour Financial Center 2401 PGA Boulevard, Suite 280-B Palm Beach Gardens, FL 33410		33410
(Address of principal executive offices)		(Zip code)

 

(561) 420-0380

(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 [ ]

 

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

 

Large accelerated filer          [  ]	Accelerated filer                      [   ]
Non-accelerated filer            [  ]	Smaller reporting company   [ X ]
(Do not check if a smaller reporting company)

 

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

Yes [ ] No [X]

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock and preferred stock , as of the latest practicable date: As of October 20, 2014, the Issuer had 36,233,708 shares of common stock and 1,000,000 share of Series A Super Voting Control preferred stock and 20,000,000 Series B preferred stock issued and outstanding.

 

 

THE RADIANT CREATIONS GROUP, INC.
AUGUST 31, 2014
	PART I – FINANCIAL INFORMATION	Page
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of August 31, 2014 (Unaudited) and February 28, 2014	3
	Condensed Consolidated Statements of Operations For the six months ended August 31, 2014 and 2013 (Unaudited)	4
	Consolidated Statements of Cash Flows For the six months ended August 31, 2014 and 2013 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis or Plan of Operation	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mining Safety Disclosure	16
Item 5.	Other Information	16
Item 6.	Exhibits	17
	Signatures	18

 

 

ITEM 1. FINANCIAL INFORMATION

THE RADIANT CREATIONS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
			August 31,				February 28,
			2014				2014
ASSETS			(Unaudited)
Cash		$	4,756			$	120,875
Accounts receivable			—				51,045
Accounts receivable reserve			146,129				72,182
Inventory			68,153				64,701
Prepaid expenses			7,400				8,410
Total current assets			226,438				317,213
Fixed assets, net			9,835				8,968
Total assets		$	236,273			$	326,181
LIABILITIES & STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities		$	20,806			$	16,828
Accrued interest			115,846				74,358
Note payable - related party			14,063				65,650
Notes payable			90,000				95,000
Convertible notes payable, current portion			476,150				513,500
Derivative liabilities			191,743				—
Total current liabilities			908,608				765,336
LONG TERM LIABILITIES:
Convertible notes payable, net of current portion and discount of $335,635			366,901				730,448
Total liabilities			1,275,509				1,495,784
STOCKHOLDERS’ DEFICIT:
Common stock at $0.001 par value: 100,000,000 shares authorized,
56,233,708 and 54,271,336 shares issued and outstanding,  respectively			562				543
Additional paid-in capital			6,240,032				3,650,743
Accumulated deficit			(7,279,830	)			(4,820,889	)
Total stockholders’ deficit			(1,039,236	)			(1,169,603	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	236,273			$	326,181
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

THE RADIANT CREATIONS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

		For the Three Months Ended August 31, 2014				For the Three Months Ended August 31, 2013				For the Six Months Ended August 31, 2014				For the Six Months Ended August 31, 2013
NET REVENUES		$	37,905			$	37,672			$	408,456			$	37,672
COST OF SERVICES			6,652				35,281				36,202				35,281
GROSS PROFIT			31,253				2,391				372,254				2,391
OPERATING EXPENSES:
General and administrative expenses			739,709				621,560				3,054,953				629,377
Depreciation			450				150				900				150
Inventory write-off			—				24,899				3,676				24,899
Total operating expenses			740,159				646,609				3,059,529				654,426
Operating income (loss)			(708,906	)			(644,218	)			(2,687,275	)			(652,035	)
OTHER INCOME (EXPENSES):
Recovery of bad debt			—				—				195,535				—
Interest expense			(196,987	)			(181,303	)			(247,244	)			(209,281	)
Gain (loss) on derivative liability			344,083				(205,963	)			280,043				(205,963	)
Total other income (expenses)			147,096				(387,266	)			228,334				(415,244	)
NET LOSS		$	(561,810	)		$	(1,031,484	)		$	(2,458,941	)		$	(1,067,279	)
NET LOSS PER COMMON SHARE - Basic and Diluted		$	(0.01	)		$	(0.01	)		$	(0.03	)		$	(0.01	)
Weighted Common Shares Outstanding - Basic and Diluted			54,400,221				32,097,540				54,838,863				32,097,540

  

