UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2005
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:
NO BORDERS, INC.
(Exact name of Company as specified in its charter)
Nevada
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Market Street Venice California 90291
-----------------------------------------
(Address of principal executive offices including zip code)
310-450-3257
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(Company's telephone number, including area code)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [x]
As of June 30, 2005 there were 60,139,525 outstanding shares of the Company's
Common Stock, $0.001 par value.
1
PART 1. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS AND NOTES
NO BORDERS, INC. AND SUBSIDIARY
(Formerly) INTERCOMMUNITY FINANCING CORP. dba NO BORDERS
(A Development Stage Company)
BALANCE SHEETS
June 30, 2005 and December 31, 2004
ASSETS
2005 2004
CURRENT ASSETS
Cash $ 17,564 $ -
----------- -----------
TOTAL CURRENT ASSETS 17,564 -
FIXED ASSETS
Computers 35,197 35,197
Leasehold improvements 4,200 4,200
----------- -----------
39,397 39,397
Less accumulated depreciation (14,574) (8,708)
----------- -----------
24,823 30,689
OTHER ASSETS
Goodwill 136,823 -
Deposits 16,200 64,800
License 25,000 25,000
----------- -----------
178,023 89,800
$ 220,410 $ 120,489
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdrafts $ - $ 17,205
Notes payable 60,000 200,000
Accounts payable 268,276 17,276
Accrued interest - -
Stockholder loans 501,665 -
----------- -----------
TOTAL CURRENT LIABILITIES 829,941 234,481
STOCKHOLDERS' EQUITY
Common stock, 200,000,000 shares
authorized, $.001 par value,
and 60,539,125 and 48,886,686 shares outstanding
at June 30, 2005 and December 31, 2004 60,539 48,887
Additional contributed capital 5,982,074 3,639,826
Retained deficit accumulated during
development stage (6,612,144) (3,802,705)
Subscriptions receivable (40,000) -
----------- -----------
(609,531) (113,992)
$ 220,410 $ 120,489
=========== ===========
See accompanying notes and accountant's report.
2
NO BORDERS, INC. AND SUBSIDIARY
(Formerly) INTERCOMMUNITY FINANCING CORP. dba NO BORDERS
(A Development Stage Company)
STATEMENT OF INCOME
For the Quarter ended and Year to Date Ended June 30, 2005 and the Year
Ended December 31, 2004, and for the period beginning October 25, 2002
(Inception), through June 30, 2005
Quarter Ending Year to Date Year to Date
June 30, June 30, December 31, Since
2005 2005 2004 Inception
REVENUES $ - $ - $ - $ -
EXPENSES
Marketing and sales - - 12,462 12,462
General and administrative 811,916 2,809,439 3,452,583 6,599,682
---------------- ------------ ------------- -------------
811,916 2,809,439 3,465,045 6,599,682
---------------- ------------ ------------- -------------
OPERATING LOSS (811,916) (2,809,439) (3,465,045) (6,599,682)
TAX PROVISIONS - - - -
---------------- ------------ ------------- -------------
NET LOSS $ (811,916) $ (2,809,439) $ (3,465,045) $ (6,599,682)
================ ============ ============= =============
Loss per shares ($0.01) ($0.05)
Average shares outstanding 55,862,741 53,364,151
See accompanying notes and accountant's report.
