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 September 30, 2014

 

or

 

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

 

For the transition period from ________________ to __________________

 

Commission File Number 000-54009

 

FREEBUTTON, INC.

(Exact name of registrant as specified in its charter)

 

Nevada	20-5982715
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

7040 Avenida Encinas
Suite 104-159

Carlsbad, CA 92011
(Address of principal executive offices) (Zip Code)

 

(760) 487-7772
(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.

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes [_] No [X]

 

As of December 15, 2014, the registrant had 33,844,260 shares of common stock, $0.001 par value, outstanding.

 

 

FREEBUTTON, INC.

 

QUARTERLY REPORT ON FORM 10-Q
September 30, 2014

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK	14
ITEM 4. CONTROLS AND PROCEDURES	14
PART II. OTHER INFORMATION	16
ITEM 1. LEGAL PROCEEDINGS	16
ITEM 1A. RISK FACTORS	16
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	16
ITEM 4. MINE SAFETY DISCLOSURES	16
ITEM 5. OTHER INFORMATION	17
ITEM 6. EXHIBITS	17

 

 

Use of Certain Defined Terms

 

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” or “the Company” are to the combined business of FreeButton, Inc.

 

Forward-Looking Statements

 

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties that may effect the Company. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the report. All subsequent written and oral forward-looking statements concerning other matters addressed in this report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

FREEBUTTON, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

September 30, 2014

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS	5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8

 

 

 

 

 

FREEBUTTON, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30, 2014				December 31, 2013
		(Unaudited)				(Audited)
ASSETS
CURRENT ASSETS
Cash		$	60,908			$	3,856
Accounts receivable			–				2,067
Inventory			15,395				24,757
TOTAL CURRENT ASSETS			76,303				30.680
OTHER ASSETS			4,193				4,193
TOTAL ASSETS		$	80,496			$	34,873
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities		$	49,606			$	1,560
Convertible Promissory Notes (Note 6)			354,095				–
Related Party Loans			42,894				31,186
TOTAL CURRENT LIABILITIES			446,595				32,746
TOTAL LIABILITIES			446,595				32,746
STOCKHOLDERS’ EQUITY (DEFICIT)
Capital stock (Note 3)
Authorized
75,000,000 shares of common stock, $0.001 par value,
Issued and outstanding
33,844,260 shares of common stock (December 31, 2013 –500)			33,844				500
Additional paid-in capital			–				(500	)
Subscription receivable			83,650				–
Deficit accumulated during the development stage			(483,594	)			2,127
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)			(366,099	)			2,127
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	80,496			$	34,873

 

Going Concern (Note 1)

 

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

 

 

FREEBUTTON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended September 30								Nine Months Ended September 30
		2014				2013				2014				2013
REVENUE
Net sales		$	71,765			$	71,538			$	191,534			$	155,284
Cost of goods sold			(18,552	)			(28,483	)			(62,460	)			(78,842	)
GROSS PROFITS			53,213				43,055				129,074				76,442
EXPENSES
Selling, general & administrative		$	75,714			$	25,419			$	170,631			$	50,386
TOTAL EXPENSES			(75,714	)			(25,419	)			(170,631	)			(50,386	)
NET OPERATING PROFIT (LOSS):			(22,501	)			17,636				(41,557	)			26,056
OTHER INCOME (EXPENSES)
Other income			–				–				3,400				–
Loan interest			(10,639	)			–				(10,639	)			–
Gain (loss) on debt settlement			5,700				–				5,700				–
TOTAL OTHER INCOME (EXPENSES)			(4,939	)			–				(1,539	)			–
NET INCOME (LOSS)		$	(27,440	)		$	17,636			$	(43,096	)		$	26,056
BASIC PROFIT (LOSS) PER COMMON SHARE		$	(0.00	)		$	35.27			$	(0.00	)		$	52.11
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC			33,844,260				500				33,844,260				500

 

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

 

 

