UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

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

 

For the quarter ended: September 30, 2015

 

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: 000-55013

 

STL MARKETING GROUP, INC.

(Exact name of Registrant as specified in its charter)

 

Colorado   20-4387296

(State or other jurisdiction

of incorporation)

 

(IRS Employer

I.D. No.)

 

10 Boulder Crescent, Suite 102

Colorado Springs, CO 80903

(Address of principal executive offices and zip Code)

 

(719) 219-5797

(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 past 12 months, 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, or 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 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of November 16, 2015, there were 866,507,801 shares of the registrant’s common stock issued and outstanding.

 

 

 

   
   

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION    
         
Item 1.   Financial Statements.   3
         
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.   14
         
Item 3.   Quantitative and Qualitative Disclosures About Market Risk.   17
         
Item 4.   Controls and Procedures.   17
         
PART II – OTHER INFORMATION
         
Item 1.   Legal Proceedings.   17
         
Item 1A.   Risk Factors.   18
         
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.   18
         
Item 3.   Defaults Upon Senior Securities.   19
         
Item 4.   Mine Safety Disclosures.   19
         
Item 5.   Other Information.   19
         
Item 6.   Exhibits.   19
         
Signatures       20

 

 2 
   

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

STL Marketing Group, Inc. & Subsidiaries

Condensed Consolidated Balance Sheets

 

   September 30, 2015   December 31, 2014 
   (Unaudited)     
         
Assets          
           
Current Assets          
Cash  $4,961   $102 
Deferred offering costs   -    84,070 
Total Current Assets   4,961    84,172 
           
Property and Equipment, net   4,112    5,755 
           
Other Assets          
Security deposits   1,135    1,135 
           
Total Assets  $10,208   $91,062 
           
Liabilities and Stockholders’ Deficit          
           
Current Liabilities:          
Accounts payable and accrued liabilities, including $702,570 and $579,120 salaries due to officers, respectively  $1,254,811   $1,062,173 
Accrued liabilities and accounts payable - related party   425,861    385,677 
Notes payable - related party   121,446    42,751 
Liabilities payable in shares   114,500    114,500 
Liability settlement   18,681    18,681 
Notes payable   60,000    60,000 
Convertible notes payable, net of discount   1,015,558    978,069 
Derivative liabilities   3,236,372    2,439,998 
Total Liabilities   6,247,229    5,101,849 
           
Commitments and Contingencies          
           
Stockholders’ Deficit          
Class A - Preferred Stock, 10% of Par Value, Non-Cumulative, $1.00 Par Value, 1,800,000 Shares Authorized, 1,800,000 Shares Issued and outstanding           1,800,000               1,800,000    
Class B - Preferred Stock, $0.001 Par Value, 1,400,000,000 Shares Authorized, 1,400,000,000 Shares Issued and outstanding  
 
      1,400,000      
 
      1,400,000    
Class C - Preferred Stock, $0.001 Par Value, 125,000 Shares Authorized, Zero Shares Issued and Outstanding           -               -    
Common Stock, $0.001 Par Value, 2,600,000,000 Shares Authorized, 866,507,801 Shares Issued and Outstanding at September 30, 2015, 59,764,239 Issued and Outstanding at December 31, 2014         866,508  
59,764
 
Additional paid in capital - Preferred Stock   (232,000)   (232,000)
Discount on Preferred Stock   (2,466,999)   (2,466,999)
Additional paid in capital - Common Stock   599,851    1,305,726 
Accumulated Deficit   (8,204,381)   (6,877,278)
 Total Stockholders’ Deficit   (6,237,021)   (5,010,787)
           
Total Liabilities and Stockholders’ Deficit  $10,208   $91,062 

 

See accompanying notes to the condensed consolidated financial statements

 

 3 
   

 

STL Marketing Group, Inc. & Subsidiaries

Condensed Consolidated Statemens of Operations

 

  For the Three Months Ended   For the Nine Months Ended 
  September 30, 2015   September 30, 2014   September 30, 2015   September 30, 2014 
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
                
Revenues $-   $-   $-   $- 
                    
Cost of revenues  -    -    -    - 
                    
Gross profit  -    -    -    - 
                    
Operating expenses                   
Compensation  61,899    61,419    186,405    185,925 
Professional fees  23,424    22,120    88,728    228,561 
Selling, general and administrative  7,858    71,532    111,106    105,376 
 Total operating expenses  93,181    155,071    386,239    519,862 
                    
Loss from operations  (93,181)   (155,071)   (386,239)   (519,862)
                    
Other income (expense):                   
Interest expense  (46,407)   (263,359)   (203,489)   (568,087)
Loss on settlement liability  -    (36,337)   -    (78,193)
Change in fair value of derivative liabilities  (29,559)   600,826    (870,433)   1,170,770 
Gain on extinguisment of derivative liabilities  -    -    287,635    - 
Private placement costs  -    (304,342)   (154,577)   (525,766)
                    
Other income (expense) - net  (75,966)   (3,211)   (940,864)   (1,276)
                    
Net Loss $(169,147)  $(158,282)  $(1,327,103)  $(521,138)
                    
Net loss per common share - basic and diluted $(0.00)  $(0.00)  $(0.00)  $(0.00)
                    
Weighted average common shares outstanding - basic
and diluted
 
 
 
866,507,801
 
 
 
 
 
 
 
386,302,419
 
 
 
