Document and Entity Information
Document and Entity Information
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9 Months Ended |
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Sep. 30, 2013
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Document And Entity Information | |
Entity Registrant Name | STL Marketing Group, Inc. |
Entity Central Index Key | 0001569055 |
Document Period End Date | Sep. 30, 2013 |
Document Type | Other |
Amendment Flag | true |
Amendment Description | Amendment no. 2 |
Entity Filer Category | Smaller Reporting Company |
Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (Parenthetical)
Condensed Consolidated Statemens of Operations
Condensed Consolidated Statemens of Operations (USD $)
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3 Months Ended | 9 Months Ended | 42 Months Ended | ||
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Sep. 30, 2013
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Sep. 30, 2012
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Sep. 30, 2013
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Sep. 30, 2012
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Sep. 30, 2013
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Income Statement [Abstract] | |||||
Revenues | |||||
Cost of revenues | |||||
Gross profit | |||||
Operating expenses | |||||
Compensation | 57,500 | 69,489 | 172,500 | 184,489 | 736,701 |
Professional fees | 31,249 | 12,890 | 164,345 | 41,431 | 881,475 |
Selling, general and administrative | 64,406 | 45,653 | 204,782 | 207,367 | 432,131 |
Total operating expenses | 153,155 | 128,032 | 541,627 | 433,287 | 2,050,307 |
Loss from operations | (153,155) | (128,032) | (541,627) | (433,287) | (2,050,307) |
Other income (expense): | |||||
Interest expense | (19,767) | (552) | (45,881) | (1,651) | (53,006) |
Interest expense - discount on notes | (115,143) | (246,229) | (246,229) | ||
Change in fair value of derivative liabilities | (693,987) | 166,078 | 166,078 | ||
Derivative expense | (727,442) | (727,442) | |||
Loss on abandonment of land lease | (58,725) | ||||
Other income (expense) - net | (828,897) | (552) | (853,474) | (1,651) | (919,324) |
Loss before income tax provision | (982,052) | (128,584) | (1,395,101) | (434,938) | (2,969,631) |
Income tax provision | |||||
Net loss | $ (982,052) | $ (128,584) | $ (1,395,101) | $ (434,938) | $ (2,969,631) |
Net loss per common share - basic and diluted | $ (0.01) | $ 0.00 | $ (0.01) | $ 0.00 | |
Weighted average common shares outstanding | 139,223,524 | 100,200,000 | 134,405,123 | 100,200,000 |
Consolidated Changes in Stockholders' Deficit
Consolidated Changes in Stockholders' Deficit (USD $)
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Preferred Stock, Class A [Member]
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Preferred Stock, Class B [Member]
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Additional Paid-In Capital Preferred Stock [Member]
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Discount On Preferred Stock [Member]
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Common Stock Class B [Member]
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Additional Paid-In Capital Common Stock [Member]
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Deficit [Member]
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Accumulated Deficit During The Development Stage [Member]
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Total
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Balance at Apr. 08, 2010 | |||||||||
Balance, shares at Apr. 08, 2010 | |||||||||
Founders Stock ($0.001 per share) | 1,400,000 | (1,399,000) | 1,000 | ||||||
Founders Stock ($0.001 per share), shares | 1,400,000,000 | ||||||||
Shares of Class B Stock issued to service providers in exchange for services rendered ($0.002 per share) | 100,000 | 119,000 | 219,000 | ||||||
Shares of Class B Stock issued to service providers in exchange for services rendered ($0.002 per share), shares | 100,000,000 | ||||||||
Net Loss | (265,206) | (265,206) | |||||||
Balance at Dec. 31, 2010 | 1,400,000 | (1,399,000) | 100,000 | 119,000 | (265,206) | (45,206) | |||
Balance, shares at Dec. 31, 2010 | 1,400,000,000 | 100,000,000 | |||||||
Preferred Stock issued for cash | 1,800,000 | (1,067,999) | 732,001 | ||||||
Preferred Stock issued for cash, shares | 1,800,000 | ||||||||
Stock issuance costs, preferred stock ($0.41 per share) | (232,000) | (232,000) | |||||||
Stock issued for cash | 200 | 199,800 | 200,000 | ||||||
Stock issued for cash, shares | 200,000 | ||||||||
Stock issuance costs, common stock | (30,000) | (30,000) | |||||||
Net Loss | (681,975) | (681,975) | |||||||