FREEBUTTON, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine months ended September 30, 2014				Nine months ended September 30, 2013
OPERATING ACTIVITIES
Net income (loss) for the period		$	(43,096	)		$	26,056
Adjustments to reconcile net loss to net cash used in operating activities:
Accounts receivable			2,067				–
Inventory			9,362				(48,490	)
Changes in operating assets and liabilities:
Increase (decrease) in accounts payables and accrued liabilities			8,005				–
Increase (decrease) in other liability			9,593				(4,194	)
NET CASH USED IN OPERATING ACTIVITIES			(14,069	)			(26,628	)
NET CASH USED IN INVESTING ACTIVITIES
Cash assumed from share exchange agreement			36,613				–
NET CASH USED IN INVESTING ACTIVITIES			36,613				–
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from subscription receivable			22,800				–
Proceeds from related parties			11,708				28,681
NET CASH PROVIDED BY FINANCING ACTIVITIES			34,508				28,681
NET INCREASE (DECREASE) IN CASH			57,052				(2,053	)
CASH, BEGINNING			3,856				254
CASH, ENDING		$	60,908			$	2,307
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest		$	–			$	–
Income taxes		$	–			$	–
Non-cash investing and financing activities
Promissory note issued for assets and business acquisition		$	–			$	–
Common stock issued for service		$	–			$	–
Debt forgiveness of related party		$	–			$	–

 

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

 

 

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

 

The Company was incorporated on November 27, 2006 under the laws of the State of Nevada and extra-provincially registered under the laws of the Province of Ontario on February 2, 2007. On September 28, 2012, the Company with a majority of the shareholders and directors changed its name from Secured Window Blinds, Inc. to Freebutton, Inc.

 

Freebutton, Inc. is now a product development and marketing company catering to the electronic vapour cigarette and accessories industry.

 

On August 14, 2014, the Company entered into a Share Exchange Agreement (the ‘Share Exchange Agreement”) which resulted in a Reverse Takeover with selling stockholders named in the prospectus, pursuant to which the Company offered and sold an aggregate of 21,000,000 shares of common stock to all the stockholders of A-1 Vapors,, Inc., a Florida corporation (“A-1 Vapors”), incorporated in the State of Florida, on April 26, 2012. The acquisition has been treated as a recapitalization of Freebutton, Inc. with A-1 Vapors, Inc. as the accounting acquirer in accordance with the Reverse Merger rules. As a result of the consummation of the Share Exchange Agreement A-1 Vapors became a wholly-owned subsidiary of the Company and the electronic cigarette business of A-1 Vapors is now the primary business of the Company.

 

Going concern

To date the Company has generated revenues from its business operations and has incurred operating losses since inception of $483,594. As at September 30, 2014, the Company has a working capital deficit of $385,687. The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. The ability of the Company to continue as a going concern is dependent on increasing sales and raising capital to fund its initial business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company intends to continue to fund its business by way of private placements and advances from related parties as may be required. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

Unaudited Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. The unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

 

Segmented Reporting

Financial Accounting Standards Board (“FSAB”) Accounting Standard Codification (“ASC”) 280, “Disclosure about Segments of an Enterprise and Related Information”, changed the way public companies report information about segments of their business in their quarterly reports issued to shareholders. It also requires entity-wide disclosures about the products and services the entity provides, the material countries in which it holds assets and reports revenues and its major customers.

 

Comprehensive Loss

FASB Statement Number 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at September 30, 2014, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

 

Use of Estimates and Assumptions

Preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain 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 period. Accordingly, actual results could differ from those estimates.

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Financial Instruments

All significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practical the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

Revenue Recognition

It is our policy that revenues are recognized in accordance with ASC 605-10.  Under ASC 605-10, product revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable and collectability is reasonably assured. Revenue is recognized at the point of sale for in person purchases and upon shipping for Internet sales.

 

Loss per Common Share

Basic earnings (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings (loss) per share reflect the potential dilution of securities that could share in the earnings of the Company. Because the Company does not have any potential dilutive securities, the accompanying presentation is only on the basic loss per share.

 

Income Taxes

The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances and tax loss carry-forwards. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.

 

Principles of consolidation

The Company consolidates its 100% owned subsidiary pursuant to Accounting Standards Codification (“ASC”) No. 810, “Consolidation”.  All intercompany transactions and balances have been eliminated.

 

Inventory

We value our inventories at the lower of cost, determined on a first-in, first-out method, or market value. Our inventory consists solely of finished goods. We review inventories on hand at least quarterly and record provisions for estimated excess, slow moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value. The regular and systematic inventory valuation reviews include a current assessment of future product demand, historical experience and obsolete finished product.

