UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

____________________________________________________

FORM 10-K

(Mark One)

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

For the fiscal year ended December 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 No. 000-07475

 

Indicate by check mark if the registrant is a well-known seasoned registrant, as defined in Rule 405 of the Securities Act.  Yes [ ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes [ ] No [X]

 

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 past 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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]

 

 Indicate by check mark whether the registrant is a shell company (as defined in Rule l2b-2 of the Exchange Act). Yes [   ] No [X]

 

As of March 15, 2015, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold on such date was approximately $1,497,296.  

 

The number of shares outstanding of the registrant’s common stock, par value $0.0001 per share, as of March 15, 2015 was 4,487,438,206.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

None.

 

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FORM 10-K

Swordfish Financial, Inc.

INDEX

        

   

 

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  Forward Looking Statements

 

This Annual Report on Form 10-K contains “forward-looking statements”. 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,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” and 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 associated with such forward-looking statements. 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 Annual Report on Form 10-K and include information concerning possible or assumed future results of our operations, including statements about business strategies; future cash flows; financing plans; plans and objectives of management; 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 this Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K 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 Annual Report on Form 10-K.

 

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

Item 1.    BUSINESS.

 

Corporate History

 

Swordfish Financial, Inc., (f/k/a Photo Control Corporation (1959-2004) and Nature Vision, Inc. (2004-2009)) (the “Company”, “we” or “us”) was incorporated as a Minnesota corporation on August 19, 1959.  On August 31, 2004, the Company changed its name to Nature Vision, Inc. in connection with a merger transaction with Nature Vision Operating Inc. (f/k/a Nature Vision, Inc.) a Minnesota corporation that was incorporated in 1998. As a part of the merger, Nature Vision Operating Inc. became a wholly-owned subsidiary of the Company. Upon the merger with Swordfish Financial, Inc., a Texas corporation on August 17, 2009, the shareholders of the Company owning a majority of the outstanding common stock voted to change the Company’s name to Swordfish Financial, Inc.   On November 12, 2014 the Company merged with SoOum, Corp., (“SoOum”) a Delaware corporation. Our executive offices are located P.O. Box 431, Vernon, Arizona 85940; our telephone number is (646) 801-3772; and our website is www.swordfishfinancial.com.

The Company is an international trading firm focusing on arbitrage of physical goods and using its own proprietary technology to identify and exploit such opportunities. The Company performs arbitrage on defined supply and demand conditions creating price discrepancies of physical commodities in opposing markets. The Company also distributes trade intelligence to global subscribers in order to solve supply shortages and to bring new business to local manufacturers. Unlike specialized supply chains, the Company’s solutions does not focus on trading a small group of commodities yet on all commodities with true arbitrage potential utilizing real time information, reliable trade economics, fast computing and proprietary algorithms to execute buy and sell transactions on surpluses and shortages.  

 

The Company takes a coordinated view of the global economy seeking out predictability within the global flow of commodities and finding the Company’s strategic position within that dynamic. Then, the Company implements tactics from the ancient persistence hunt model to manage a pool of projects and brings a portion of these potential transactions to completion.

 

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Arbitrage Model

Commodities

The Company trades commodities in any highly demanded region but focuses primarily in areas of conflict and frontier marketplaces. The Company categorizes transactions as soft commodity trades and hard commodity trades.

-

Soft Commodities Trades: rice, wheat, sugar, soybeans, meats, live cattle, seafood, live seafood and other soft commodities, as intelligence indicates.

-

Hard Commodities Trades: iron ore, crude oil, coal, salt, aluminum, copper, gold, silver, palladium and platinum, cement, fly ash, precious metals and other such hard commodities, as intelligence indicates.

Completion of Transactions

Closing Model

Seek and attain following results:

1. Persistence over the long-run alleviates risk	2. Document accumulation creates a ratchet effect towards absolute finalization of transactions

 

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Methodology

 

Find - Intelligence Department

Objectives:

-Record first hand trade & economic “intelligence”

-Pool large groups of “targets” including price and logistic data

-Match buy and sell “targets” through the company’s fast computing system, or through Business to Business and Person to Person   meetings

 

Filter - Development Department

Objectives:

-Attain due diligence on all matched targets

-Filter a list of the best 16 transactions

-Attain binding agreements for all parties

 

Close - Solutions Department

Objectives:

-Create closing packages for the best five transactions every two weeks

-Inspect, deliver and submit closing package to pertinent parties

-Deliver and collect payment(s)

Pricing Strategy

-The Company creates CIF/FOB prices at or below global index prices

-The Company seeks pricing that offers average or greater earnings among the pool of transactions within its pipeline.

 

Philosophy

The Company seeks not to build supply chains and therefore believes the following: 

-The ability to move around/or exploit failing industries increases staying power

-A diminished cost of maintenance for facilities and less labor cost and liability exists

-Transactions with the least capital exposure can be chosen

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Finding opposing targets and intelligence

Business Operations

 

Effective on the date of our merger with SoOum, November 12, 2014, the Company changed its business focus to commodities trading.

 

Item 1A.   RISK FACTORS.

 

Not applicable.

 

Item 1B.  UNRESOLVED STAFF COMMENTS

 

None.

 

 Item 2. PROPERTIES.

 

The Company does not own or lease any real estate.  The Company’s officers and directors work from their various homes.

 

Item 3. LEGAL PROCEEDINGS.

 

Various creditors previously brought suit for collections of their claims against the Company and the Company owes approximately $1,066,755 in judgments on various legal proceedings, which liabilities are recorded on the Company’s financial statements.  The Company’s previously completed legal proceedings and amounts due in connection therewith are described in Notes 5 and 10 to the financial statements included in this report.  