 
 
 
 
483,549,766
 
 
 
 
 
 
 
237,058,602
 
 

 

See accompanying notes to the condensed consolidated financial statements

 

 4 
   

 

STL Marketing Group, Inc. & Subsidiaries

Condensed Consolidated Statements of Stockholders’ Deficit

For the period from January 1, 2015 to September 30, 2015

 

 

  Preferred Stock, Class A
Par Value $1.00
   Preferred Stock, Class B Par Value $0.001   Additional Paid-In Capital   Discount on    Common Stock, Class B
Par Value $0.001
   Additional Paid-In Capital        
  Shares   Amount   Shares   Amount   Preferred Stock   Preferred Stock   Shares   Amount   Common Stock   Accumulated Deficit   Total 
                                            
Balance January 1, 2015  1,800,000   $1,800,000    1,400,000,000   $1,400,000   $(232,000)  $(2,466,999)   59,764,239   $59,764   $1,305,726   $(6,877,278)  $(5,010,787)
                                                       
Shares issued for conversion of notes payable  -    -    -    -    -    -    806,743,562    806,744    (705,876)   -    100,868 
Net Loss  -    -    -    -    -    -    -    -    -    (1,327,103)   (1,327,103)
Balance September 30, 2015 (Unaudited)  1,800,000   $1,800,000    1,400,000,000   $1,400,000   $(232,000)  $(2,466,999)   866,507,801   $866,508   $599,851   $(8,204,381)  $(6,237,021)

 

See accompanying notes to the condensed consolidated financial statements

 

 5 
   

 

STL Marketing Group, Inc. & Subsidiaries

Condensed Consolidated Statements of Cash Flows

 

    For the Nine Months Ended  
   September 30, 2015   September 30, 2014 
   (Unaudited)   (Unaudited) 
         
Cash Flows From Operating Activities:          
Net Loss  $(1,327,103)  $(521,138)
Adjustments to reconcile net loss to net cash used in operating activities          
Depreciation and amortization   1,643    1,568 
Stock based compensation   -    66,500 
Deferred offering costs   84,070    - 
Amortization of debt discount   136,069    349,940 
Change in fair value of derivative liabilities   870,433    (1,170,770)
Private placement costs   154,577    509,902 
Amortization of deferred offering costs   -    15,864 
Financing fees   -    78,193 
Gain on extinguishment of derivative liabilites   (287,635)   - 
Debt converted below par   -    143,816 
Changes in operating assets and liabilities:          
Security deposits   -    - 
Accounts payable and accrued liabilities   194,926    147,047 
Accounts payable - related party   40,184    66,906 
Net Cash Used in Operating Activities   (132,836)   (312,172)
           
Cash Flows From Investing Activities:          
Purchase of property and equipment   -    (640)
Security deposits   -    3,398 
Net Cash Provided by Investing Activities   -    2,758 
           
Cash Flows From Financing Activities:          
Proceeds from related party notes payable   83,695    - 
Payment of related party notes payable   (5,000)   - 
Proceeds from convertible notes   59,000    314,000 
Net Cash Provided by Financing Activities   137,695    314,000 
           
Net increase cash    4,859    4,586 
           
Cash at beginning of period   102    717 
           
Cash at end of period  $4,961   $5,303 
           
Supplemental disclosure of non-cash investing and financing activities:          
           
Conversion of convertible notes into common stock  $98,580   $116,860 
Conversion of accrued interest on convertible note into common stock  $2,288   $- 
Note payable issued for deferred offering costs  $-   $25,000 
Common stock issued for deferred offering costs  $-   $50,000 
Liabilities settled in connection with the Liabilities Purchase Agreement  $-   $164,758 

 

See accompanying notes to the condensed consolidated financial statements

 

 6 
   

 

STL Marketing Group, Inc. & Subsidiaries

Notes to the Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014

(Unaudited)

 

Note 1 – Nature of Operations and Summary of Significant Accounting Policies

 

Nature of Operations

 

The Company has recently added the sale and distribution of PBX equipment (VoIP technology) to its original focus in the development of renewable energy projects. As a result, our business is the sales and distribution of VoIP PBXs under the brand name PhoneSuite, as well as the prospective sale of electricity through a wind park to a government owned utility company in Costa Rica.

 

On October 15, 2012, STL Marketing Group, Inc. (“STLK”, the “Company”) entered into a merger agreement with Versant Corporation, a Delaware corporation (“Versant”). In January 2013 the respective Boards of Versant and STLK approved a Share Exchange Plan (“SEP”) and as a result, on February 4, 2013: (1) the holders of STLK Preferred A and Preferred C Series stock returned their shares to treasury; (2) STLK’s Preferred Series A, B and C were restructured and amended to reflect the SEP; (3) Versant Class A shareholders exchanged 1,800,000 shares of Versant Class A shares for 1,800,000 shares of STLK Series A Preferred Convertible Stock; (4) Versant’s shareholders exchanged 1,000 shares of Versant Class X common shares for 1,400,000,000 shares of STLK Series B Preferred Stock; (5) Versant’s shareholders exchanged 200,003 shares of Class B common stock for convertible notes in STLK and 6,666,667 shares of STLK’s common stock; and (6) Versant issued 7,500,000 shares of Class B common shares to STLK shareholders, granting them 100% of the common shares in Versant. Upon finalization of the merger, Versant’s shareholders held 100,120,000 shares or 98.26% of the combined entity.