 

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

 

THE RADIANT CREATIONS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

 (Unaudited)

 

		For the Six Months Ended August 31, 2014				For the Six Months Ended August 31, 2013
CASH FLOWS PROVIDED BY (USED) IN OPERATING ACTIVITIES:
Net loss		$	(2,458,941	)		$	(1,067,279	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			900				150
Inventory write off			3,676				24,899
(Gain) Loss on derivative liability			(280,043	)			205,963
Amortization of debt discount			178,543				153,557
Stock compensation expense			2,488,416				564,627
Changes in operating assets and liabilities:
Inventory			(7,128	)			—
Accounts receivable			51,045				(37,672	)
Accounts receivable reserve			(73,947	)			—
Prepaid Expenses			1,010				(5,400	)
Accounts payable and accrued liabilities			45,466				61,303
Net cash provided by (used) in operating activities			(51,003	)			(99,852	)
CASH FLOWS PROVIDED BY (USED) IN INVESTING ACTIVITIES:
Purchase of fixed assets			(1,767	)			(9,255	)
Cash provided by (used) in investing activities			(1,767	)			(9,255	)
CASH FLOWS PROVIDED BY (USED) IN FINANCING ACTIVITIES:
Proceeds from (Payments on) related party notes			(84,499	)			76,000
Payments on short term notes and convertible notes			21,150	)			—
Contributed capital			—				2,000
Shares repurchased			—				(246,668	)
Proceeds from issuance of common stock			—				283,504
Cash provided by (used) in financing activities			(63,349	)			114,836
NET CHANGE IN CASH			(116,119	)			5,729
Cash at Beginning of Period			120,875				8,583
Cash at End of Period		$	4,756			$	14,312
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest		$	68,700			$	—
Income taxes			—				—
NON-CASH FINANCING ACTIVITY
Conversion of principal and interest into common stock		$	58,500			$	—

  

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

 

THE RADIANT CREATIONS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 

 

NOTE 1 – Organization and Significant Accounting Policies

 

Nature of Business

 

On June 20, 2013, following a change of control and subsequent acquisition of an exclusive license agreement, certain assets and processes to innovative technologies in skin protection and enhancement, which consist of various proprietary products including an anti-aging and revitalizing skin cream generally sold under the "Radiant Creations" label, the Company changed its principal business to the development and marketing of unique and proprietary scientific technologies and cosmetic and over-the-counter personal enhancement products and devices. The Company currently sells its products exclusively over the internet to customers located globally.

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted

 

Principles of consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include the valuation of stock-based compensation on derivatives.

 

Fair Value of Financial Instruments

 

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as August 31, 2014:

 

Recurring Fair Value Measures		Level 1				Level 2				Level 3				Total
Embedded conversion derivative liability		$	—			$	—			$	191,743			$	191,743

 

Basic and diluted net loss per share

 

Basic loss per share is computed using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the dilutive effects of common stock equivalents on an “as if converted” basis. For the year ended February 28, 2014, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

For the six months ended August 31, 2014, the number of potentially dilutive shares consisting of 29,204,158 shares underlying convertible debt that are not included in the calculation of diluted loss per share because their impact is anti-dilutive.

 

Recently issued accounting pronouncements

 

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

NOTE 2 – Going Concern

 

The accompanying financial statements have been prepared on the basis of accounting principles applicable to a “going concern”, which assume that the Company will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations.

 

Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. The Company has a working capital deficit of $682,170 and has incurred net losses since inception. The Company’s future capital requirements will depend on numerous factors including, but not limited to, executing its marketing and business plans and the pursuit of business opportunities. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained. In the interim, shareholders of the Company have committed to meeting its operating expenses. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – Notes Payable

 

Notes payable – third parties

 

The Company had two notes with outstanding balances as of August 31, 2014 of $75,000 and $15,000 which are subject to annual interest of 15% and mature on November 29, 2014 and January 31, 2015, respectively.

 

Notes payable - related parties

 

As of February 28, 2014 the Company had advances from corporate officers of $15,650. The advances were non-interest bearing and due on demand. These advances were fully paid as of August 31, 2014.