 

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations; provided that we do not currently have sufficient funds to satisfy our outstanding judgments as described above. We may become involved in material legal proceedings in the future.

 

Item 4. MINE SAFETY DISCLOSURES.

Not applicable. 

 

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PART II

 

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Market Information. We had 4,990,987,648 shares of our common stock issued and outstanding as of March 15, 2015, which shares were held by 403 record holders.  

 

Our common stock is currently quoted on the OTC Pink market (commonly referred to as the “pinksheets”) under the symbol “SWRF”. The following table sets forth, for the periods indicated, the high and low sales prices for our common stock, for the quarters presented. Prices represent inter-dealer quotations without adjustments for markups, markdowns, and commissions, and may not represent actual transactions.  Effective June 1, 2011, the Company affected a 10:1 forward stock split of its outstanding common stock and the sales prices below retroactively reflect such split.

 

Common Stock

Quarter Ended

High

Low

2013

December 31	$ 0.0099	$.0028
September 30	$ .0095	$.0034
June 30	$ .0095	$.006
March 31	$ .01	$0.006
2014
December 31	$ .0001	$.0009
September 30	$ .0002	$   .001
June 30	$ .0011	$.0002
March 31	$ .0034	$.0011

 

The Company's common stock is considered a "penny stock" as defined in the Commission's rules promulgated under the Exchange Act (the “Rules”). The Commission's rules regarding penny stocks impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally persons with net worth in excess of $1,000,000, exclusive of residence, or an annual income exceeding $200,000 or $300,000 jointly with their spouse). For transactions covered by the rules, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Thus the Rules affect the ability of broker-dealers to sell the Company's shares should they wish to do so because of the adverse effect that the Rules have upon liquidity of penny stocks. Unless the transaction is exempt under the Rules, under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990, broker-dealers effecting customer transactions in penny stocks are required to provide their customers with (i) a risk disclosure document; (ii) disclosure of current bid and ask quotations if any; (iii) disclosure of the compensation of the broker-dealer and its sales personnel in the transaction; and (iv) monthly account statements showing the market value of each penny stock held in the customer's account. As a result of the penny stock rules, the market liquidity for the Company's securities may be severely adversely affected by limiting the ability of broker-dealers to sell the Company's securities and the ability of purchasers of the securities to resell them.

 

Dividends

 

We have not paid any dividends on our common stock to date and do not anticipate that we will be paying dividends in the foreseeable future. Any payment of cash dividends on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition, our anticipated capital requirements and other factors that our Board of Directors may think are relevant. However, we currently intend for the foreseeable future to follow a policy of retaining all of our earnings, if any, to finance the development and expansion of our business and, therefore, do not expect to pay any dividends on our common stock in the foreseeable future. Additionally, the terms of our preferred stock impose restrictions on our ability to pay dividends.

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Equity Compensation Plan Information

 

           The Company does not have any outstanding stock incentive or similar plans which it plans to issue securities under moving forward.  

 

Recent Sales Of Unregistered Securities

 

During the three months ended December 31, 2014, the Company issued had no sales of unregistered securities.

 

Item 6.   SELECTED FINANCIAL DATA

 

Not required for smaller reporting issuers.

 

Item 7.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with our audited consolidated financial statements and notes thereto appearing elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties, including information with respect to the plans, intentions and strategies for our businesses. The actual results may differ materially from those estimated or projected in any of these forward-looking statements.

 

Results of Operations

Year Ended December 31, 2014 Compared With Year Ended December 31, 2013

Net revenues for the years ended December 31, 2014 and 2013 was $1,992 and $-0-, respectively.  Net loss for the years ended December 31, 2014 was $14,751,242 compared to net loss of $669,988 for the year ended December 31, 2013.

 

Total operating expenses were $14,753,234 for the year ended December 31, 2014 compared to $669,988 for the year ended December 31, 2013.  The primary expenses for the year ended December 31, 2014 were general and administrative expenses of $632,478, interest expense of $588,463, other expense of 12,845,480 which consisted of the liability on the conversion of preferred stock, gain on derivative of $(86,998), impairment of goodwill of $480,000 and loss on conversion of $ 293,811. The primary expenses for the year ended December 31, 2013 were general and administrative expenses of $258,758, interest expense of $440,652, gain on derivative of $30,589, impairment of goodwill of $-0- and loss on conversion of $ -0-.

 

Liquidity and Capital Resources

Our operations used approximately $180,107 in cash for the year ended December 31, 2014. Cash required during the year ended December 31, 2014, came principally from cash proceeds from debt of $164,500 and cash proceeds from equity purchase agreement of $10,000 for the year ended December 31, 2014.

Our operations used approximately $293,500 cash for the year ended December 31, 2013. Cash required during the year ended December 31, 2013 came principally from cash proceeds from issuance of debt of $293,500 for the year ended December 31, 2014.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  We incurred net losses of $14,751,242 and $669,988 respectively, for the years ended December 31, 2014 and 2013 and had an accumulated deficit of $26,133,617 as of December 31, 2014.  We have managed our liquidity during the first, second and third quarters of 2014 through the issuance of convertible notes.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

Item 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

 

 

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Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See Financial Statements beginning on page F-1.

 

Item 9.  CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K. In designing and evaluating the 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. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. 

 

Based on our evaluation, our Principal Executive Officer and Principal Financial Officer, after considering the existence of material weaknesses identified, determined that our internal control over financial reporting disclosure controls and procedures were not effective as of December 31, 2014.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

 

Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management, including our Principal Executive Officer and Principal Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control over Financial Reporting - Guidance for Smaller Public Companies.