 

As the owners and management of Versant had voting and operating control of the Company after the merger, the transaction was accounted for as a recapitalization with Versant deemed the acquiring company for accounting purposes, and the Company deemed the legal acquirer. Due to the change in control, the consolidated financial statements reflect the historical results of Versant prior to the merger and that of the consolidated Company following the merger. Common Stock and the corresponding capital amounts of the Company pre-merger have been retroactively restated as of the earliest periods presented as capital stock reflecting the exchange ratio in the merger.

 

STLK was a “shell company” prior to the merger and did not conduct an active trade or business. Because it was a shell company at the time of the Merger, we filed a general form for registration under Form 10 under the Securities Exchange Act of 1934, as amended.

 

Summary of Significant Accounting Policies

 

Basis of Presentation of Unaudited Condensed Financial Information

 

The unaudited condensed financial statements of the Company for the nine months ended September 30, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2014 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 22, 2015. These financial statements should be read in conjunction with that report.

 

 7 
   

STL Marketing Group, Inc. & Subsidiaries

Notes to the Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014

(Unaudited)

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates and assumptions by management include, among others, the accrual of potential liabilities, and the assumptions used in valuing derivatives and share-based instruments issued for services and financing. Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The fair value of our financial assets and liabilities reflects our estimate of amounts that we would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of our assets and liabilities, we seek to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

Level 1   Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2   Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3   Pricing inputs that are generally unobservable inputs based on the Company’s assumptions and not corroborated by market data.

 

The Company’s financial instruments consist principally of cash, accounts payable, accrued liabilities, and notes payable. The carrying amounts of such financial instruments in the accompanying balance sheets approximate their fair values due to their relatively short-term nature. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

 

As of September 30, 2015 and December 31, 2014, the Company’s condensed consolidated balance sheets included the fair value of derivative liabilities of $3,236,372 and $2,439,998, respectively, which was based on Level 2 measurements.

 

Share-Based Compensation

 

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (FASB) whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

 

 8 
   

 

STL Marketing Group, Inc. & Subsidiaries

Notes to the Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014

(Unaudited)

 

Reverse Stock Split

 

In October 2014, the Company’s board of directors and stockholders approved an amended and restated certificate of incorporation to affect a reverse split of shares of our common stock at a 1-for-15 ratio. The reverse split became effective in March 2015. The par value and the authorized shares of the common and convertible preferred stock were not adjusted as a result of the reverse split. All issued and outstanding common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect this reverse split for all periods presented.

 

Net Income/(Loss) per Common Share

 

Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all potentially dilutive shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method.

 

At September 30, 2015 and 2014, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive:

 

Common stock equivalents are as follows:

 

   September 30, 2015   September 30, 2014  
         
Convertible Debt   31,546,431,115    9,292,898,942 
Liability to be paid in shares   545,000,000    872,093 
Liability to be paid in shares (30% discount)   1,003,812,571    285,715,200 
Common stock equivalents   33,095,243,686    9,579,486,235 

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.

 

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2014-15 on the Company’s financial statements and disclosures.

 

 9 
   

 

STL Marketing Group, Inc. & Subsidiaries

Notes to the Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014

(Unaudited)

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

Note 2 – Going Concern

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the nine month period ended September 30, 2015, the Company incurred a net loss of $1,327,103 and used cash in operations of $132,836. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2014 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

 

At September 30, 2015, the Company had cash on hand in the amount of $4,961. Management estimates that the current funds on hand will not be sufficient to continue operations. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, and estimates that a significant amount of capital will be necessary to advance the development of our projects to the point at which they will become commercially viable.

 

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing. The ability of the Company to continue as a going concern is dependent on management’s plans, which include further implementation of its business plan and continuing to raise funds through debt and/or equity raises.

 

Note 3 – Notes Payable

 

   September 30, 2015   December 31, 2014 
In October 2010, a third party loaned the Company $50,000 under a demand note bearing zero interest. This note is in default.
  $50,000   $50,000 
           
In March 2011, third parties loaned the Company $10,000 under a demand note bearing zero interest. The note were acquired in the merger and is in default.   10,000    10,000 
   $60,000   $60,000 

 

 10 
   

 

STL Marketing Group, Inc. & Subsidiaries

Notes to the Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014

(Unaudited)

 

Note 4 – Liabilities payable in shares and settlement liability

 

Liabilities payable in shares

 

In August 2012, the Company executed a consulting agreement with a third party to provide various services. Under the terms of the agreement, the consultant would be paid $10,000 per month for six months in the form of free trading shares. The share total is computed as follows: earned compensation will accrue interest at 6%, and accrued compensation will be convertible into 70% of the average of the lowest three closing bid prices of the 20 days preceding any conversion. At September 30, 2015, a balance of $60,000 remains outstanding and at September 30, 2015, is convertible into 1,003,812,571 shares of Common Stock.

 

In January 2014, the Company executed a three-month consulting agreement with a third party to provide strategic planning matters. The consultant would be paid $15,000 per month for three months in the form of restricted common stock, using the average of the last five trading days of the month. As of September 30, 2015, a balance of $15,000 remains outstanding and at September 30, 2015, is convertible into 150,000,000 shares of Common Stock.

 

In February 2014, the Company engaged an attorney as counsel. According to the engagement contract, a portion of the fees due to the attorney would be paid in restricted common shares. As of September 30, 2015 the Company has fees payable in the amount of $39,500, which at September 30, 2015 is convertible into 395,000,000 shares of Common Stock.