 

Stock-based Compensation

The Company follows FASB ASC 718-10, "Stock Compensation", which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 is a revision to SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. No stock-based compensation have been issued as of September 30, 2014.

 

Advertising Costs

The Company accounts for advertising costs in accordance with provisions in ASC 720-35-25 which states that advertising costs can be expensed as incurred or the first time the advertising takes place.

 

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

 

NOTE 3 – STOCKHOLDERS’ EQUITY/DEFICIT

 

The Stockholders’ Equity/Deficit section of the Company contains the following classes of Capital Stock as of September 30, 2014.

-

Common stock $0.001 par value: 75,000,000 shares authorized: 33,844,260 shares issued and outstanding.

 

On August 14, 2014, 21,000,000 shares were returned to the Company in anticipation of the acquisition of A1 Vapors, Inc.

 

On August 14, 2014, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with selling stockholders named in the prospectus, pursuant to which the Company offered and sold an aggregate of 21,000,000 shares of common stock to all the stockholders of A-1 Vapors, Inc., a Florida corporation (“A-1 Vapors”).

 

As a result of the Reverse Merger with A-1 Vapors, Inc. and Freebutton, Inc. carried forward 12,844,260 commons shares, and subscription receivable representing 272,336 common shares valued at $342,231 in net liabilities assumed of Freebutton, Inc. prior to August 14, 2014. The net liabilities consisted of $36,613 in cash, $24,749 in accrued liabilities and $354,095 in promissory notes and $24,749 in accrued liabilities.

 

On August 14, 2014, the Company converted $10,851 of debt in Subscription receivables to issue 72,336 common shares through a debt conversion agreement at $0.15 per share.

 

On September 25, 2014, the Company received $22,800 in Subscription receivables to issue 152,000 common shares through a private placement at $0.15 per share.

 

Subsequent to the period on October 6, 2014, the Company received $$27,200 in Subscription receivables to issue 181,333 common shares through a private placement at $0.15 per share.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

The Company entered into the following transactions with a related party:

 

As of the period ending September 30, 2014, the CEO has advanced $38,358 and the COO has advanced $4,536 to the Company. The advances are unsecured, non-interest bearing and are payable on demand.

 

Management Contracts

On August 15, 2014 A-1 Group, Inc., (the “Company”) signed an initial two (2) year Employment Agreement with it Chief Executive Officer. The Company has agreed to a salary of $3,500 per month starting September 1, 2014 and a lump sum signing bonus of $10,000 due on August 29, 2014.

 

On August 15, 2014 A-1 Group, Inc., (the “Company”) signed an initial two (2) year Employment Agreement with it Chief Operating Officer. The Company has agreed to a salary of $3,500 per month starting September 1, 2014.

 

During the nine month period ending September 30, 2014, the Company accrued $17,000 in management fees of which $3,500 had been paid as of September 30, 2014. The remaining outstanding balance of $13,500 was paid subsequent to the period in October 2014.

 

NOTE 5 – COMMITMENTS

 

The Company began leasing kiosk space in greater Miami in 2013 and run through 2015. At September 30, 2014, contractual obligations were as follows:

 

·

Period beginning October 1, 2014 to December 31, 2014 - Rent Obligations - $27,327

·

Period ending December 31, 2015 – Rent Obligations - $39,125

 

NOTE 6 – CONVERTIBLE PROMISSORY NOTE

 

On October 23, 2013 the Company signed a Convertible Promissory Note for $10,000, with an interest rate of 8% with a maturity date of October 23, 2014. The issuer of the Convertible Promissory Note has the option to convert all or portion of the Promissory Note into common shares of the Company. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $90,000 at a differing price.

 

On December 23, 2013 the Company signed a Convertible Promissory Note for $20,000, with an interest rate of 8% with a maturity date of December 23, 2014. The issuer of the Convertible Promissory Note has the option to convert all or portion of the Promissory Note into common shares of the Company. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $180,000 at a differing price.