 

We identified the following deficiencies which together constitute a material weakness in our assessment of the effectiveness of internal control over financial reporting as of December 31, 2014: 

 

·

The Company has inadequate segregation of duties within its cash disbursement control design.

   

·

During the year ended December 31, 2013, the Company internally performed all aspects of its financial reporting process, including, but not limited to the underlying accounting records and record journal entries and responsibility for the preparation of the financial statement due to the fact these duties were performed often times by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

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The Company is continuing the process of remediating its control deficiencies. However, the material weakness in internal control over financial reporting that has been identified will not be remediated until numerous internal controls are implemented and operate for a period of time, are tested, and the Company is able to conclude that such internal controls are operating effectively. The Company cannot provide assurance that these procedures will be successful in identifying material errors that may exist in the financial statements. The Company cannot make assurances that it will not identify additional material weaknesses in its internal control over financial reporting in the future. Management plans, as capital becomes available to the Company, to increase the accounting and financial reporting staff and provide future investments in the continuing education and public company accounting training of our accounting and financial professionals.

 

It should be noted  that any  system of  controls,  however  well  designed  and operated,  can provide only  reasonable,  and not absolute,  assurance  that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.  Because of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

 

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

PART III

 

Item 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

Directors and Executive Officers

 

Our directors and executive officers are as follows:

BIOGRAPHY

The following sets forth biographical information regarding the Company’s directors:

Susan Sjo

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Ms. Sjo was appointed as a director and Chief Executive Officer of the Company on August 29, 2014. From 1987 to 1998 Ms. Sjo was CEO and Chairman of Sjo Inc., a global hedge fund located in Chicago, Illinois.  From 1998 to the present Ms. Sjo has served as Managing Director of Stack Capital, LLC, a family office located in Chicago, Illinois. Since 2006, she has served as CEO of St. Esprit Research and Trading, LLC a Multi-Asset and Finance Consultancy located in the Chicagoland area. Ms. Sjo Graduated from Barat College of DePaul University located in Chicago, Illinois, where she received a Bachelors of Arts degree with Honors in International Studies.

William Westbrook

Since February, 2013 Mr. Westbrook has served as President and CEO, and as a member of the Board of Directors of SoOum. From 2008 to 2013 Mr. Westbrook served as CEO of Estmar Global, Inc., located in West Point, Utah.  Estmar Global, Inc. is an international trade company involved in the buying and selling of physical commodities. From 2008 to 2009 Mr. Westbrook served as a business and management consultant for Aspen Technologies, located in Burlington, Massachusetts.  From 2007 to 2008 Mr. Westbrook acted as the budget director for Romney for President. William Westbrook served as assistant controller of the Lennar Corporation, located in Tucson, Arizona from 2006 to 2007. In 2001 Mr. Westbrook received a Bachelor of Arts degree in Economics from Brigham Young University, located in Provo, Utah.

Ronald A. Vega

Mr. Ronald A. Vega served as a Senior Indirect Tax Manager for BP Corporation located in Houston, Texas from March, 2004 through May, 2012. From June, 2012 through February, 2014 Mr. Vega served as Vice President of Business Development for DL Trading, LLC located in Katy, Texas. DL Trading, LLC is involved in the trading of previously undeveloped duty drawback recoveries associated with the importation and exportation of specific petro chemicals, plastics and chemical products. From June, 2013 to the present Mr. Vega was employed by Stelle Innovations, LLC as Vice President of Business Development and Operations. Stelle Innovations, LLC is located in Rye, New York and it is a provider of procurement and sourcing supply chain logistic services for companies engaged in capital improvement projects. From April, 2014 to the present Mr. Vega has served as the Chief Financial Officer and a Director of SoOum Corporation, located in Summit, New Jersey. SoOum Corporation is an international arbitrage trading firm. In 1991 Mr. Vega received a BBA in Accounting from the University of Texas-Pan American located in Edinburgh, Texas. In May, 2000 Mr. Vega received a Juris Doctorate Degree from Indiana University School of Law, located in Indianapolis, Indiana.

Luis J. Vega

Mr. Luis J. Vega served in the United States Army from 1985 to 2005 as a Nuclear Biological Chemical Warfare Specialist Senior Procurement and Operations manager. From June 2005 to October 2007 Mr. Vega was an employee of SMI GMS at Fort Polk, LA as Senior Logistics Manager assisting deploying military units. From 2007 to August 2009 Mr. Vega was Business Development Manager of Estmar Global. From August, 2009 to October, 2010 Mr. Vega was a Civil Service Employee for the Department of Defense (DOD) and with Cubic Defense Applications located in Ft. Irwin, California, where he was in charge of Middle East, Europe and Asia operations. Cubic Defense Applications is a DOD contractor, and Mr. Vega served as a Training Analyst there. From December, 2010 to August, 2011 Mr. Vega was also employed by ConsultNet which is located in Salt Lake City, Utah. ConsultNet is a staffing and recruiting business, and Mr. Vega served as a recruiter. From 2014, to the present Mr. Vega has served as Chief Operations Officer and a member of the Board of Directors of SoOum. Mr. Vega received a Bachelor of Science degree in Health and Administration from the University of Phoenix in 2011. The University of Phoenix is located in Phoenix, Arizona. He continues his education and will complete a Masters Degree in December, 2014.

Corporate Governance

 

The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations. The Company has not formally adopted a written code of business conduct and ethics that governs the Company’s employees, officers and directors as the Company is not required to do so.

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In lieu of an Audit Committee, the Company’s Board of Directors, is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company's financial statements and other services provided by the Company’s independent public accountants. The Board of Directors reviews the Company's internal accounting controls, practices and policies. 