 

Settlement liability

 

In March 2008, the Company entered into an asset purchase agreement to purchase assets for $65,000 in STLK common stock. At December 31, 2013, the liability related to this asset purchase totaled $43,333. In 2014, the Company agreed to a settlement to pay the $43,333, and payments of $24,652 were made in 2014. At September 30, 2015 and December 31, 2014, respectively, the balance of $18,681 remains outstanding.

 

Note 5 – Convertible Notes Payable

 

At September 30, 2015 and December 31, 2014, convertible notes consisted of the following:

 

   September 30, 2015   December 31, 2014 
Unsecured convertible notes payable.  $1,044,739   $1,084,319 
Debt discount   (29,181)   (106,250)
Notes payable, net of discount  $1,015,558   $978,069 

 

From 2007 to 2015, the Company issued Convertible Promissory Notes (“Notes”) in the aggregate principal amount of $1,087,073 to various accredited investors. The Notes bear interest ranging from 8% to 12% per annum and mature on various dates from March 2008 to September 2016. The Company is currently in default of payment for Notes that matured in March 2008 through April 2015 in the aggregate principal amount of $959,330.

 

The Notes are convertible into shares of Common Stock of the Company at the option of the holder commencing on various dates following the issuance date of the Notes and ending on the later of the maturity date or date of full payment of principal and interest. The principal amount of the Notes along with, at the holder’s option, any unpaid interest and penalties, are convertible at price per share at discounts ranging from 10% to 75% of the Company’s Common Stock trading market price during a certain time period, as defined in the agreements. Further, the conversion prices for three notes are subject to a floor such that the conversion prices will not be less than a certain price, as defined in the agreement, with such floor prices ranging from $0.004 to $0.015 per share. In addition, the conversion prices are subject to adjustment in certain events, such as in conjunction with any sale, conveyance or disposition of all or substantially all of the Company’s assets or consummation of a transaction or series of related transactions in which the Company is not the surviving entity.

 

As of December 31, 2014, the balance of the Notes was $1,084,319. During the nine month ended September 30, 2015, the Company issued $59,000 of new unsecured convertible notes. During the nine months ended September 30, 2015, note holders converted $98,580 of principal and $2,287 of accrued interest into 806,743,562 shares of the Company’s common stock. At September 30, 2015, the principal balance of the Notes was $1,044,739.

 

As of December 31, 2014, the debt discount related to issuance of the Notes was $106,250. During the nine months ended September 30, 2015, the Company recorded debt discounts of $59,000, and recorded discount amortization of $136,069. As of September 30, 2015, debt discount was $29,181. The remainder of the valuation discount will be amortized as interest expense over the remaining term of the Notes.

 

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STL Marketing Group, Inc. & Subsidiaries

Notes to the Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014

(Unaudited)

 

The Company considered the current FASB guidance of “Contracts in Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not within the issuers’ control means the instrument is not indexed to the issuers own stock. Accordingly, the Company determined that the conversion prices of the Notes were not a fixed amount because they were subject to an adjustment based on the occurrence of future offerings or events. In addition, the Company determined that instruments with floor prices ranging from $0.004 to $0.015 were de minimus and in substance not indexed to the Company’s own stock. As a result, the Company determined that the conversion features of the Notes were not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company records debt discount to the face amount of the notes, and any excess is recorded as a derivative liability.

 

Note 6 – Derivative liabilities

 

Under authoritative guidance issued by the FASB instruments which do not have fixed settlement provisions, are deemed to be derivative instruments. The conversion feature of the Company’s convertible notes payable and liabilities payable in shares (described in Note 4 and 5 above) did not have fixed settlement provisions because the ultimate determination of shares to be issued could exceed current available authorized shares.

 

In accordance with the FASB authoritative guidance, the conversion feature of the financial instruments was separated from the host contract and recognized as a derivative instrument. The conversion feature of the financial instruments had been characterized as a derivative liability and was re-measured at the end of every reporting period with the change in value reported in the statement of operations.

 

The derivative liability was valued at the following dates using a Black-Scholes-Merton model with the following assumptions:

 

  

 

 

September 30, 2015

  

January to September, 2015

(Dates of Inception)

  

 

 

December 31, 2014

 
Conversion feature:               
Risk-free interest rate   0.33%   .11%   0.03%
Expected volatility   511%   636%-756%    290%-959%
Expected life (in years)   0.25 -1 year    0.33-1 year    0.1-1.68 years 
Expected dividend yield   -    -    - 
                
Fair Value:               
Conversion feature  $3,236,372   $213,577   $2,439,998 

 

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company used its own stock’s volatility as the estimated volatility. The expected life of the conversion feature of the notes was based on the remaining terms of the financial instruments. The expected dividend yield was based on the fact that the Company has not customarily paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.

 

At December 31, 2014, the balance of the derivative liabilities was $2,439,998. As of September 30, 2015, the Company re-measured the derivative liabilities and determined the fair value to be $3,236,372. For the nine months ended September 30, 2015, the Company recorded a loss on the change in fair value of derivatives of $870,433. In addition, during the nine months ended September 30, 2015, convertible notes and accrued interest totaling $100,867 were converted into shares of common stock and the Company recorded a gain of $287,635 related to the extinguishment of the corresponding derivative liability.