 

 

NOTE 6 – CONVERTIBLE PROMISSORY NOTE (continued)

 

On March 11, 2014 the Company signed a consolidated and extension of the Company’s Promissory Notes. The New total amount of the combined Promissory Note is $307,266 with an interest rate of 8% and maturity date of August 28, 2014. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $1,000,000 at a differing price. In the event the Company does not pay the outstanding balance by August 28, 2014, the interest rate of the Promissory Note increases to 12% per annum. The promissory note is in default and the 12% interest rate is in effect.

 

On June 20, 2014 the Company signed a Convertible Promissory Note for $16,828, with an interest rate of 8% with a maturity date of December 20, 2014. The issuer of the Convertible Promissory Note has the option to convert all or portion of the Promissory Note into common shares of the Company. The Conversion price share would be $0.10, unless the Company has, between the issue date of the Promissory Note and its Maturity date, sold its capital stock in financing in which the Company received gross proceeds of an excess of $152,000 at a differing price.

 

The conversion of the Promissory Note(s) is contingent upon an “Event Default” and the Promissory Note is not currently convertible. If the Promissory Note does become convertible the non-cash expense to the Company is dependent on the trading value of the Company’s stock on the day of conversion and the $0.10 conversion price. The estimated non-cash expense if the Promissory notes had been converted as of September 30, 2014 would have been $678,735.

 

NOTE 7 – ASSET AND BUSINESS ACQUISITION

 

A1 Vapors, Inc. – Share Exchange Agreement

 

On August 14, 2014 FreeButton entered into an exchange agreement (the “Exchange Agreement”) with A1 Vapors, Inc. Under the terms of the Exchange Agreement, the shareholders of A1 Vapors, Inc. received 21,000,000 newly-issued shares of FreeButton’s Common Stock in exchange for all of A1 Vapor’s outstanding Common Stock. A1 Vapors, Inc. has become a wholly-owned subsidiary of FreeButton. The acquisition has been treated as a recapitalization of the Company with Al Vapors as the accounting acquirer in accordance with the Reverse Merger rules. As a result of the proposed consummation of the Share Exchange Agreement A1 Vapors, Inc. will become a wholly-owned subsidiary of the Company and the electronic vapour cigarette industry will become the primary business of the company.

 

NOTE 8 – SUBSEQUENT EVENTS

 

Subsequent to the period on October 6, 2014, the Company received $$27,200 in Subscription receivables to issue 181,333 common shares through a private placement at $0.15 per share.

 

 

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

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of FreeButton, Inc.’s (the “Company”, “FreeButton, “we”, “us” and “our”) financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in “Item 1. Financial Statements.” In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors.

 

Business Overview

 

We are an electronic cigarette company with Internet sales and kiosk locations in the greater Miami area through our fully owned subsidiary A1 Vapors, Inc. A1 Vapors is a product development and marketing company catering to the electronic vapor cigarette and accessories industry. A1 Vapors offers a variety of options to choose from to appeal to all smokers including a diverse selection of devices and flavors.

 

“Electronic cigarettes” or “e-cigarettes” and “vaporizers” are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash, or carbon monoxide. Electronic cigarettes look like traditional cigarettes and, regardless of their construction are comprised of three functional components:

 

·

A mouthpiece, which is a small plastic cartridge that contains a liquid nicotine solution;

·

The heating element that vaporizes the liquid nicotine so that it can be inhaled; and

·

The electronics, which include: a lithium-ion battery, an airflow sensor, a microchip controller and an LED which illuminates to indicate use.

 

When a user draws air through the electronic cigarette and or vaporizer, the air flow is detected by a sensor, which activates a heating element that vaporizes the solution stored in the mouthpiece/cartridge, the solution is then vaporized and it is this vapor that is inhaled by the user. The cartridge contains either a nicotine solution or a nicotine free solution, either which may be flavored.

 

The Company was engaged in the business of operating sweepstakes websites featuring free giveaways of premier consumer products to users who participated in online games. Prior to this the Company was offering window blind system products and ceased such operation upon the consummation of a change of control of the Company in August 2012. Since August 2012, and until mid-August 2014, management had been building the Company to be a platform for marketing and advertising initiatives and a marketplace for consumer products. On August 14, 2014 the Company entered into a Share Exchange Agreement with A-1 Vapors, Inc. as reported in our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on August 22, 2014 (the “August 2014 Form 8-K”). The Company is now involve in the electronic cigarette retail market.