 

Committees of the Board

 

Our Company currently does not have nominating, compensation, or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation or audit committee charter. The Board of Directors believes that it is not necessary to have such committees, at this time, because the functions of such committees can be adequately performed by the directors.

 

Audit Committee Financial Expert

 

Our Board of Directors has determined that we do not have a board member that qualifies as an "audit committee financial expert " as defined in Item 407(D)(5) of Regulation S-K, nor do we have a Board member that qualifies as "independent" as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(14) of the FINRA Rules.

 

We believe that our directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The directors of our Company do not believe that it is necessary to have an audit committee because management believes that the functions of an audit committee can be adequately performed by the Board of Directors. In addition, we believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development.   

 

Board Meetings and Annual Meeting

 

During the fiscal year ended December 31, 2013, our Board of Directors held 2 formal meetings.  We did not hold an annual meeting in 2014.  All of our directors attended at least 75% of the meetings of the Board of Directors.

 

Code Of Business Conduct And Ethics

 

Each of the Company’s directors and employees, including its executive officers, are required to conduct themselves in accordance with ethical standards set forth in the Code of Business Conduct and Ethics adopted by the Board of Directors.  The Code of Business Conduct and Ethics was previously filed as Exhibit 14.1 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005. Any amendments to or waivers from the code will be posted on our website.  Information on our website does not constitute part of this filing.

 

Shareholder Proposals

 

Our Company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The Board of Directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board of Directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.

 

SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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Section 16(a) of the Exchange Act requires our directors and officers, and the persons who beneficially own more than 9.99% percent of our common stock, to file reports of ownership and changes in ownership with the SEC. Copies of all filed reports are required to be furnished to us pursuant to Rule 16a-3 promulgated under the Exchange Act.

 

Based solely on the reports received by us, the transaction report of Company transactions supplied by our transfer agent and our shareholders list as of May 15, 2014, to the best of our knowledge all required directors, officers and greater than 9.99% percent shareholders complied with applicable filing requirements during the fiscal year ended December 31, 2014, except that:

 

Item 11. EXECUTIVE COMPENSATION.

 

The following table summarizes the compensation earned during the last two fiscal years by our executive officers.

 

SUMMARY COMPENSATION TABLE*

 

 

          *   No executive employees received any Bonus, Option Awards, Stock Awards, Non-Equity Incentive Plan Compensation or Nonqualified Deferred Compensation Earnings during the periods presented. Does not include perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is more than $10,000. The value of the Stock Awards and Option Awards in the table above, if any, were calculated based on the fair value of such securities calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.  

 

(1)

Mr. Trevino was appointed as a Director of the Company on December 21, 2012 and as the Chief Technical Officer of the company on December 26, 2012.     

   

(2)

Since the time of the merger with SoOum on November 12, 2014 and the election of new officers and directors, no compensation was paid to the executive officers of the Company during fiscal year 2014.

  

Employment Agreements

The Company’s only employment contract is with Ms. Susan Sjo, a Director of the Company and it is for the period from September 1, 2014 to November 30, 2014, unless extended by the parties. Under the contract Ms. Sjo will be paid $20,000 per month in cash or stock. There are no other employments or contracts or arrangements with our officers or directors. There are no compensation plans or arrangements, including payments to be made by us with respect to our officers, directors, employees or consultants that would result from the resignation, retirement or any other termination of such directors, officers, employees or consultants. There are no arrangements for compensation to our directors, officers, employees or consultants that would result from a change-in-control.

Stock Options

 

The Company had no stock options outstanding at December 31, 2014.

 

Board of Director Compensation

 

Our executive directors did not receive any compensation, for their service as Directors of the Company for the years ended December 31, 2013 and 2014.

13

 

 

 

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table sets forth certain information as of March 15, 2015 with respect to the beneficial ownership of our common stock, by (i) each stockholder known to be the beneficial owner of 5% or more of the outstanding common stock of the Company (based solely on the Company’s record shareholders list as of March 15, 2015, and Schedule 13D’s and Section 16 reports filed with the SEC), (ii) each executive officer and director, and (iii) all executive officers and directors as a group.

 

Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.

 

We believe that, except as otherwise noted and subject to applicable community property laws, each person named in the following table has sole investment and voting power with respect to the shares of common stock shown as beneficially owned by such person.

The following table sets forth the proposed beneficial ownership information after the closing of the Merger Transaction:

              

 

(1)   Applicable percentage ownership is based on 3,198,187,425 shares which were outstanding on March 15, 2015.

 

(2)   These shareholders received series B preferred shares in the merger with SoOum.  Each share grants them 1,000 votes.  It is anticipated that at some point these shares will be converted to common shares, which will align the capital structure of the Company.  Thus at this time the noted shareholders own no shares of common stock, but they will own series B preferred shares that will give them ownership and combined voting rights equal to 80% of all the common stock outstanding.

(3) Mr. Westbrook owns 5,449,711 shares of series B preferred stock which, grants him 5,449,711,372 votes. This equates to approximately 34.07% of the outstanding voting rights for all voting shares.

(4) Mr. R. Vega owns 2,715,900 shares of series B preferred stock which grants him 2,715,900,761 votes. This equates to approximately 16.98% of the outstanding voting rights for all voting shares.

 

(5) Mr. L. Vega owns 2,715,900 shares of series B preferred stock which grants him 2,715,900,761 votes. This equates to approximately 16.98% of the outstanding voting rights for all voting shares.