 

Note 7 – Related Party Transactions

 

(A) Accounts Payable and Accrued Liabilities – Related Party

 

Since April 8, 2010 through September 30, 2015, management and board members have been advancing funds to the Company, paying expenses on behalf of the Company, and deferring salaries and consulting fees. As of September 30, 2015 and December 31, 2014, accounts payable and accrued liabilities due to board members and companies owned by board members totaled $425,861 and $385,677, respectively.

 

(B) Related Party Consulting Services

 

The Company incurred consulting expenses to a company that is owned by a board member, and for the nine months ending September 30, 2015 and 2014 the amounts were $22,500 and $75,000 respectively.

 

(C) Notes Payable – Related Parties

 

The Company executed various promissory notes to related parties since inception. The balance of the outstanding notes at December 31, 2014 was $42,751. During the nine months ended September 30, 2015, notes were issued in the amount of $83,695 to related parties. The notes mature in 3 months to 1 year, are unsecured, and have interest rate at 6%, per annum. During the nine months ended September 30, 2015, the Company repaid $5,000 on notes to related parties. The balance of the outstanding notes at September 30, 2015 was $121,446. At September 30, 2015, the Company is in default on $61,446 of these notes.

 

Note 8 – Foreign Operations

 

Costa Rica

 

Operations outside the U.S. include subsidiaries in Costa Rica. Foreign operations are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange. These subsidiaries are still in the development stage and have not generated any revenues.

 

Note 9 – Stockholders Deficit

 

Common Stock –

 

For the nine months ended September 30, 2015, 806,743,563 of Common Stock has been issued to the Holders of various convertible notes that converted $98,580 in principal and $2,288 in accrued interest.

 

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STL Marketing Group, Inc. & Subsidiaries

Notes to the Condensed Consolidated Financial Statements

For the three and nine months ended September 30, 2015 and 2014

(Unaudited)

 

Note 10 – Commitments and Contingencies

 

Payable to Tarpon Bay Partners LLC

 

In 2014, Tarpon Bay Partners LLC (Tarpon) assumed $519,282 of past due accounts payable of the Company from various creditors of the Company. Tarpon then commenced an action against the Company to recover the aggregate of the past due accounts. On March 19, 2014, the Circuit Court of the Second Judicial Circuit for Leon County, Florida approved an agreement between the Company and Tarpon, in which the Company agreed to issue shares of the Company’s common stock to Tarpon sufficient to generate proceeds equal to the aggregate of the past due accounts. In addition, Tarpon will receive a fee of approximately 33% based on the proceeds. The Company will record the fees as the shares are issued and the past due accounts are paid. The past due amounts assumed are recorded as current liabilities of the Company until settled under the assignment agreement.

 

During the nine months ended September 30, 2015, the Company did not issue any shares of common stock to Tarpon in connection with the agreement. During the nine months ended September 30, 2014, the Company issued 176,088,000 shares of common stock to Tarpon valued at $245,550, of which Tarpon received fees of $80,793 and $164,757 reduced past due accounts payable, leaving a balance owed to vendors of $354,525. At September 30, 2015 and December 31, 2014, the balance due of $354,525 is included in accounts payable and accrued liabilities on the accompanying balance sheets.

 

As part of the agreement with Tarpon, the Company issued to Tarpon two convertible notes aggregating $50,000, which were due in May 2014 and September 2014. At September 30, 2015 and December 31, 2014, the notes total $41,680 and are included in the balance of convertible notes payable, net of discount on the accompanying balance sheets. The notes are currently in default. At September 30, 2015, the amounts outstanding on the notes plus accrued interest was $47,134, and were convertible into 942,670,800 shares of the Company’s common stock.

 

Litigations, Claims and Assessments

 

The Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm its business. Other than the below litigation with the Costa Rican Investment Bank, the Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse affect on its business, financial condition or operating results.

 

In 2012, the Company filed an arbitration claim with the “Centro Internacional de Conciliacion y Arbitraje” or “CICA” alleging that Grupo Aldesa, S.A., its then investment bank, withheld $195,400 of investor funds from the Company in mid-2011 for its own use and benefit and contrary to the executed agreement between the companies. The case claims that Aldesa received funds from two investors and remitted 50% of those funds and keeping the balance without authorization. Additionally, the Company did notify the Federal Bureau of Investigation (FBI), as well as, the State Attorney General of both Delaware and Colorado in mid-2012. Grupo Aldesa appealed to the Sala Primera de la Corte Suprema (the Supreme Court over these types of legal matters) in October of 2012 claiming CICA did not have subject matter jurisdiction or the right to adjudicate the case. In a strongly worded opinion Sala Primera rejected Aldesa’s appeal in the Company’s favor. CICA has received the official notice from the Sala Primera regarding the opinion and has taken up the case from where we were before the appeal.

 

The CICA process has reached its final legal stage, we are awaiting the final judgment which is expected this year.

 

Note 11 – Subsequent Events

 

On November 5, 2015 the Company signed a binding Letter of Intent with Camposagrado, Inc., the inventor of a hotel communications systems application or “App” under the trademark “F3TCH”. Under the terms of the binding Letter of Intent, STLK will license, on an exclusive basis, Camposagrado’s App to the hospitality industry worldwide. Camposagrado, Inc. is majority owned by Jose P. Quiros, the Company’s Chief Executive Officer. A definitive agreement should be reached by mid December 2015.