 

As soon as practicable the Company will file an Amendment to the Articles of Incorporation requesting the state of Nevada and FINRA change its name from “FreeButton, Inc.” to the new name “A1 Group, Inc.” All of the Company’s filings will reflect the new name when the process is completed with the state and federal agencies.

 

Recent Development

 

On May 23, 2014, FreeButton, Inc. entered into an Exchange Agreement with A-1 Vapors, Inc., to acquire A-1 Vapors. The transaction contemplated by the Exchange Agreement was consummated on August 14, 2014. As reported in our From 8-K filed with the SEC on August 22, 2014, the Company entered into a Share Exchange Agreement (the ‘Share Exchange Agreement”) which resulted in a Reverse Takeover with selling stockholders named in the prospectus, pursuant to which the Company offered and sold an aggregate of 21,000,000 shares of common stock to all the stockholders of A-1 Vapors,, Inc., a Florida corporation (“A-1 Vapors”), incorporated in the State of Florida, on April 26, 2012. The acquisition has been treated as a recapitalization of Freebutton, Inc. with A-1 Vapors, Inc. as the accounting acquirer in accordance with the Reverse Merger rules. As a result of the consummation of the Share Exchange Agreement A-1 Vapors became a wholly-owned subsidiary of the Company and the electronic cigarette business of A-1 Vapors is now the primary business of the Company.

 

A-1 Vapors, Inc., a product development and marketing company catering to the electronic cigarette and accessory industry, with internet sales and multiple kiosk retail locations in the Miami area. Bruce Storrs, Chairman, Chief Executive Officer, Director and Andy Diaz Chief Operating Officer, Director of the Company, and are the sole shareholders’ of A1 Vapors, Inc.

 

As a result of the Share Exchange Agreement, Bruce Storrs and Andy Diaz became the majority shareholders and became the principal officers and directors of the Company.

 

 

As reported in our Form 8-K file with the SEC on May 14, 2014, on April 11, 2014 the Company entered into a Binding Letter of Intent (“LOI”) to acquire A1 Vapors, Inc. a product development and marketing firm catering to the electronic vapour cigarette industry. Under the terms of the LOI the Company will purchase all of the issued and outstanding capital stock of A1 pursuant to a definitive agreement to be entered into between the parties. Consideration for the purchase will be approximately 21 million restricted shares of the Company’s common stock. As reported in our Current Report on Form 8-k filed on May 27, 2014, on May 23, 2014 FreeButton entered into an exchange agreement (the “Exchange Agreement”) with A1 Vapors. Under the terms of the Exchange Agreement, the shareholders of A1 Vapors will receive 21,000,000 newly-issued shares of FreeButton’s Common Stock in exchange for all of A1 Vapor’s outstanding Common Stock. Upon completion of the proposed transaction, A1 will become a wholly-owned subsidiary of FreeButton. The closing date is expected to be on or before the end of the third quarter in 2014. The foregoing description of the LOI does not purport to be complete and is qualified in its entirety by reference to the full text of the LOI, a copy of which is filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q and incorporated herein by reference. The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the LOI, a copy of which is filed as Exhibit 10.4 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

 

Plan of Operations

 

Our Plan is to become a leading retailer of electronic cigarette and vapor related products in the North American market. We intend to accomplish that objective through competing on price and quality, expanding our presence at physical locations, expanding distribution points and expanding our online presence.

 

The brands that we select to sell in addition to the A-1 Vapors, white-label brand, are selected on their general popularity with our target consumer base. We believe that this strategy will enable us to continue to offer “best-in-class” products which have the potential to increase our sales the most, while avoiding risk of product development and manufacturing. Our ability to negotiate reasonable pricing with these manufactures is also a contributing factor to selection.

 

We will continue to seek out and identify new products to introduce to our consumer base which we believe will increase our revenue per person and generate greater repeat business such as starter kits, a variety of batteries and new flavors to our line of e-liquid.