Balance at Dec. 31, 2011 | 1,800,000 | 1,400,000 | (232,000) | (2,466,999) | 100,200 | 288,800 | (947,181) | (57,180) | |
Balance, shares at Dec. 31, 2011 | 1,800,000 | 1,400,000,000 | 100,200,000 | ||||||
Net Loss | (627,349) | (627,349) | |||||||
Balance at Dec. 31, 2012 | 1,800,000 | 1,400,000 | (232,000) | (2,466,999) | 100,200 | 288,800 | (1,574,530) | (684,529) | |
Balance, shares at Dec. 31, 2012 | 1,800,000 | 1,400,000,000 | 100,200,000 | ||||||
Stock issued for cash | 12,600 | 12,400 | 25,000 | ||||||
Stock issued for cash, shares | 12,600,000 | ||||||||
Stock issuance costs, common stock | |||||||||
Effect of merger and recapitalization | 26,624 | (26,624) | (2,072,374) | (2,072,374) | |||||
Effect of merger and recapitalization, shares | 26,623,524 | ||||||||
Puchase of Treasury Shares ($1.00 per share) | (200) | (199,800) | (200,000) | ||||||
Puchase of Treasury Shares ($1.00 per share), shares | (200,000) | ||||||||
Net Loss | (1,395,101) | (1,395,101) | |||||||
Balance at Sep. 30, 2013 | $ 1,800,000 | $ 1,400,000 | $ (232,000) | $ (2,466,999) | $ 139,224 | $ (74,776) | $ (2,072,374) | $ (2,969,631) | $ (4,327,004) |
Balance, shares at Sep. 30, 2013 | 1,800,000 | 1,400,000,000 | 139,223,524 |
Consolidated Changes in Stockholders' Deficit (Parenthetical)
Consolidated Changes in Stockholders' Deficit (Parenthetical) (USD $)
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9 Months Ended | 12 Months Ended | |||
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Dec. 31, 2010
Preferred Stock, Class B [Member]
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Sep. 30, 2013
Common Stock Class B [Member]
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Dec. 31, 2010
Common Stock Class B [Member]
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Dec. 31, 2011
Common Stock Class B [Member]
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Dec. 31, 2011
Preferred Stock, Class A [Member]
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Founder's stock, price per share | $ 0.001 | ||||
Stock issued, per share | $ 0.002 | $ 0.002 | $ 1.00 | ||
Treasury stock, price per share | $ 1.00 | ||||
Preferred stock, price per share | $ 0.001 | $ 1.00 | |||
Common stock, price per share | $ 0.001 | $ 0.001 | $ 0.001 |
Condensed Consolidated Statements of Cash Flows
Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations and Summary of Significant Accounting Policies
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Sep. 30, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations and Summary of Significant Accounting Policies |
Note 1 – Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
STL Marketing Group, Inc.
On October 15, 2012, STL Marketing Group, Inc. (“STLK”) entered into a merger agreement with Versant Corporation, a Delaware corporation (“Versant”). The agreement consisted of $75,000 for the Series A and C Preferred Stock. On January 23 and January 29, the respective Boards of Versant and STLK respectively approved the Share Exchange Plan (“SEP”). As a result of the Share Exchange Plan, on February 4, 2013: (1) the STL Marketing holders of Preferred A and Preferred C Series stock, returned their shares to Treasury for the reclassification and restructuring of these shares; (2) STLK’s Preferred Series A, B and C were restructured and amended to reflect the SEP agreed to by the companies; (3) Versant Class X shareholders exchanged their 1,000 Versant Class X Common shares for 1,400,000,000 Preferred Series B STLK Stock; (4) Versant Class A shareholders exchanged their 1,800,000 Versant Class A shares for 1,800,000 Preferred Series A Convertible STLK Stock; (5) of the 200,003 Versant’s Class B Common Stock shareholders, 200,000 shares ($200,000 value) received convertible notes in STLK and the remaining 3 shares ($219,000 value) received 100,000,000 restricted STLK Common Stock; (6) Versant issued 7,500,000 Class B, Common Shares to STL Marketing Group, granting them 100% of the common shares in Versant. Upon finalization of the merger the accounting acquirer held 1,501,800,000 shares or 98.26% of the combined entity and the legal acquirer held 26,623,524 shares of 1.74% of the combined entity. Prior to the merger the STL Class A and Class C Preferred Series stock had 5,068,390 votes (99.57%) out of the possible 5,090,013,524.
STL Marketing Group, Inc. was a “shell company” prior to the Merger and did not conduct an active trade or business. From and after the consummation of the Merger on February 4, 2013 STL Marketing Group, Inc.’s primary operations consisted of the business and operations of Versant Corporation. Because STL Marketing Group, Inc. 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 (the “Exchange Act”).