 

The Company had a note payable to a related party with an outstanding balance as of August 31, 2014 of $14,063. The note is subject to annual interest of 15% and matured on August 31, 2014. At August 31, 2014 the note is default. On October 8, 2014 the Company settled the note for cash payment in the amount of $10,000.

 

 

NOTE 4 – Convertible Notes Payable

 

In 2013, the Company issued a convertible note to a third party amounting to $730,448 which is subject to annual interest of 10%. The note is convertible at a fixed rate of $0.075 per share and matures on September 20, 2015. Principal payments on this note during the six months ended August 31, 2014 amounted to $27,912. As disclosed above, these notes were deemed tainted on the date that the other convertible notes became convertible on May 18, 2014. A derivative liability of $252,313 was recorded as a debt discount and amortized over the term of the note.

 

On November 19, 2013, the Company signed a convertible note agreement with a third party in which the party loaned $78,500 subject to annual interest of 8%. The note matured on August 21, 2014 and is convertible into the Company’s common stock after 180 days from the date of issuance at 58% of the average of the lowest prices of the common stock during the ten days preceding the date of conversion. On May 18, 2014, the note became convertible and the embedded conversion option required derivative accounting owing to the variable the conversion rate. On May 18, 2014, a derivative liability of $64,146 was recorded as a debt discount and amortized over the term of the note. The embedded conversion option of the note also tainted the outstanding convertible notes. During the six months ended August 31, 2014, the lender converted $58,500 in exchange for 1,962,372 shares of common stock. The remaining balance due on the note is $20,000.

 

The Company also entered into convertible note agreements with a third party on December 17, 2013 for $32,500 and January 27, 2014 for $32,500 and July 8, 2014 for $21,500. The notes are convertible after 180 days and bear similar terms to the note above. As of August 31, 2014, the notes dated December 17, 2013 and January 27, 2014 reached their conversion dates and became qualified for derivative treatment.

 

Note Date	Face Amount	Eligible Date	Conversion Date	Amounts Converted	Balance Outstanding
11/19/2013	$78,500	05/19/2014	06/13/2014 07/01/2014 07/11/2014 07/21/2014	$12,000 $12,000 $15,000 $19,500	$66,500 $54,500 $39,500 $20,000
12/17/2013	$32,500	06/15/2014	N/A	-	$32,500
01/27/2014	$32,500	07/26/2014	N/A	-	$32,500
07/08/2014	$21,500	01/04/2015	N/A	-	$21,500
Totals	$165,000	-	-	$58,500	$106,500

 

As of August 31, 2014, the Company owed convertible notes totaling $370,000 to third parties including accrued interest of another $4,041. Interest is 10% annually and is to be paid currently. The notes may be converted at the option of the Holder at a fixed rate of $0.075 per share. As disclosed above, these notes were deemed tainted on the date that the other note became convertible on May 18, 2014. A net derivative liability of $148,771 was recorded as a debt discount to be amortized over the terms of the notes.

 

Amortization expense on the debt discounts for the six months ended August 31, 2014 amounted to $178,543.

 

NOTE 5 – Derivative Liabilities

 

The Company records the fair value of the of the conversion features of the convertible notes disclosed in Note 3 and 4 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative liability was calculated using a multi-nominal lattice model. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statements of operations. During the six months ended August 31, 2014, the Company recorded a gain on the change in fair value of derivative liability of $280,043.

 

The following table summarizes the changes in the derivative liability during the six months ended August 31, 2014:

 

Balance as of February 28, 2014	$                    —
Fair value of embedded conversion derivative liability at issuance	514,181
Reclassification of derivatives upon conversion of convertible debt	(42,395)
Unrealized derivatives gains included in other expense	(280,043)
Ending balance as of August 31, 2014	$           191,743

 

 

 

The fair value of the instruments was determined using multinomial lattice model based on the following assumptions:

 

-

The projected volatility curve for each valuation period was based on the historical volatility of the Company.

-

1 year volatility of 204%,

-

An event of default would occur 5% of the time, increasing 1.00% per month to a maximum of 10%,

-

The monthly trading volume would average $984,023 to $1,013,117 and would increase at 1% per month. The variable conversion price of 58% of ask-bid or close prices over 10 trading days have effective discount rates of 46.27% to 46.51%,

-

The Note Holders would automatically convert fixed and variable conversion prices (with full ratchet resets) the notes at the stock price for the convertible Note if the registration was effective and the Company was not in default, and conversion price reset events are assumed every 3 months.