 

Comparison of the Three Month and Nine Month Periods Ended September 30, 2014 and 2013

 

Our net loss for the three months ended September 30, 2014 was $27,440 compared to net income of $17,636 during the same period from the prior fiscal year. During the three month period ended September 30, 2014 we generated $71,765 in revenue and incurred, Cost of goods sold of $18,552, Selling, general and administrative expenses of $75,714, Loan interest of $10,639 and Gain on debt settlement of $5,700; as compared to $71,538 in revenue, Cost of goods of $28,483 and Selling, general and administrative expenses of $25,419 and nil in Loan interest for the same period in 2013. The increase in our Selling, general and administrative costs for the three months ended September 30, 2014 , compared to the same period from the prior fiscal year was due to increase in audit, accounting , rent and management expenses. The increase in loan interest relates to the commencement of our new business operations upon the consummation of a change of control of the Company which occurred in August 14, 2014 as discussed above and as reported in the Form 8-K filed on August 22, 2014.

 

Our net loss for the nine months ended September 30, 2014 was $43,096 compared to net income of $26,056 during the same period from the prior fiscal year. During the nine month period ended September 30, 2014 we generated $191,534 in revenue and incurred, Cost of goods sold of $62,460, Selling, general and administrative expenses of $170,631, Loan interest of $10,639, Other income of $3,400 and Gain on debt settlement of $5,700; as compared to $155,284 in revenue, Cost of goods of $78,842 and Selling, general and administrative expenses of $50,386 and nil in Loan interest for the same period in 2013. The increase in our Selling, general and administrative costs for the nine months ended September 30, 2014 , compared to the same period from the prior fiscal year was due to increase in audit, accounting , rent and management expenses. The increase in loan interest relates to the commencement of our new business operations upon the consummation of a change of control of the Company which occurred in August 14, 2014 as discussed above and as reported in the Form 8-K filed on August 22, 2014.

 

Capital Resources and Liquidity

 

As of September 30, 2014, we had $80,496 in assets comprised of $60,908 in cash, $4,193 in Deposits and $15,395 in Inventory as compared to $34,873 in assets comprised of $3,856 in cash, $2,067 in accounts receivable, $ $4,193 in Deposits and $24,757 in Inventory as of December 31, 201 As of September 30, 2014, our total liabilities were $446,595 comprised of Accounts payable and accrued expenses of $49,606, Promissory Notes of $354,095 and Related party advances of $42,894 compared to total liabilities of $32,746 as of December 31, 2013 comprised of Accounts payable and accrued expenses of $1,560, Promissory Note of $nil and Related part advances of $31,186. The increases assets and liabilities are to the commencement of our new business operations upon the consummation of a change of control of the Company which occurred in August 14, 2014 as discussed above and as reported in the Form 8-K filed on August 22, 2014.

 

 

The Company requires additional funding to meet its ongoing obligations and to fund anticipated operating losses. Our auditor has expressed substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on raising capital to fund its initial business plan and ultimately to attain profitable operations. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

We expect to incur product development, marketing and professional and administrative expenses as well expenses associated with maintaining our SEC filings, however, we do not have any material capital expenditures planned at this time. We will require additional funds during this time and will seek to raise the necessary additional capital. If we are unable to obtain additional financing, we may be required to reduce the scope of our business development activities, which could harm our business plans, financial condition and operating results. Additional funding may not be available on favorable terms, if at all. The Company intends to continue to fund its business by way of equity or debt financing and advances from related parties.

 

If we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our Company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock. In the event we are unsuccessful in raising additional capital through the issuance of equity or convertible debt securities, we will seek to raise additional capital through the issuance of debt or its equivalents. Issuance of debt or its equivalents will result in increased interest expense.

 

We are a development stage company with no revenues to date, and therefore we may have to pay high cost in securing a financing. We cannot assure you that we will be able to raise the working capital as needed in the future on terms acceptable to us, if at all. Any delay to raise capital as needed would have a material adverse effect on our business, financial condition and results of operations.

 

If we cannot raise additional fund, we will have to cease business operations. As a result, investors in the Company’s common stock would lose all of their investment.

 

Off Balance Sheet Arrangements

 

There are no off-balance sheet arrangements currently contemplated by management or in place that are reasonably likely to have future effect on the business, financial condition, revenue or expenses and/or result of operations.