  

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

 

Forward Looking Statements

 

This quarterly report on Form 10-Q and other reports (collectively, the “Filings”) filed by STL Marketing Group, Inc. (“STL” or the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K, filed with the SEC on April 22, 2015, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

 

Plan of Operation

 

The Company’s efforts for the next 12 months are focused on the following three areas: (i) continuing efforts to pursue the proposed Power Purchase Agreement (“PPA”) to begin generating renewable wind energy in Costa Rica, (ii) the development of our telecommunications business focused on the distribution and sales of VoIP telecommunications equipment (“PBX Systems”); and (iii) the sale and commercialization of new software products.

 

Efforts to Finalize the Power Purchase Agreement

 

In December 2012, we received an official letter affirming our PPA proposal from the Compañia Nacional de Fuerza y Luz (“CNFL”) issued and signed by its General Manager and filed with the Securities and Exchange Commission on July 30, 2013 (the “PPA Letter”). In 2013, based on the PPA Letter and ongoing meetings with the CNFL, the Company had its personnel in Costa Rica providing additional technical and tender information in an effort to finalize the PPA. However, since November 2013, the Costa Rica presidential elections were in process and our progress was delayed.

 

The Costa Rica presidential elections resulted in Mr. Luis Guillermo Solis becoming the President of Costa Rica (as the candidate from the Partido Accion Ciudadana or PAC). We believed Mr. Solis, as a candidate, took a very favorable position to the generation of electricity by private enterprises as part of an overall solution to the energy crisis of the country. However, since his election, President Solis has since appointed the new Grupo ICE Chairman and CEO whom we believe opposes any private generation of electricity. Further complicating matters, the General Manager who issued us the PPA Letter from CNFL, was unexpectedly removed from office. In fact, a great majority of the CNFL executive staff, who the Company believes was key in its efforts to finalize the PPA have been removed and replaced.

 

As a result, the Board has reached out to CNFL and requested a meeting with the new General Manager to move forward on our PPA proposal as reflected in the PPA Letter. The Company will also be exploring alternatives to CNFL, including the possibility of a 7200/7508 license (maximum of 20MW).

 

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In the interim, the Company has cut its operating costs in Costa Rica by approximately $13,000 per month. Most of the professional studies and technical assessments for the PPA have been paid for and will continue to be applicable in the future leaving minimal costs for us to continue pursuing the PPA. Additionally, the Company believes that all of the services related to the PPA can be easily reinstated or expanded as needed.

 

At the time of this filing, there has been no movement from the government to allow any new private generation projects. The moratorium for the “study” is still in place with little hope of a fast resolution. This industry wide hold affects all companies, not just our project

  

PhoneSuite Solutions, Inc.

 

On May 29, 2014, the Board of Directors (the “Board”) of STL Marketing Group, Inc. (the “Company”) approved the formation of PhoneSuite Solutions, Inc. (“PSS”), as a Delaware corporation and a wholly owned subsidiary of the Company. On June 16, 2014, the Board approved the issuance of one-hundred (100) shares of common stock of PSS to the Company (the “Subsidiary Shares”). The Subsidiary Shares represent 100% of the authorized and outstanding shares of common stock of PSS.

 

On June 24, 2014, PSS, as the Company’s wholly owned subsidiary, entered into a Strategic Alliance and Distribution Agreement (the “Agreement”) with Call Management Products, Inc. (“CMP”), a Colorado corporation in the business of designing, manufacturing, marketing, and selling telecommunications products. The Agreement provides that PSS will establish a dealer network and market and sell CMP’s products both internationally and in the United States (the “Territory”). In the domestic market PSS will market to the general business market, excluding the hospitality and assisted living verticals. Internationally, PSS may sell to all markets and develop both the hospitality and general business marketplaces.

 

Our progress on PhoneSuite was delayed for the better part of six months due to personal tragedies that affected our CEO, namely the death of his eldest son on April 2 and his wife on April 15. However, this past October, the Company did meet with a major chain to work on the overseas expansion and sale of the PhoneSuite branded equipment, equipment that has been approved for sale as an endorsed solution by that chain. The Company hopes to meet with CMP to better understand the technical parameters to duplicate the approved solution overseas and work on developing this overseas relationship through 2015 and 2016. Assuming the solution is transferable to overseas data centers, it is anticipated that the Company will begin quoting PhoneSuite’s cloud based solution for various projects in its assigned territory by year-end.

 

KINETOS Letter of Intent

 

On August 3, 2015 the Company entered into a Letter of Intent with a software developer, Kinetos, S.A.. The Company is exploring a variety of approaches to the US market for Kinetos’ products. Kinetos is a software developer that has been in business for several decades and has a long list of clients in Central America for its goods and services. The parties have agreed to attempt to complete a definitive agreement by year end.

 

Kinetos’ core product is an automated real time communications system driven by a smart flow algorithm with enhanced CRM like functions that automatically assist the client Company’s efforts to maintain a close intelligent relationship with the customer. This solution is both automated and scalable and includes push to text, email, call scheduling, mobile app push messages and full interaction etc. based on a Company’s business and processes. Kinetos’ smart flow follow-up system can be implemented in combination with its analytics product, integrated to other applications, or as a stand-alone. Kinetos also has some more “main stream” products ranging from Automated Campaign Managers, IVRs, Banking Call Logging, Contact Centers or Debt Collection Systems.