 

 

 

14

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors and officers, and persons who beneficially own more than 10% of a registered class of the Company's equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company's securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely on the Company's review of the copies of the forms received by it during the fiscal year ended December 31, 2014 and written representations that no other reports were required, the Company does not believe that any persons required to make filings under Section 16(a) during such fiscal year failed to file such reports or filed such reports late.

 

Item 13.   CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Former Officer and Director Loans to Company

 

On August 14, 2009, the Company closed a Stock Purchase/Merger Agreement with Swordfish Financial, Inc., a Texas corporation (“Swordfish Texas”), pursuant to which the Company sold an aggregate of 109,874,170 shares of its common stock in exchange for a $3,500,000 promissory note, payable in two installments of $1,750,000 each with the first installment being due forty-five (45) days from the date of the note and the second installment being due one-hundred twenty (120) days from the date of the note.  The note accrued interest at the rate of 5% per annum.  No payments were ever made on the promissory note.

 

Effective September 30, 2012, the Company and Swordfish Texas entered into a Mutual Termination of Common Stock Purchase Agreement (the “Termination Agreement”), whereby the parties agreed that the Company was in breach of the August 14, 2009, Stock Purchase/Merger Agreement; Swordfish Texas agreed to return the 109,874,170 shares of common stock which were issued to various affiliates of Swordfish Texas (mainly our former Chief Executive Officer, Michael Alexander); and the parties agreed to release each other from any and all claims and causes of actions that they had in connection with the transaction.

 

The Company’s former Chairman of the Board, President and Chief Executive Officer, Michael Alexander, who does not currently hold any positions with the Company, became beneficial owner of 77,000,000 shares of the 109,874,170 shares of the Company's common stock distributed in the stock purchase/merger transaction. 

 

In July 2008, the Company amended the terms and replaced the original $1,000,000 demand note issued to Richard P. Kiphart, a then member of its Board of Directors (Mr. Kiphart resigned on August 17, 2009), in October 2007.   The demand promissory note is unsecured and bears an interest rate of 15% per annum. The amendment to the note extended the maturity date to August 17, 2010.  Interest is payable on the first day of each month.  The entire principal and interest is payable upon demand any time after August 17, 2010.    The Company paid no interest and accrued approximately $189,000 of interest on this note during the year ended December 31, 2012 and paid $75,000 in accrued interest during December 31, 2013.

 

On August 17, 2009, the Company borrowed $200,000 from a former member of the Board of Directors in order to meet its short-term cash flow requirements. This demand promissory note is secured by a second lien on the Company’s assets and has an interest rate of 15% per annum.  The entire principal and accrued interest is payable upon demand any time after February 17, 2010.   The Company paid no interest and accrued $30,000 and $59,000 of interest on this note during the years ended December 31, 2012 and December 31, 2013, respectively.

 

On August 18, 2010, the Company borrowed $50,000 from a former member of the Board of Directors in order to meet its short-term cash flow requirements. This demand promissory note is secured by a second lien on the Company’s assets and has an interest rate of 15% per annum.  The entire principal and accrued interest is payable upon demand 180 days from the date of the note.  At any time prior to the maturity of the note, the noteholder has the option to convert the note principal and accrued interest into the Company’s common stock at $0.10 per share.  The Company paid no interest and accrued $20,000 of interest on this note during each of the years ended December 31, 2012 and December 31, 2013.

15

 

Review, Approval and Ratification of Related Party Transactions

 

Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officers, directors and significant stockholders.  We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof.   On a moving forward basis, our directors will continue to approve any related party transaction.

 

Director Independence

 

We do not have an audit, compensation or nominating committee, but our entire Board of Directors acts in such capacities.  Although our directors are not considered as “independent directors” pursuant to the provisions of Item 407(a) of Regulation S-K, we believe that the members of our Board of Directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.  The Board of Directors of our Company does not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the Board of Directors.  In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development. 

 

Item 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

Swordfish Financial Independent Public Accountant’s Fees

 

The following table presents fees for professional services rendered by Patrick Heyn CPA for the audit of the Company’s financial statements for the years ended December 31, 2014 and 2013:

Audit Fees were for professional services for auditing and reviewing the Company’s financial statements, as well as for consents and assistance with and review of documents filed with the Securities and Exchange Commission.

 

 

 

16

 

 

Pre-Approval Policy for Services of Swordfish Financial Independent Auditors

 

The Board of Directors review the Form 10-Q and Form 10-K filings before their filing. In addition, the Board of Directors reviews the audit plans and anticipated fees for audit and tax work prior to the commencement of that work. All fees paid to the independent auditors are pre-approved by the Board of Directors. These services may include audit services, audit-related services, tax services and other services. 

 

PART IV

 

Item 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

1. Financial Statements

 

Audit Financial Statements at the end of this Report starting on Page F-1.
  

2. Financial Statement Schedules

 

Schedules have been omitted because they are not required, not applicable, or the required information is otherwise included.

 

3. Exhibits

 

See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K.

 

  

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

SWORDFISH FINANCIAL, INC.

Date:   April 15, 2015

By:/s/William Westbrook

William Westbrook

Chief Executive Officer

(Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature		Title		Date
/s/William Westbrook William Westbrook		President, Chief Executive Officer and Director (Principal Executive Officer)		April 15, 2015
/s/Ronald Vega Ronald Vega		Treasurer, Chief Financial Officer and Director (Principal Financial/Accounting Officer)		April15, 2015

17

Exhibit Index

 

3.1			Amended and restated articles of incorporation (previously filed as Exhibit 3.1 to the Registrant’s Report on Form 8-K dated September 7, 2004).