For accounting purposes, the Merger transaction has been accounted for as a reverse acquisition, with STL Marketing Group, Inc. as the acquirer. The consolidated financial statements of STL Marketing Group, Inc. for the fiscal years ended December 31, 2013 represent a continuation of the financial statements of Versant Corporation, with one adjustment, which is to retroactively adjust the legal capital of Versant Corporation to reflect the legal capital of STL Marketing Group, Inc.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is our opinion, however, that the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited interim consolidated financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2012 and 2011, together with Management’s Discussion and Analysis, as contained in the Form 10 filed on July 30, 2013. The financial information as of December 31, 2012 is derived from the audited financial statements for the year ended December 31, 2012. The interim results for the nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013 or for any future interim periods.
Principles of Consolidation
The Company’s consolidated subsidiaries and/or entities are as follows:
All inter-company balances and transactions have been eliminated in consolidation.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted 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.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited interim consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our 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:
The following are the major categories of liabilities measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):
Changes in the unobservable input values could potentially cause material changes in the fair value of the Company’s Level 3 financial instruments. The significant unobservable inputs used in the fair value measurements is the expected volatility assumption. A significant increase (decrease) in the expected volatility assumption could potentially result in a higher (lower) fair value measurement.
Long-Lived Assets
We review property and equipment, long-term prepayments and intangible assets, excluding goodwill, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value. We have made no material adjustments to our long-lived assets in any of the years/periods presented.
Cash
The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of the related assets, which ranges from three to seven years.
Leasehold improvements, if any, are amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.
Research and Development
Research and development is expensed as incurred.
Advertising Costs
We expense advertising costs in the period in which they are incurred. For the nine months ended September 30, 2013 and 2012, advertising expenses totaled approximately $0 and $0 respectively.
Share Based Payment Arrangements
Generally, all forms of share-based payments, including stock option grants warrants and restricted stock grants are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments are recorded in general and administrative expense in the consolidated statement of operations. We have applied fair value accounting and the related provisions of Accounting Standards Codification (“ASC”) 718 for all share based payment awards. The fair value of share-based payments is recognized ratably over the stated vesting period. In the event of termination, we will cease to recognize compensation expense.
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.
Original Issue Discount
For certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Debt Issue Costs and Debt Discount
The Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Income Tax Provision
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Income and Comprehensive Income in the period that includes the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the nine months ended September 30, 2013 and 2012. The Company believes that all prior periods are still subject to examination by tax authorities.
Net 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 dilutive potential of 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.
Since the Company reflected a net loss for the nine months ended September 30, 2013 and 2012, the effect of considering any common stock equivalents, if exercisable, would have been anti-dilutive. A separate computation of diluted loss per share is not presented.
Common stock equivalents are as follows:
Recently Issued Accounting Pronouncements
In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, an amendment to FASB ASC Topic 220. The update requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This ASU is effective prospectively for the Company fiscal years, and interim periods within those years beginning after December 15, 2012. Adoption of this ASU did not have a material effect on the Company’s financial position, results of operations or cash flows.
In January 2013, the FASB issued ASU 2013-01, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements 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 the 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 International Financial Reporting Standards (IFRS). ASU 2013-01 is effective for all entities (public and private) for the fiscal years beginning on or after January 1, 2013, and interim periods within. Retrospective application is required for any period presented that begins before the entity’s initial application of the new requirements. The adoption of this ASU did not have a material effect on the Company’s financial position, results of operations or cash flows.
Other Recently Issued, but Not Yet Effective
Accounting Pronouncements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements. |
Going Concern
Going Concern
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9 Months Ended |
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Sep. 30, 2013
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Going Concern | |
Going Concern |
Note 2 – Going Concern
As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss of $1,395,101 and net cash used in operations of $271,973 for the nine months ended September 30, 2013. The Company has a deficit accumulated during the development stage of $2,969,631 and a working capital deficit of $4,339,423 at September 30, 2013. The Company does not yet have a history of financial stability. Historically, the principal source of liquidity has been the issuance of debt and equity securities. 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 on management’s plans, which include further implementation of its business plan and continuing to raise funds through debt and/or equity raises.