 

In addition to this core product, Kinetos has developed disruptive new software that integrates its existing products with a new and powerful Big Data algorithm based on machine learning. This combined suite of product sorts through a Company’s own metadata and predicts with very high accuracy, for instance, the cancellation of a service by an existing customer, and then takes proactive “intelligent” action through Kinetos’ follow up system. In short, the software can predict when a customer is going to cancel a service (e.g. cellular service) well before they do and give the service provider an opportunity to retain said customer.

 

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Camposagrado, Inc. Binding Letter of Intent

 

On November 3, 2015, the Company entered into a binding Letter of Intent with Camposagrado, Inc. to exclusively license and commercialize Camposagrado’s patent pending Application or “App” to the worldwide hospitality industry (U.S. Pat. Application No. 14/877,595). This Application, trademarked as F3TCH, migrates the hotel guestroom telephone to a user’s smart device, including their smartphone or tablet, and will allow the guest to utilize their own smart device as their point of contact within the hotel’s communications platform during their stay at a “F3TCH compatible” hotel. The App is free to users and hotels and is monetized through the use of advertisements on the Application. The Company believes that this Application has a strong potential for revenue generation and plans to launch this product in the first half of 2016. This Letter of Intent, as well as any subsequent agreement, is a related party transaction (please see the Notes section for more information).

 

For the three months ended September 30, 2015 compared to the three months ended September 30, 2014

 

For the three months ended September 30, 2015 and 2014, the Company reported a net loss of $(169,147) and $(152,282), respectively. The change in net loss between the periods ended June 30, 2015 and 2014 is primarily due to the derivative liabilities.

 

Operating expenses decreased by roughly 40% during the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. The $61,890 decrease in operating expenses is primarily attributed to the following changes in operating expenses: increase in professional fees of $1,304 and decrease in general and administrative of $63,674 primarily related to the write off of deferred offering costs.

 

The Company has no revenues to date.

 

For the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014

 

For the nine months ended September 30, 2015 and 2014, the Company reported a net loss of $(1,327,103) and $(521,138), respectively. The change in net loss between the periods ended June 30, 2015 and 2014 is primarily due to an increase in the derivative liabilities.

 

Operating expenses decreased by roughly 26% during the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. The $133,623 decrease in operating expenses is primarily attributed to the following changes in operating expenses: decrease in professional fees of $139,833 due a decrease in outside services and increase in general and administrative of $5,730 primarily related to the write off of deferred offering costs and a decrease in overall operating expenses.

 

The Company has no revenues to date.

 

Liquidity and Capital Resources

 

As of September 30, 2015, we had a working deficit of $6,242,268 as compared to December 31, 2014 of $5,017,677, an increase of $1,224,591. The increase in working capital deficit for the period ended September 30, 2015, is primarily attributed to an increase in derivative liabilities of $796,374. In addition, the Company had an increase in liabilities related to accrued payables and expenses of $192,638, additional convertible notes, net of discount of $37,489 and in notes payable – related party of $78,695.

 

Net cash used in operating activities for the nine months ended September 30, 2015 and 2014, was $(132,836) and $(312,172), respectively. The Net Loss for the nine months ended September 30, 2015 and 2014 was $(1,327,103) and $(521,138), respectively.

 

Net cash provided by investing activities for the nine months ended September 30, 2015 was $0, as compared to the nine months ended September 30, 2014 of $2,758.

 

Net cash provided by all financing activities for the nine months ended September 30, 2015 was $137,695, as compared to $314,000 for the nine months ended September 30, 2014. During the nine month period ended September 30, 2015, the Company sold notes for the proceeds of $59,000.

 

As reflected in the accompanying financial statements, the Company has a net loss and net cash used in operations of $1,327,103 and $135,124, respectively, for the nine months ended September 30, 2015.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures

 

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act) are not effective to ensure that information required to be disclosed by us in report that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and 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 chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b) Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Other than disclosed below, we are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. Other than described below, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Arbitration- Grupo Aldesa - (Pending)

 

In 2012, the Company filed an arbitration claim with the “Centro Internacional de Conciliacion y Arbitraje” or “CICA” alleging that Grupo Aldesa, S.A., its then investment bank, withheld $195,400 of investor funds from the Company in mid-2011 for its own use and benefit and contrary to the executed agreement between the companies. The case claims that Aldesa received funds from two investors and remitted 50% of those funds and keeping the balance without authorization. Additionally, the Company did notify the Federal Bureau of Investigation (FBI), as well as, the State Attorney General of both Delaware and Colorado in mid-2012. Grupo Aldesa appealed to the Sala Primera de la Corte Suprema (the Supreme Court over these types of legal matters) in October of 2012 claiming CICA did not have subject matter jurisdiction or the right to adjudicate the case. In a strongly worded opinion Sala Primera rejected Aldesa’s appeal in the Company’s favor. CICA has received the official notice from the Sala Primera regarding the opinion and has taken up the case from where we were before the appeal.

 

The CICA process has reached its final legal stage, we are awaiting the final judgment which is expected this year.