3.2			Amended of Articles of Incorporation Changing the Company’s Name to Swordfish Financial, Inc. (previously filed as Exhibit 3.1 to the Registrant’s Report on Form 8-K filed September 4, 2009).
3.3			Amendment of Articles of Incorporation – Increasing Authorized Shares of Common Stock to 500,000,000 shares and Preferred Stock to 50,000,000 shares (filed as Exhibit 3.1 to Registrant’s Report on Form 8-K dated November 12, 2010).
3.4			Amended and Restated Articles of Incorporation dated June 6, 2011.
3.5			Amended and restated bylaws (previously filed as Exhibit 3.2 to the Registrant’s Report on Form 8-K dated September 7, 2004).
4.1			Amended and Restated 2004 Stock Incentive Plan, dated June 3, 2004 (previously filed as Exhibit 10.1 to Registrant's Form 10-QSB Quarterly Report for the period ended June 30, 2005).
10.1			Demand Promissory Note, dated July 8, 2008, in the principal amount of $1,000,000 executed by Nature Vision, Inc. in favor of Richard Kiphart (previously filed as Exhibit 10.1 to the Registrant’s Report on Form 8-K dated July 11, 2008).
10.2			Mutual Termination of Common Stock Shares Purchase Agreement between Swordfish Financial, Inc., Minnesota and Swordfish Financial, Inc., Texas (September 30, 2012)(filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 2, 2012 and incorporated herein by reference).
14.1			Code of Business Conduct and Ethics (previously filed as Exhibit 14.1 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005).
21.1*			Subsidiaries.
31.1*			Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2*			Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1*			Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
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.

 

++XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

 

 

18

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

F-1

 

 

 

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements

 

 

F-2

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements

 

F-3

 

The accompanying notes are an integral part of these financial statements

 

 

F-4

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT FOR THE YEARS ENDED DECEMBER 31 2014 AND 2013

The accompanying notes are an integral part of these financial statements

 

 

F-5

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – The Company

 

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

 

On September 23, 2014 the Company entered into a Securities Purchase Agreement with 100% of the common stock shareholders (the “Sellers”) of SoOum Corp.  Upon the closing of the transaction on November 10, 2014, SoOum Corp. shareholders transferred all of their outstanding shares of common stock to SoOum Holdings, Inc., a wholly owned subsidiary of Swordfish.  In consideration, Swordfish issued 9,100,000 shares of its Class B Preferred stock and 1,690,000 shares of its Class C preferred Stock.  The Class B Preferred Stock is convertible at the rate of 1,000 common shares to 1.  The Class C Preferred Stock is convertible at the rate of 10,000 common shares to 1.  Class B and Class C have voting rights of 1,000 and 10,000 votes per share respectively.

 

Nature of Operations

Swordfish Financial, Inc., (f/k/a Nature Vision, Inc. and Photo Control Corporation) as Nature Vision, Inc. previously designed, manufactured and marketed outdoor recreation products primarily for the sport fishing and hunting markets.

 

The Company did not meet the minimum net worth covenants of a line of credit with M&I Business Credit LLC (M&I Bank) as of June 30, 2009, which put the Company in default on the line of credit.  On August 14, 2009, simultaneously with the signing of the Swordfish Financial, Inc., the Texas corporation, stock Purchase/Merger Agreement (described above) M&I Bank, which was owed approximately $1,800,000 by the Company, foreclosed on the line of credit and forced the Company to enter into a Voluntary Surrender Agreement.  The Voluntary Surrender Agreement gave M&I Bank total possession of the Company’s premises, its operations and all of the Company’s collateral, which consisted of all of Nature Vision’s assets.  M&I Bank liquidated basically all of the Nature Vision assets to recover the line of credit debt.  

 

Based on the limited assets, product lines and resources remaining after the M&I Bank liquidation, the Company determined that there was not enough remaining of the Nature Vision operations to continue as an outdoor recreation product company and decided to concentrate on the business on being an asset recovery company and using the financial resources recovered to retire the Company’s debts and invest in other businesses domestically and internationally.

 

F-6

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE A – The Company - continued

Effective approximately December 2012, the Company decided to discontinue its efforts on being an asset recovery company and changed its business focus to the pursuit of the acquisition of Internet media companies which provide service to home entertainment and cable business.

 

Effective with the merger of SoOum Corp., the Company changed its business focus to international commodity trading arbitrage.  The Company will use its own proprietary technology to identify and exploit arbitrage opportunities.  SoOum also plans to distribute trade intelligence to global subscribers in order to solve supply shortages and bring new business to local manufacturers.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Swordfish Financial, Inc., and its wholly owned subsidiaries; Nature Vision, Inc. and SoOum (the “Company”).  All significant inter-company balances have been eliminated in consolidation.

 

NOTE B – Summary of Significant Accounting Policies

Method of Accounting

 

The Company maintains its books and prepares its financial statements on the accrual basis of accounting.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less.  The Company maintains cash and cash equivalents at financial institutions, which periodically may exceed federally insured amounts.

 

Income Taxes

 

The Company accounts for income taxes in accordance with generally accepted accounting principles which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

 

The Company evaluates all significant tax positions as required by accounting principles generally accepted in the United States of America.  As of December 31, 2014, the Company does not believe that it has taken any positions that would require the recording of any additional tax liability nor does it believe that there are any unrealized tax benefits that would either increase or decrease within the next year.  It is the Company’s policy to recognize any interest and penalties in the provision for taxes.