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. |
Property and Equipment
Property and Equipment
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Sep. 30, 2013
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment |
Note 3 – Property and Equipment
Depreciation expense for the nine months ended September 30, 2013 and 2012 and for the period from April 8, 2010 (inception) through September 30, 2013 was $2,173, $2,173 and $7,081, respectively. |
Due From Investment Bank
Due From Investment Bank
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9 Months Ended |
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Sep. 30, 2013
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Due From Investment Bank | |
Due From Investment Bank |
Note 4 – Due From Investment Bank
In April 2011, the Company engaged a Costa Rican investment bank, as its exclusive agent to advise the Company on the structuring of corporate openness and equity placement. During 2012 the Company entered into a dispute with the investment bank. The Company contends that the investment bank retained more than the fee allowed by the contract on the sale of equity securities (the “Closings”) that took place during the period April 2011 through December 2011. At September 30, 2013 and December 31, 2012, the Company believes they are owed $195,400 and $195,400, respectively, from the investment bank relating to excess fees withheld from the Closings. Due to the uncertainty surrounding the recoverability of the funds from the investment bank the Company has recorded a full allowance against the receivable. This amount has been recorded in additional paid in capital in the statement of stockholders equity. If the company wins the dispute and actually recovers the funds it will be recorded to additional paid in capital. |
Notes Payable
Notes Payable
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Sep. 30, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable |
Note 5 – Notes Payable
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Liability to be Settled in Stock
Liability to be Settled in Stock
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Sep. 30, 2013
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Liability To Be Settled In Stock | |||||||
Liability to be Settled in Stock |
Note 6 – Liability to be Settled in Stock
In March of 2008, the Company entered into an asset purchase agreement to purchase certain tangible and intangible assets for $65,000 in STLK common stock. As of September 30, 2013 and December 31, 2012, a liability totaling $43,333 and $0 respectively, exists related to these unissued shares. This liability was acquired in the merger.
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 will be paid $10,000 per month for 6 months in the form of free trading shares. The share total is computed as follows:
At September 30, 2013, the Company had recorded the entire $60,000, yet remains outstanding and available to be converted. This liability was acquired in the merger. |
Convertible Notes Payable
Convertible Notes Payable
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Notes Payable |
Note 7 – Convertible Notes Payable
At September 30, 2013 and December 31, 2012, convertible debt consisted of the following:
The debt holders are entitled, at their option, to convert all or part of the principal and accrued interest into shares of the Company’s common stock at conversion prices and terms discussed above. The Company classifies embedded conversion features in these notes as a derivative liability due to the discount to market feature, which could require a settlement in shares that cannot be determined until such conversions occur. The Company may not be able to determine if sufficient authorized shares exist in connection with contemplated conversions, which requires liability classification.
Convertible debt consisted of the following activity and terms:
During the nine months ended September 30, 2013 and 2012, the Company recorded debt discounts totaling $435,000 and $0, respectively.
The debt discounts pertain to convertible debt that contains embedded conversion options that are required to be bifurcated and reported at fair value.
The Company amortized $246,229 and $0 during the nine months ended September 30, 2013 and year ended September 30, 2012, respectively, to interest expense.
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Derivative Liabilities
Derivative Liabilities
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Sep. 30, 2013
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Derivative Liability [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Liabilities |
Note 8 – Derivative Liabilities
The Company records debt discount to the extent of the gross proceeds raised, any excess amount is recorded as a derivative expense. The Company recorded a derivative expense of $727,442 and $0 for the nine months ended September 30, 2013 and 2012.
The Company uses the Black-Scholes model to estimate the fair value of its derivative liabilities at the end of each quarterly reporting period. The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2013:
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Related Party Transactions
Related Party Transactions
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions |
Note 9 – Related Party Transactions
As of September 30, 2013 and December 31, 2012 the Company had accounts payable due to board members and companies owned by board members of $246,665 and $200,759. During the period April 8, 2010 through September 30, 2013, management and board members have been loaning money to the Company, paying expenses on behalf of the Company and deferring consulting fees.
The Company incurred consulting expenses to a company that is owned by a board member, and for the period ending September 30, 2013 and September 30, 2012 the amounts were $112,500 and $112,500 respectively.
The Company executed various promissory notes to related parties since inception. No new notes were issued for the period ending September 30, 2013.
The notes had the following range of terms:
During the period/year ended September 30, 2013 and December 31,2012, the Company repaid $2,925 and $7,933 respectively leaving a balance of $73,949 and $76,874 respectively.
The Company is currently in default on several of these notes.