NOTE 5 – Equity

 

During the six months ended August 31, 2014, the Company granted 38,050,000 options to employees with a term of 5 years and are exercisable at prices ranging from $0.098 to $0.127 per share. 10,000,000 options vested immediately while the remaining 28,050,000 options vest at a rate of 33% on the grant date, 33% one year from the grant date and the remaining 33% two years from the grant date. The fair value of the options was determined using a Black Scholes model. The total grant date fair value of the options amounted to $4,502,234 of which $1,840,794 was recorded as stock compensation expense during the six months ended August 31, 2014. During the six months ended August 31, 2014, the Company granted 7,500,000 warrants with a term of 5 years and are exercisable at prices ranging from $0.05 to $0.115 per share to employees and board advisors. 2,500,000 warrants vested immediately at the grant date while 2,500,000 will vest one year from the grant date and the remaining 2,500,000 warrants will vest two years from the grant date. The first tranche of the vested warrants was valued at $647,622 using the Black Scholes model and fully recognized as stock compensation expense during the six months ended August 31, 2014.

The assumptions used in the Black Scholes valuations include:

 

-

Volatility: 188% to 288%

-

Risk-free interest rate: 0.43% to 0.58%

-

Zero expected dividends

-

Expected term is the simplified method

-

Exercise prices are based on option agreements

-

Common stock price on the valuation date

The following tables summarize the Company’s stock options and warrants activity during the six months ended August 31, 2014:

			Options		Weighted Average Exercise Price		Aggregate Intrinsic Value		Exercisable		Weighted Average Remaining Life
Balance, February 28, 2014			-	$	-
Granted			30,550,000		0.11
Expired			-		-
Exercised			-		-
Balance, August 31, 2014			30,550,000	$	0.11		$                   -		16,850,000		4.54

 

			Warrants		Weighted Average Exercise Price		Aggregate Intrinsic Value		Exercisable		Weighted Average Remaining Life
Balance, February 28, 2014			-	$	-
Granted			7,500,000		0.10
Expired			-		-
Exercised			-		-
Balance, August 31, 2014			7,500,000	$	0.10		$                   -		2,500,000		4.67

 

 

NOTE 7 - Subsequent Events

 

On September 9, 2014, the Company signed a convertible note agreement with a third party in which the party loaned $35,000 subject to annual interest of 12%. The note is convertible into the Company’s common stock immediately upon issuance at 60% of the lowest trade price of the common stock during the 25 days preceding the date of conversion.

On September 9, 2014 and October 13, 2014 Biodynamic Molecular Technologies, LLC (a control shareholder) agreed to cancel a total of 20,000,000 common shares of the Company. This cancellation of common stock allowed the Company to obtain additional financing without the need to expand its currently authorized number of common shares in the amount of 100,000,000.

 

On September 21, 2014 the Company signed a demand promissory note with a related party in the amount of $7,500. Terms include, interest only at 10%, principle and interest due in 24 months. The note may be prepaid without notice at the option of the Company.

 

On October 10, 2014, the Board of Directors agreed to designate a series of preferred shares (the Series A Super Voting Preferred Shares) including 1,000,000 (non-convertible) shares containing the following preferential provision:

 

Holders of each Series A Preferred Stock shall have two hundred (200) times the number of votes on all matters submitted to the shareholders that each shareholder of the Corporation’s Common Stock (rounded to the nearest whole number) is entitled to vote at each meeting of the shareholders of the Corporation (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the shareholders of the Corporation for their action or consideration. Holders of the Series A Preferred Stock shall vote together with the holders of Common Stock as a single class and,

 

Except as specifically provided, the Series B Preferred Stock shall, with respect to rights on redemption and rights on liquidation, winding up and dissolution, rank senior to (i) all classes of Common Stock, $0.00001 par value per share, of the Company (the “Common Stock”) and (ii) any class or series of capital stock of the Company hereafter created (unless, with the consent of the Holder(s) of Series B Preferred Stock). All other provisions remain pari passu as to the Company's common stock.

 

The shares were issued to Biodynamic Molecular Technologies, LLC.