3
NO BORDERS, INC. AND SUBSIDIARY
(Formerly) INTERCOMMUNITY FINANCING CORP. dba NO BORDERS
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
From October 25, 2002 (Inception) through June 30, 2005
Retained Deficit
Accumulated
Additional During
Common Stock Contributed Development Subscriptions
Shares Amount Capital Stage Receivable Total
----------- ---------- ----------- ------------- ----------- ------------
October 25, 2002
Initial shares issued 525 $ - $ - $ - $ - $ -
Net loss - - - - - -
December 31, 2002 525 - - - - -
Capital contributed - 10,000 - - - 10,000
Net loss - - - (337,660) - (337,660)
December 31, 2003 525 10,000 - (337,660) - (327,660)
Notes payable converted to stock and
Shares sold 475 2,418,998 - - - 2,418,998
Merger with American Eagle Corporation (1,000) (2,428,998) 10,000 - - (2,418,998)
44,871,686 44,872 2,374,126 - - 2,418,998
Shares for services 4,015,000 4,015 1,255,700 - - 1,259,715
Net loss - - - (3,465,045) - (3,465,045)
December 31, 2004 48,886,686 48,887 3,639,826 (3,802,705) - (113,992)
Shares sold 4,429,231 4,429 355,571 - (40,000) 320,000
Shares issued for services 6,749,208 6,749 1,939,751 - - 1,946,500
Shares for acquisition 474,000 474 46,926 - - 47,400
Net loss - - - (2,809,439) - (2,809,439)
June 30, 2005 60,539,125 $ 60,539 $5,982,074 $ (6,612,144) $ (40,000) $ (609,531)
See accompanying notes and accountant's report.
4
NO BORDERS, INC. AND SUBSIDIARY
(Formerly) INTERCOMMUNITY FINANCING CORP. dba NO BORDERS
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Quarter ended and Year to Date Ended June 30, 2005 and the Year
Ended December 31, 2004, and for the period beginning October 25, 2002
(Inception), through June 30, 2005
Quarter Ending Year to Date Year to Date
June 30, June 30, December 31, Since
2005 2005 2004 Inception
-------------- ------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (811,916) $ (2,809,439) $ (3,465,045) $ (6,612,144)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities
Depreciation 2,934 5,866 8,708 14,574
Shares issued for services 367,051 1,946,500 1,259,715 3,206,215
Write off of software development costs - - 35,650 35,650
Changes in Current assets and liabilities:
Increase in Accounts payable 85,924 161,577 11,406 178,853
Increase in Accrued interest - - (3,030) -
Decrease in deposits 32,400 48,600 - 48,600
-------------- ------------- ------------- -------------
NET CASH USED BY
OPERATING ACTIVITIES (323,607) (646,896) (2,152,596) (3,128,252)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed assets - - (29,358) (39,397)
Increase in Deposits - - (64,800) (64,800)
Purchase of License - - (25,000) (25,000)
Purchase of Software development costs - - - (35,650)
-------------- ------------- ------------- -------------
NET CASH USED BY
INVESTING ACTIVITIES - - (119,158) (164,847)
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder loan borrowings 8,165 301,665 - 454,083
Shareholder loan payments - - (32,989) (152,418)
Proceeds from Notes payable 10,000 60,000 200,000 640,000
Proceeds from Stock sales 360,000 360,000 2,038,998 2,398,998
Subscriptions receivable (40,000) (40,000) (40,000)
Capital contributed - - - 10,000
NET CASH PROVIDED BY
FINANCING ACTIVITIES 338,165 681,665 2,206,009 3,310,663
NET INCREASE IN CASH 14,558 34,769 (65,745) 17,564
CASH AT BEGINNING OF PERIOD 3,006 (17,205) 48,540 -
------------ ------------ ------------ ------------
CASH AT END OF PERIOD $ 17,564 $ 17,564 $ (17,205) $ 17,564
============ ============ ============ ============
See accompanying notes and accountant's report.
5
NOTES TO FINANCIAL STATEMENTS NO BORDERS, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
The Company was incorporated on October 25, 2002 as Intercommunity Financing
Corp. in California. Beginning in 2003 the Company adopted the dba of No
Borders. On October 21, 2004 a Share Exchange Agreement was entered into between
the American Eagle Manufacturing Company and Intercommunity Financing Corp dba
No Borders, Inc. The agreement was deemed effective as of September 30, 2004,
wherein American Eagle Manufacturing Company agreed to issue 40,000,000 shares
of its restricted common stock to the shareholders of the Company in exchange
for one hundred percent of the issued and outstanding common stock of the
Company. On October 21, 2004 the American Eagle Manufacturing Company changed
its name to No Borders, Inc.