F-7

 

 

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE B – Summary of Significant Accounting Policies - continued

               

Earnings per Share

 

Earnings per share of common stock are computed in accordance with FASB ASC 260 (prior authoritative literature:  FASB Statement No. 128.), FASB ASC 260 replaces SFAS No, 128, “Earnings per Share”.  Basic earnings per share are computed by dividing income or loss available to common shareholders by the weighted-average number of common shares outstanding for each period.  Diluted earnings per share are calculated by adjusting the weighted average number of shares outstanding assuming conversion of all potentially dilutive stock options, warrants and convertible securities, if dilutive. Common stock equivalents that are anti-dilutive are excluded from both diluted weighted average number of common shares outstanding and diluted earnings per share.

               

Financial Instruments

               

The Company’s financial instruments consist of cash, long-term investments, and accounts payable. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.

             

Stock-Based Compensation

 

Stock-based compensation is computed in accordance with FASB ASC 718 (prior authoritative literature:  FASB Statement No. 123R). FASB ASC 718 replaces SFAS No. 123R which requires all share-based payment to employees, including grants of employee stock options, to be recognized as compensation expense in the financial statements based on their fair values.  That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company has selected the Black-Scholes option pricing model as the most appropriate fair value method for our awards and have recognized compensation costs immediately as our awards are 100% vested.  

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of FASB ASC 505-50 (prior authoritative literature, EITF 96-18, “Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and EITF 00-18, “Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees.”)  The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.

F-8

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE B – Summary of Significant Accounting Policies - continued

Stock-Based Compensation - continued

In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.  Stock-based compensation related to non-employees is accounted for based on the fair value of the related stock or options or the fair value of the services, whichever is more readily determinable in accordance with ASC 718.  

               

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.                 

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.

 

The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments.  In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

 

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. The Company uses a lattice model for valuation of the derivative.  

When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments.  The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.

 

The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.

 

Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net cash settlement of the derivative instrument could be required within the 12 months of the balance sheet date.

F-9

 

 

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE C – Recently Issued Accounting Standards

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forward Exists. The new guidance requires that unrecognized tax benefits be presented on a net basis with the deferred tax assets for such carry forwards. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.       

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

- Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income

- But only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

 The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

 

F-10

 

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE C – Recently Issued Accounting Standards - continued

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs.

Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

In October 2012, the FASB issued ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations. 

NOTE D – Acquisition – iPoint Television

On January 15, 2014, the Company completed the acquisition of 90% of the issued and outstanding membership interest of iPoint.  Pursuant to the Securities and Exchange Agreement the Company issued Clark Ortiz, the company’s CEO and Chairman 25,000,000 shares of Swordfish’s Series A Preferred Stock, which has voting rights equal to 100 shares of the Company’s common stock and is convertible into the Company’s common stock at the rate of 10 shares of common stock for each share of Series A. Preferred Stock.  In addition to issuance of the Series A Preferred Stock the Company agreed as part of the purchase price to issue 50,000,000 shares of its common stock to Mr. Ortiz.  At the date of the transaction, the Company didn’t have any authorized and unissued shares available to issue to Mr. Ortiz, however in order to close the transaction, Mr. Ortiz agreed to close the transaction pending the Company increasing the authorized shares of common stock, which the Company did on March 25, 2014.  As a result of the transaction, the Company owns 90% of issued and outstanding membership interests in iPoint Television LLC and therefore a majority owned subsidiary of the Company and the Company will be able to report the results of iPoint on a consolidated basis in the Company’s financial statements.  iPoint Television, also known as iPoint TV, is a Smart media and entertainment company, which holds development licenses from Apple, Android, Google, Roku, Kindle and most every smart device.  iPoint is  a full service Internet Protocol Television (IPTV), media entertainment company which develops applications for mobile and TV smart devices.

F-11

 

 

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE E – Going Concern 

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations.  As a result, there is an accumulated deficit of $26,133,617 at December 31, 2014.

The Company’s continued existence is dependent upon its ability to raise capital or acquire a marketable company.  The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE F – Term Notes Payable

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

F-12

 

 

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE G – Convertible Promissory Notes Payable

 As of December 31, 2014, the Company has outstanding six (6) security purchase agreements with accredited investors for the sale of convertible promissory notes bearing interest at 8.0% - 12%, per annum.  Pursuant to the convertible promissory notes the investor may convert the amount paid towards the Securities Purchase Agreements into common stock of the company at a conversion price equal to 50% - 55% of the average of the 3 lowest volume weighted average trading prices during the 10 day period ending on the latest complete trading day prior to the conversion date.   Trading price means the closing bid price on the OTC Market Over-the-Counter Bulletin Board Pink Sheets.

The conversion rights embedded in the Notes are accounted for as a derivative financial instruments because of the down round feature of the conversion price.  The beneficial conversion feature was valued at the date of issuance using the Black-Scholes-Merton options pricing model with the following assumptions:  risk free interest rates ranging from .07% to .15%, contractual expected life of nine (9) to twelve (12) months, expected volatility of 185% to 236%, calculated using the historical closing price of the company’s common stock, and dividend yield of zero, resulting in fair market value.