 

On October 13,2014, the Board of Directors agreed to designate a series of preferred shares (the Series B Preferred Shares) including 20,000,000 (non-convertible) shares containing the following preferential provisions:

 

Except as specifically provided, the Series B Preferred Stock shall, with respect to rights on redemption and rights on liquidation, winding up and dissolution, rank senior to (i) all classes of Common Stock, $0.00001 par value per share, of the Company (the “Common Stock”) and (ii) any class or series of capital stock of the Company hereafter created (unless, with the consent of the Holder(s) of Series B Preferred Stock). All other provisions remain pari passu as to the Company's common stock.

 

The shares were issued to Biodynamic Molecular Technologies, LLC.

 

 

 

 

 

 

 

 

 

 

 

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

Cautionary Statement Regarding Forward-Looking Statements

 

Certain statements contained in this Quarterly Report constitute "forward-looking statements." These statements, identified by words such as "plan," "anticipate," "believe," "estimate," "should," "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption "Part II - Item 1A. Risk Factors" and elsewhere in this Quarterly Report. We do not intend to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review the reports and documents, particularly our Annual Reports, Quarterly Reports and our Current Reports we file from time to time with the Securities and Exchange Commission (the "SEC").

 

As used in this Quarterly Report, the terms "we," "us," "our," "Radiant," and the "Company" refer to The Radiant Creations Group, Inc. unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

 

Introduction

 

Effective May 21, 2012, a change of control took place and Clarent Services Corp. acquired from Half Moon Bay Holdings, LLC, 25,000,000 shares of common stock of the Company, representing all of Half Moon Bay’s holdings of the Company.  The shares constituted approximately 83.33% of the thirty million (30,000,000) issued and outstanding shares of common stock of the Company. There are no arrangements or understandings among members of the former and new control groups and their associates with respect to election of directors or other matters.

 

Recent Corporate Developments

 

On June 20, 2013, a change of control of the Company occurred when Biodynamic Molecular Technologies, LLC a privately held company organized in the State of Florida acquired from Clarent Services Corp., the former majority stockholder of the Company, in a private transaction, 25,000,000 restricted shares of common stock, par value $0.00001 per share of the Company.

 

The Company is not aware of any arrangements, including any pledge of securities of the Company, the operation of which may at a subsequent date result in a change of control of the Company.

 

Involvement in Certain Legal Proceedings

During the past five years no director or executive officer of the company (i) has been involved as a general partner or executive officer of any business which has filed a bankruptcy petition; (ii) has been convicted in any criminal proceeding nor is subject to any pending criminal proceeding; (iii) has been subjected to any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (iv) has been found by a court, the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law.

 

Family Relationships

 

Mr. Gary R. Smith, our CEO, directly owns fifty percent, Mr. Gary D. Alexander, our CFO, owns twenty five percent, Mr. Michael S. Alexander, our EVP, owns twenty five percent and Mr. Manpreet Singh Thaper has no direct or indirect financial interest in Biodynamic Molecular Technologies, LLC the majority shareholder of the Company.

Plan of Operation

On June 20, 2013, following a change of control and subsequent acquisition of an exclusive license agreement, certain assets and processes to innovative technologies in skin protection and enhancement, which consist of various proprietary products including an anti-aging and revitalizing skin cream generally under the "Radiant Creations" label, the Company changed its principal business to the development and marketing of unique and proprietary scientific technologies and cosmetic and over-the-counter personal enhancement products and devices. 

 

 

As of August 31, 2014, we had cash assets of $4,756 and a working capital deficit of $682,170 and an accumulated deficit of $7,279,830. As such, we anticipate that we will require substantial financing in the near future in order to meet our current obligations and to continue our operations. In addition, in the event that we are successful in identifying suitable alternative business opportunities, of which there is no assurance, we anticipate that we will need to obtain additional financing in order to pursue those opportunities.

 

Currently, we do not have any financing arrangements in place and there are no assurances that we will be able to obtain sufficient financing on terms acceptable to us, if at all. Due to the lack of our operating history and our present inability to generate significant revenues, our auditors have stated in their audit report included in our audited financial statements for the year ended February 28, 2014 that there currently exists substantial doubt about our ability to continue as a going concern.