 

Recent Accounting Pronouncements

 

We have implemented all new accounting pronouncements that are in effect and that may impact its financial statements. We do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

 

Smaller reporting companies are not required to provide the information required by this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

Our management, including our principal executive officer and principal accounting officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act as of June 30, 2014, and concluded that the disclosure controls and procedures were not effective, because certain deficiencies involving internal controls constituted material weaknesses as discussed below. The material weaknesses identified did not result in the restatement of any previously reported financial statements or any other related financial disclosure, nor does management believe that it had any effect on the accuracy of our financial statements for the current reporting period.

 

 

A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As of September 30, 2014, the following material weaknesses existed:

 

	·	The Company does not have an independent audit committee in place, which would provide oversight of the Company’s officers, operations and financial reporting function.
	·	The Company’s disclosure controls and procedures do not provide adequate segregation of duties; and
	·	The Company does not have effective controls over period-end financial disclosure and reporting processes.

 

Management believes that the above material weaknesses could result in a material misstatement in our financial statements in future periods.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board of Directors.

 

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements when our financial position permits.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the nine month period ended September 30, 2014, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

To the best of our knowledge, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject.

 

ITEM 1A. RISK FACTORS

 

Smaller reporting companies are not required to provide the information required by this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuer Purchases of Equity Securities

 

Period	(a) Total number of shares (or units) purchased	(b) Average price paid per share (or unit)	(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
January 1-31, 2014	0	N/A	N/A	N/A
February 1-28, 2014	100,000 (1)	$0.25	N/A	N/A
March 1-31, 2014	0	N/A	N/A	N/A
April 1-30, 2014	0	N/A	N/A	N/A
May 1 – 31, 2014	100,000 (1)	$0.50	N/A	N/A
June 1 – 30, 2014	0	N/A	N/A	N/A
September 1-30, 2014	224,336	$0.15	N/A	N/A
Total	424,336	$0.256	N/A	N/A

 

(1) These shares were not repurchased in connection with a publicly-announced plan or program and were repurchased by the Company from various investors who previously purchased the shares from the Company in connection with a private purchase memorandum and debt conversion agreement as discussed in Note 3 to the accompanying financial statements.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

 

ITEM 5. OTHER INFORMATION

 

On April 11, 2014 the Company entered into the LOI to acquire A1 Vapors, Inc. a product development and marketing firm catering to the electronic vapour cigarette industry. Under the terms of the LOI the Company will purchase all of the issued and outstanding capital stock of A1 pursuant to a definitive agreement to be entered into between the parties. Consideration for the purchase will be approximately 21 million restricted shares of the Company’s common stock. As reported in our Current Report on Form 8-k filed on May 27, 2014, on May 23, 2014 FreeButton entered into an exchange agreement (the “Exchange Agreement”) with A1 Vapors. Under the terms of the Exchange Agreement, the shareholders of A1 Vapors will receive 21,000,000 newly-issued shares of FreeButton’s Common Stock in exchange for all of A1 Vapor’s outstanding Common Stock. Upon completion of the proposed transaction, A1 will become a wholly-owned subsidiary of FreeButton. The closing date is expected to be on or before September 30, 2014. The foregoing description of the LOI does not purport to be complete and is qualified in its entirety by reference to the full text of the LOI, a copy of which is filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q and incorporated herein by reference. The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the LOI, a copy of which is filed as Exhibit 10.4 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

 

The Exchange Agreement was consummated on August 14, 2014.

 

ITEM 6. EXHIBITS

 

3.1	Articles of Incorporation of FreeButton, Inc. as filed with the Secretary of State of Nevada, incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed on May 5, 2008.
3.2	By-Laws of FreeButton, Inc., incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 filed on May 5, 2008.
3.3	Corrected Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on October 5, 2012.
3.4	Current Report on 8-K filed on August 22, 2014, Material Definitive Agreement.
10.3*	Binding Letter of Intent between the Company and A1 Vapors Inc. effective April 11, 2014.
10.4*	Exchange Agreement between the Company and A1 Vapors Inc. effective May 23, 2014.
31.1*	Certification of Principal Executive Officer and Principal Accounting Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

 

*Filed herewith

 

 

SIGNATURES

 

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

 

 

	FreeButton, Inc.
Dated: December 16, 2014	By:	/s/ Bruce Storrs
		Bruce Storrs President, Chief Executive Officer and Secretary
		(Duly Authorized Officer, Principal Executive Officer and Principal Accounting Officer)