 

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Exchange Under Section - 3(a)(10)

 

On March 19, 2014, the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida (the “Court”), entered an order (the “Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a stipulation of settlement (the “Settlement Agreement”) between the Company, and Tarpon Bay Partners, LLC, a Florida limited liability company (“Tarpon”), in the matter entitled Tarpon Bay Partners, LLC v. STL Marketing Group, Inc., Case No. 2014-CA-278 (the “Action”). Tarpon commenced the Action against the Company on February 6, 2014 to recover an aggregate of $519,281.96 of past-due accounts payable of the Company, which Tarpon had purchased from certain service providers of the Company pursuant to the terms of separate receivable purchase agreements between Tarpon and each of such vendors (the “Assigned Accounts”), plus fees and costs (the “Claim”). The Assigned Accounts relate to certain legal, accounting, and financial services. The Order provides for the full and final settlement of the Claim and the Action. The Settlement Agreement became effective and binding upon the Company and Tarpon upon execution of the Order by the Court on March 19, 2014. Please see the current report on Form 8-K filed with the Securities and Exchange Commission on March 25, 2014.

 

SEC Subpoena

 

On, or about, July 22, 2014 the United States Securities Commission (“SEC”) delivered a subpoena to the Company for all information regarding an investigation of Tarpon Bay Partners, LLC. The Company provided the SEC with the requested material as directed.

 

Item 1A. Risk Factors.

 

As a smaller reporting company, we are not required to provide the information required by the item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

For the nine months ended September 30, 2015 the Company issued the following shares of Common Stock:

 

129,272,559 of Common Stock to the Holder of a convertible note that converted $10,859 in principal and $0 in accrued interest for a convertible note with the maturity date of September 2014. All stock was issued during the second quarter.

 

272,148,657 of Common Stock to the Holder of a convertible note that converted $25,000 in principal and $1411 in accrued interest for a convertible note with the maturity date of August 2015. Of which, 19,127,704 shares were issued during the first quarter and 253,148,657 during second quarter.

 

243,341,755 of Common Stock to the Holder of various convertible notes that converted $43,530 in principal and $0 in accrued interest for a convertible note with the maturity date of March 2015. Of which, 43,180,986 shares were issued during the first quarter and 20,160,769 during second quarter.

 

62,700,592 of Common Stock to the Holder of various convertible notes that converted $10,100 in principal and $877 in accrued interest for a convertible note with the maturity date of March 2015. Of which, 14,626,426 shares were issued during the first quarter and 48,074,166 during second quarter.

 

99,280,000 of Common Stock to the Holder of various convertible notes that converted $9,091 in principal and $0 in accrued interest for a convertible note with the maturity date of May 2016. Of which, 8,450,000 shares were issued during the first quarter and 90,830,000 during second quarter.

 

The issuances of these shares were made in reliance on the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act as the common stock was issued in exchange for debt securities of the registrant held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering.

 

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These securities were not registered under the Securities Act of 1933 (the “Securities Act”). Unless otherwise noted, such issuance of securities was exempt from registration under the safe harbor provided by Regulation D Rule 506 and/or Section 4(a)(2) of the Securities Act. We made this determination in part based on the representations of investors, which included, in pertinent part, that such investors were sophisticated as defined in Rule 506(b)(2)(ii) of Regulation D, and upon such further representations from the investors that (a) the Investor is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (b) the Investor agrees not to sell or otherwise transfer the purchased securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available, (c) the Investor either alone or together with its representatives has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, and (d) the Investor has no need for the liquidity in its investment in us and could afford the complete loss of such investment. Our determination is made based further upon our action of (a) making written disclosure to each Investor in the Subscription Agreement prior to the closing of sale that the securities have not been registered under the Securities Act and therefore cannot be resold unless they are registered or unless an exemption from registration is available, (b) making written descriptions of the securities being offered, the use of the proceeds from the offering and any material changes in the Company’s affairs that are not disclosed in the documents furnished, and (c) placement of a legend on the certificate that evidences the securities stating that the securities have not been registered under the Securities Act and setting forth the restrictions on transferability and sale of the securities, and upon such inaction of the Company of any general solicitation or advertising for securities herein issued in reliance upon Regulation D Rule 506 and Section 4(a)(2) of the Securities Act.

 

Item 3. Defaults upon Senior Securities.

 

There has been no default in payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosure.

 

Not applicable.

 

Item 5. Other Information.

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

Item 6. Exhibits.

 

Exhibit
No.
  Description
     
31.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002
     
31.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002
     
32.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted 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

 

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SIGNATURES

 

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

 

  STL Marketing Group, Inc.
     
Date: November 16, 2015 By: /s/ Jose P. Quiros
  Name: Jose P. Quiros
  Title: Chief Executive Officer
    (Principal Executive Officer)

 

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Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jose P. Quiros, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of STL Marketing Group, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  

Date: November 16, 2015 By: /s/ Jose P. Quiros
    Chief Executive Officer
    (Principal Executive Officer)

 

   
   

 

 

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jaime Kniep, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of STL Marketing Group, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  

Date: November 16, 2015 By: /s/ Jaime Kniep
    Chief Financial Officer
    (Principal Accounting Officer)

 

   
   

 

 

Exhibit 32.1

 

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Jose P. Quiros, Chief Executive Officer of STL Marketing Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  

Date: November 16, 2015 By: /s/ Jose P. Quiros
    Chief Executive Officer
    (Principal Executive Officer)

 

   
   

 

 

 

Exhibit 32.2

 

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Jaime Kniep, Chief Financial Officer, of STL Marketing Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  

Date: November 16, 2015 By: /s/ Jaime Kniep
    Chief Financial Officer
    (Principal Accounting Officer)