Off-Balance Sheet Arrangements

None.

Financing Requirements

 

From December 29, 2005 (Inception) to August 31, 2014, we have suffered cumulative losses of $7,279,830. We expect to continue to incur substantial losses as we continue the growth of our business. Since our inception, we have funded operations through common stock issuances, related party loans, and the support of creditors in order to meet our strategic objectives.

 

Our management believes that sufficient funding will be available to meet our business objectives, including anticipated cash needs for working capital, and are currently evaluating several financing options, including a public offering of securities. However, we do not have any financing arrangements currently in place and there can be no assurance that we will be able to obtain sufficient financing when needed. As a result of the foregoing, our independent auditors believe there exists substantial doubt about our ability to continue as a going concern.

 

There is no assurance that we will be able to obtain additional financing if and when required. We anticipate that additional financing may come in the form of sales of additional shares of our common stock which may result in dilution to our current shareholders.

 

Going Concern Qualification

 

Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern.  The Company has a working capital deficit of $682,170 and has incurred net losses of $7,279,830 for the period from December 29, 2005 (inception) to August 31, 2014 and the Company will require additional financing in order to finance its business activities on an ongoing basis.  The Company’s future capital requirements will depend on numerous factors including, but not limited to, executing the company’s marketing and business plans and the pursuit of other business opportunities. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained.  In the interim, shareholders of the Company have committed to meeting its operating expenses.  Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide them with the opportunity to continue as a going concern. 

 

Liquidity and Capital Resources 

It is the intent of our management, stockholders, and specifically the majority Shareholder, BioDynamic Molecular Technologies, LLC and our Chief Executive Officer, Gary R. Smith, our Chief Financial Officer, Gary D. Alexander and Our Chief Operating Officer, Manpreet Singh Thaper to provide sufficient working capital necessary to support and preserve the integrity of our Company as a corporate entity.  However, there is no legal obligation for either the majority Shareholder(s) or Officer(s) to provide additional future funding. If our management ceases to provide us the needed financing and we fail to identify any alternative sources of funding, there will be substantial doubt about our ability to continue as a “going concern”.

 

 

 

We have no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities.  As a result, there can be no assurance that sufficient funds will be available to us to enable us to pay the expenses related to such activities.

 

Regardless of whether or not our cash assets prove to be adequate to meet our operational needs, we may have to compensate providers of services by issuances of our common stock in lieu of cash.

 

At August 31, 2014, we had $4,756 in cash, $1,275,509 in liabilities, and an accumulated deficit of $7,279,830. Our primary source of liquidity has been from loans from a majority shareholder(s) and loans from outside parties.  As of August 31, 2014, the Company owed $1,254,703 in notes and accrued interest).

  

Net cash used in operating activities was $(51,003) during the quarter ended August 31, 2014.  

 

Cash used in investing activities was $(1,767) during the quarter ended August 31, 2014.

 

Cash used in financing activities was $(63,349) during the quarter ended August 31, 2014.  

 

Our expenses to date are largely due to professional fees that include accounting and legal fees.

The Company has a working capital deficit of $682,170 and has incurred net losses of $7,279,830 for the period from December 29, 2005 (inception) to August 31, 2014. Our future capital requirements will depend on numerous factors, including, but not limited to, executing our marketing and business plans and the ability to pursue other business opportunities. We are actively pursuing alternative financing and have had discussions with various third parties, although no firm commitments have been obtained to date.  In the interim, shareholders of the Company have agreed to meet our operating expenses.  We believe that actions presently being taken to revise our operating and financial requirements provide the Company with the opportunity to continue as a “going concern,” although no assurances can be given.

 

Net Loss

 

We incurred a net loss of $561,810 and $2,458,941 for the three months and six months ended August 31, 2014, respectively, compared to a net loss of $1,031,484 and $1,067,279 for the three months and six months ended August 31, 2013, respectively.  From inception on December 29, 2005 to August 31, 2014, we have incurred a net loss of $7,279,830.  Our basic and diluted loss per share was $(0.01) and $(0.03) for the three months and six months ended August 31, 2014, respectively, and $(0.01) and $(0.01) for the three months and six months ended August 31, 2013, respectively. 