The Company had convertible debentures outstanding as follows:

December 31, 2014		Outstanding Balance of Convertible Debenture	Unamortized Discount	Net of Principal and Unamortized Discount
Convertible Debentures
January 10, 2014 - Debenture		$      7,150	––	$        7,150
February 28, 2014 – Debenture		13,910	(2,063)	11,847
April 2, 2014 – Debenture		20,000	(6,000)	14,000
June 18, 2014 – Settlement Agreement		58,420	(16,228)	42,192
Total Convertible Debentures		$   99,480	(24,291)	$     75,189

F-13

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE G – Convertible Promissory Notes Payable - continued

December 31, 2013		Outstanding Balance of Convertible Debenture	Unamortized Discount	Net of Principal and Unamortized Discount
Convertible Debentures
July 1, 2013 – Debenture		$  41,500	$    (13,734)	$     27,766
August 6, 2013 - Debenture		22,500	(10,000)	12,500
September 9, 2013 - Debenture		27,500	(15,278)	12,222
October 8, 2013 - Debenture		26,500	(17,667)	8,833
October 8, 2013 – Debenture		15,700	(10,167)	5,533
November 11, 2013 - Debenture		4,000	(3,911)	89
December 3, 2013 - Debenture		32,500	(28,889)	3,611
Total Convertible Debentures		$  170,200	$     (99,646)	$    70,554

NOTE H – Accrued Expenses

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

F-14

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE I – Stockholders’ Equity

Preferred Stock

The Company is authorized to issue up to 50,000,000 shares of preferred stock, $0.0001 par value (“Preferred Stock”), which is convertible to common at 10 to 1.  The Board of Directors authorized to fix the designations, rights, preferences, powers and limitations of each series of Preferred Stock.  The Company’s prior CEO, Clark Ortiz currently holds 25,000,000 shares of the Company’s preferred stock.

On September 26, 2014 the Board of Directors authorized an amendment to the articles of incorporation to authorize 10,000,000 shares each preferred stock class B and class C.  These shares have a $.0001 par value, have voting rights of 1,000 to 1 and are convertible to common at 1,000 to 1.

Common Stock 

On March 25, 2014 the Company amended their authorized Common Stock to 5,000,000,000 shares from 1,000,000,000 shares.

   

On March 21, 2014 the Company resolved to adopt the 2014 Incentive Stock Option and Restricted Stock Plan.  The purpose of this Plan is to provide a means by which eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following: (i) Incentive Stock Options, (ii) Nonqualified Stock Options, (iii) rights to acquire restricted stock, and (iv) stock appreciation rights.  Eligible Award recipients are the employees, directors and consultants of the Company and its Affiliates. The Company also seeks to retain the services of the group of persons eligible to receive Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.  450,000,000 shares of common stock are registered to this plan at an offering price of $0.001.  The Plan shall expire on March 20, 2024. 

NOTE J – Commitments and Contingencies

Various creditors have brought legal proceedings for collections of their claims against the Company.  Judgments payable at December 31, 2014 and 2013 are $1,102,510 and $1,066,755, respectively.

NOTE K – Related Party Transactions

The Company has borrowed $1,100,611 from a former member of the Board of Directors and two (2) related parties. The related party notes total to $5,600.  Two of the notes from the former Board of Directors total to $1,045,000 and are unsecured.  The third note in the amount of $50,000 is secured by a second lien on the Company’s assets.  The notes to the former member of the Board of Directors are in default and the Company has included approximately $1,128,864 of accrued interest in accrued expenses at December 31, 2014.

NOTE L – Fair Value 

The Company has categorized its assets and liabilities recorded at fair value based upon the fair value hierarchy specified by GAAP.  All assets and liabilities are recorded at historical cost which approximates fair value, and therefore, no items were valued according to these inputs.

F-15

SWORDFISH FINANCIAL, INC.

Haltom City, Texas

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

The levels of fair value hierarchy are as follows:

[  ]

Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access; 

[  ]

Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals; and 

[  ]

Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, the Company categorizes such financial asset or liability based on the lowest level input that is significant to the fair value measurement in its entirety.  Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category.  All assets and liabilities are at cost which approximates fair value and there are not items that were required to be valued on a non-recurring basis.

The following liabilities were valued at fair value as of December 31, 2014 and 2013. No other items were valued at fair value on a recurring or non-recurring basis as of December 31, 2014 and 2013.

December 31, 2014		Fair Value Measurements Using
	Carrying
	Value	Level 1	Level 2	Level 3	Total
Derivative Liabilities	$      ––	$      ––	$      ––	$      168,248	$      168,248
Total		$      ––	$      ––	$      168,248	$      168,248

 

 

December 31, 2013		Fair Value Measurements Using
	Carrying
	Value	Level 1	Level 2	Level 3	Total
Derivative Liabilities	$      ––	$      ––	$      ––	$      189,871	$      189,871
Total		$      ––	$      ––	$      189,871	$      189,871

 

NOTE M – Merger

 

 On September 23, 2014 the Company signed a merger agreement with SoOum Corp., a Delaware corporation.  Per the agreement, the outstanding shares of SoOum Corp common stock will be converted into 6,768,955 shares of the Company’s preferred stock.  This transfer of stock will result in an eighty percent (80%) ownership interest of the Company. Upon completion, the Company will be the surviving corporation and SoOum will be a wholly owned subsidiary. At the date of merger, $480,000 goodwill was acquired and posted to the Company.  At December 31, 2014 the goodwill amount of $480,000 was impaired (See Note N).

 

NOTE N – Impairment of Goodwill

 

At December 31, 2014 the Company has evaluated the balance of goodwill and has determined that it has a value of $-0-.  The Company has therefore impaired goodwill in the amount of $480,000 at December 31, 2014.

 

NOTE O – Liability for Conversion Feature of Preferred Shares

 

Upon the issuance of the Series B Preferred and the Series C Preferred for the SoOum Corp acquisition, the owners of these securities were entitled to receive in total 80% of the common stock of the Company upon full conversion.  Assuming full conversion at a fixed conversion ratio, based on the common shares outstanding at December 31, 2014, there would be 26,250,000,000 shares common that would be converted, which is 25,690,960,686 more shares than the current authorized amount.  Based on the stock price at December 31, 2014, $.0005, the total value of those shares would be $12,845,480.  In accordance with generally accepted Accounting Principles, the Company recorded a liability for that amount on the financial statements.

F-16