Debt under these obligations at September 30, 2013 and December 31, 2012 is as follows:
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Retirement Plan
Retirement Plan
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9 Months Ended |
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Sep. 30, 2013
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Retirement Plan | |
Retirement Plan |
Note 10 – Retirement Plan
401(k)
The Company provided a 401(k) employee savings and retirement plan (the “Plan”). The Plan covered all employees who have completed six months of consecutive service with 160 hours monthly or have completed one year of service. The Company matched 100 percent of a participant’s elective deferrals that do not exceed 3 percent of the participant’s compensation, plus 50 percent of the participant’s elective deferrals that exceed 3 percent of the participant’s compensation, but do not exceed 5 percent of the participant’s compensation. Total contributions by the Company to the Plan were $0, $4,650, and $12,349 for the nine months ended September 30, 2013 and 2012 and for the period April 8, 2010 (inception) through September 30, 2013, respectively. |
Foreign Operations
Foreign Operations
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9 Months Ended |
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Sep. 30, 2013
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Foreign Currency [Abstract] | |
Foreign Operations |
Note 11 – 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.
The consolidated financial statements of the Company’s subsidiary, located in Costa Rica, are translated from colones, its functional currently, into U.S. dollars, the Company’s functional currency. All foreign currency assets and liabilities are translated at the exchange rate in effect at the reporting date, and all revenue and expenses are translated at the month-end exchange rate. The effects of translating the financial statements of the foreign subsidiary into U.S. dollars are reported as a cumulative translation adjustment, a separate component of the accumulated other comprehensive income (loss) in the consolidated statements of the shareholders’ equity (deficit). Foreign currency transaction gains/losses are reported as a component of other income – net in the consolidated statements of operations. The amount of foreign currency transaction gains and losses and translation adjustments were de minimis during the period ended September 30, 2013. |
Stockholders Deficit
Stockholders Deficit
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Sep. 30, 2013
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders Deficit |
Note 12 – Stockholders Deficit
Common Stock has 2,600,000,000 shares authorized at $0.001 par value. Subject to the foregoing provisions, dividends may be declared on the Common Stock, and each Share of Common Stock shall entitle the holder thereof to one vote in all proceedings in which action shall be taken by stockholders of the Corporation.
Class A Preferred –
Series A Convertible Preferred Stock has 1,800,000 shares authorized and issued, with a $1.00 par value, with each share of the Series B Preferred Stock to have the following rights and privileges:
Class B Preferred –
Series B Preferred Stock has 1,400,000,000 shares authorized and issued, with a $0.001 par value, with each share of the Series B Preferred Stock to have the following rights and privileges:
Class C Preferred –
Series C Preferred Stock has 125,000 shares authorized, with a $0.001 par value, with each share of the Series C Preferred Stock to have the following rights and privileges:
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Commitments and Contingencies
Commitments and Contingencies
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
Note 13 – Commitments and Contingencies
Agreements with Placement Agents and Finders
In April 2011, the Company engaged, a Costa Rican investment bank, as its exclusive agent to advise the Company on the structuring of corporate openness and equity placement with the following terms:
A former principal member of the board of directors of the Company is an employee of the investment bank.
During the year ended December 31, 2011 the Company paid the investment bank fees of $262,000. The Company is disputing $195,400 of these fees. (See Note 4)
Operating Leases
On November 1, 2010, the Company began leasing office space in Colorado Springs. The lease has a three year term. Monthly rent begins at $568 per month and increases over the term of the lease. The Company is also responsible for paying a share of the landlord’s property operating costs. Lease was through 11/14/13 and has been renewed for an additional three years.
On February 19, 2011, the Company began leasing mixed use space in Costa Rica. The lease has a three year term. monthly rent begins at $1,800 per month and increases over the term of the lease. This lease expires in February 2014.
On October 1, 2011, the Company began a virtual office lease. The lease had a one year term and renews automatically. Monthly rent begins at $199 per month and increases over the term of the lease.
Rent expense amounted to $33,480, and $29,534 for the period ending September 30, 2013 and September 30, 2012, respectively and was included in selling, general and administrative expenses in the consolidated statements of operations.
Future minimum lease payments under these operating leases are approximately as follows:
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 litigation with Costa Rican Investment Bank, as discussed in Note 4, 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. |
Subsequent Events
Subsequent Events
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9 Months Ended |
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Sep. 30, 2013
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Subsequent Events [Abstract] | |
Subsequent Events |
Note 14 – Subsequent Events
The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were available to be issued to determine if they must be reported. The Management of the Company determined that there are certain reportable subsequent events to be disclosed as follows.
On October 9, 2013, the Company signed an agreement with Iconic Holdings LLC for an Equity Line of Credit of up to five million dollars ($5,000,000). This line of credit will only be available upon a subsequent registration of the Company’s shares with the SEC, in which the Company signed a convertible note with a $27,500 value to cover the cost associated with the subsequent filings. |