 

Operating and Administration Expenses

 

Operating expenses increased by $93,550 from $646,609 in the three months ended August 31, 2013, to $740,159 in the three months ended August 31, 2014.  

 

Operating expenses increased by $2,405,103 from $654,426 in the six months ended August 31, 2013, to $3,059,529 in the six months ended August 31, 2014. 

 

Operating expenses for the six months comparison primarily consist of office administration, professional and regulatory compliance, investor relations and marketing and advertising.

 

Other Expenses 

Other income (expenses) increased by $534,362 from $(387,266) in the three months ended August 31, 2013, to $147,096 in the three months ended August 31, 2014. 

 

Other income (expenses) increased by $643,578 from $(415,244) in the six months ended August 31, 2013, to $228,334 in the six months ended August 31, 2014. 

 

Other expenses for the six months comparison primarily consist of interest expense, depreciation and derivative related costs.

 

 

 

Common and Preferred Stock

We are authorized by our Amended and Restated Articles of Incorporation and our Additional Articles of Incorporation to issue an aggregate of 200,000,000 shares of capital stock, of which 100,000,000 are shares of common stock, par value $0.00001 per share (the “Common Stock”) and 100,000,000 are shares of preferred stock (the “Preferred Stock”), par value $0.00001 per share.  As of August 31, 2014, 56,233,708 shares of Common Stock were issued and outstanding and there were 77 shareholders of our Common Stock and 0 shares of Preferred Stock were issued and outstanding.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not Applicable.

 

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

For purposes of this Item 4., the term disclosure controls and procedures means controls and other procedures of the Company (i) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (15 U.S.C. 78a  et seq. and hereinafter the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii)  include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures do not comply with the requirements in (i) and (ii) above and are not effective.  

 

On August 31, 2014, our President, Gary R. Smith, has reviewed the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) as of the end of the period covered by the report and has concluded that (i) the Company’s disclosure controls and procedures are not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Commission, and (ii) the Company’s controls and procedures have not been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  

 

The material weakness identified relates to the lack of proper segregation of duties. The Company believes that the lack of proper segregation of duties is due to the Company’s limited resources.

 

Changes in Internal Controls over Financial Reporting

 

There were no changes in our internal control over financial reporting identified in connection with our evaluation of these controls as of the first fiscal quarter ended August 31, 2014 as covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Inherent Limitations on Effectiveness of Controls 

The Company's management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

ITEM 1. Legal Proceedings

 

None.

 

PART II - OTHER INFORMATION

 

ITEM 1A. Risk Factors

 

The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.

 

WE HAVE LIMITED BUSINESS OPERATIONS AND ONE PRODUCT AVAILABLE FOR SALE. WE HAVE NOT IDENTIFIED ANY ALTERNATIVE BUSINESS OPPORTUNITIES. OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS WILL CONSIST OF EXECUTING OUR MARKETING AND BUSINESS PLANS AND RESEARCHING NEW OPPORTUNITIES.

 

Our assets consists of an exclusive license purchased from Dr. Yin-Xiong Li, MD, Ph.D. to his patent in Enhanced Broad-Spectrum UV Radiation Filters and Methods as disclosed and claimed in U.S. Patent No. US Patent # 6,117,846 - Nucleic acid filters and US Patent Application # 20080233626 - Enhanced broad-spectrum UV radiation filters and methods, and the following international filings European Application # 07811023.6, and Australian Application # 2007281485 and as trade secrets associate with the above listed intellectual property and trade secrets and potential patent applications for an anti-aging skin rejuvenation cream, an acne OTC treatment, a wrinkle reduction cream, BioSalt redistribution technology using supplements.  The License Agreement, as of June 25, 2013 has added an addendum to it allowing Renewable to transfer the license agreement to The Radiant Creations Group.

 

In the event the Company is unable to maintain compliance with the terms of the exclusive license agreement the grantor could elect to limit or terminate the agreement which would have a material impact on our financial condition.

 

We May Not be Able to Obtain Additional Financing

 

As of February 28, 2014, we had cash on hand of $120,875 and a working capital deficit of $(448,123).

 

As of August 31, 2014, we had cash on hand of $4,756 and a working capital deficit of $(682,170).

 

Currently, our ability to obtain additional financing may be substantially limited. If sufficient financing is not available or obtainable as and when needed, we may not be able to continue as a going concern and investors may lose a substantial portion or all of their investment. We currently do not have any financing arrangements in place and there are no assurances that we will be able to acquire financing on acceptable terms or at all.

 

We Have Limited Officers and Directors

 

Because management consists of only three persons, Gary R. Smith, President and CEO, Gary D. Alexander, CFO and Corporate Secretary and Manpreet Singh Thaper, COO will be the only individuals responsible in conducting the day-to-day operations of the Company.  We do not benefit from having access to multiple judgments that a greater number of directors or officers would provide, and we will rely completely on the judgment of our three officers when selecting a target products to market.  Mr. Smith, Mr. Alexander and Mr. Singh Thaper anticipate devoting only a limited amount of time per month to the business of the Company.  Mr. Smith, Mr. Alexander and Mr. Singh Thaper all anticipate executing written employment agreements with the Company in the near future, however we do not anticipate obtaining key man life insurance on  Mr. Smith, Mr. Alexander or Mr. Singh Thaper. The loss of the services of  Mr. Smith, Mr. Alexander or Mr. Singh Thaper would adversely affect development of our business and our likelihood of continuing operations.

 

We Depend on Management and Management's Participation is Limited

 

We will be entirely dependent upon the experience of our officers and directors in seeking, investigating, and acquiring new business opportunities and in making decisions regarding our operations.  It is possible that, from time to time, the inability of such persons to devote their full time attention to the Company will cause the Company to lose an opportunity.

 

We May Conduct Further Offerings in the Future in Which Case Investors' Shareholdings' will be Diluted 

We may conduct equity offerings in the future to finance any future business projects that we decide to undertake. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, investors' percentage interest in us will be diluted. The result of this could reduce the value of their stock.

 

Because Our Stock is a Penny Stock, Shareholder will be More Limited in Their Ability to Sell Their Stock

 

The shares of our common stock constitute "penny stocks" under the Exchange Act. The shares will remain classified as a penny stock for the foreseeable future. The classification as a penny stock makes it more difficult for a broker/dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker/dealer engaged by the purchaser for the purpose of selling his or her shares will be subject to rules 15g-1 through 15g-10 of the Exchange Act. Rather than having to comply with these rules, some broker-dealers will refuse to attempt to sell a penny stock.

 

The "penny stock" rules adopted by the SEC under the Exchange Act subjects the sale of the shares of our common stock to certain regulations which impose sales practice requirements on broker/dealers. For example, brokers/dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities.

Legal remedies, which may be available to an investor in "penny stocks," are as follows:

 

(a) if "penny stock" is sold to an investor in violation of his or her rights listed above, or other federal or states securities laws, the investor may be able to cancel his or her purchase and get his or her money back.

 

(b) if the stocks are sold in a fraudulent manner, the investor may be able to sue the persons and firms that caused the fraud for damages.

 

(c) if the investor has signed an arbitration agreement, however, he or she may have to pursue his or her claim through arbitration.

 

If the person purchasing the securities is someone other than an accredited investor or an established customer of the broker/dealer, the broker/dealer must also approve the potential customer's account by obtaining information concerning the customer's financial situation, investment experience and investment objectives. The broker/dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the SEC's rules may limit the number of potential purchasers of the shares of our common stock.

 

ITEM 2. Unregistered Sale of Equity Securities and Use of Proceeds

 

None.

 

ITEM 3. Defaults on Senior Securities

 

None.

 

ITEM 4. Mining Safety Disclosure

 

Not Applicable.

 

ITEM 5. Other Information

 

None.

 

ITEM 6. Exhibits

 

EXHIBIT 31	Section 302 Certification of Chief Executive Officer and Chief Financial Officer
EXHIBIT 32	Section 906 Certification of Chief Executive Officer and Chief Financial Officer

 

 

 

 

 

 

SIGNATURES

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

 

 

THE RADIANT CREATIONS GROUP, INC.

 

 

Dated:  October 20, 2014	By: /s/ Gary R. Smith Gary R. Smith, Chief Executive Officer
Dated:  October 20, 2014	By: /s/ Gary D. Alexander Gary D. Alexander, Chief Financial Officer