DESCRIPTION OF BUSINESS
The Company is presently focused on the delivery of significantly lower cost
remittance transfers and long distance telephony and additional financial
services and products through a unified Stored Value Card platform issued
through a network of affiliated agents to individual card-holders in both
underserved U.S. migrant-receiving as well as non-U.S. rural migrant-sending
communities that need to stay connected.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
short-term debt securities to be cash equivalents.
Cash paid during the years for:
2004
Interest $ -0-
Income taxes $ -0-
FIXED ASSETS
Property and equipment are carried at cost. Maintenance, repairs and renewals
are expensed as incurred. Depreciation is computed on the straight line basis
over their estimated useful life of 3 years for computers and 39 years for
leasehold improvements.
6
NO BORDERS, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
SOFTWARE DEVELOPMENT COSTS
The Company has expended $35,650 in software development costs through December
31, 2003 for internal use software. The software being developed is to
facilitate the unified Stored Value Card platform. The software is entirely
proprietary. The Company expended an additional $403,241 in development cost in
2004. In April 2005 the management reviewed the software development to date and
determined while some of the code will be salvaged the project has been
abandoned as written. Accordingly all software development cost were expensed in
2004.
LICENSES
On February 27, 2004, the Company entered into a License agreement to use
"Balance" Mural Images for a five year period and the right to renew for an
additional five years with notification and payment of an additional fee. This
agreement will be amortized over five years using the straight line basis. The
balance at June 30, 2005 and December 31, 2004 was $25,000.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statements of
Financial Accounting Standards No. 109 "Accounting for Income Taxes", which
requires a company to recognize deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in a
company's financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement carrying amounts and tax basis of assets and liabilities
using enacted tax rates. The Company has no differences between book and tax
accounting. At June 30, 2005 the Company had a net operating loss carry forward
of approximately $6,000,000.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
7
NO BORDERS, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Development Stage
The Company is classified as a development stage entity since it devotes most of
its activities to establishing business and its principal activities have not
yet commenced.
NOTE 2- ACQUISITIONS
On February 15, 2005, the Company entered into a Share Exchange Agreement with
the shareholders of two dormant card service companies, to acquire 100% of the
outstanding stock of the companies for 474,000 shares of the Company's common
stock.
Assets Acquired
Goodwill and other intangibles 136,823
---------
Total $ 136,823
Liabilities Assumed
Accounts payable $ 89,423
=========
The agreement specifies that after one year from the closing date the Company's
shares shall have a market value of $800,000. If not the Company is required to
issue additional shares to increase the value of shares issued to the $800,000
value, provided that in no event shall the Company be obligated to issue more
than an additional 600,000 shares.
NOTE 3 - NOTES PAYABLE
During 2003 the Company entered into a series of Notes payable with individuals.
The notes are due December 28, 2004, and bear interest at 5% per annum. The
Notes' have conversion rights to shares of the Company's common stock. The
Notes' co-makers are the two shareholders of the Company. The holders of these
notes converted them to common stock in October 2004.
In December 2004, the Company borrowed $250,000 from three individuals. The
individuals were given 500,000 shares of Common stock valued at $.13 per share
or $65,000 as an inducement to enter this transaction. The note was for 60 days
at 12% interest. In addition a major shareholder of the Company pledged
2,000,000 shares of his stock as additional security for the loan. The loan was
not paid by the Company when due and the underlying lender, a bank, ceased the
collateral in satisfaction of the loan.
8
NO BORDERS, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 2005
NOTE 3 - NOTES PAYABLE - CONTINUED
The balance outstanding at June 30, 2005 and December 31, 2004 on this loan was
$60,000 and $200,000 respectively.
NOTE 4- COMMITMENTS
On December 15, 2004, the Company entered into a lease for office space for 3
years. The lease is for $10,800 a month and requires a $64,800 deposit.
Future minimum annual payments under the above agreement are:
2005 $ 129,600
2006 $ 129,600
2007 $ 118,800
2008 $ -0-
NOTE 5 - GOING CONCERN
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 6 - CONTINGENCIES
On October 22, 2004, the Company as American Eagle Manufacturing Company, sold
substantially all of its assets related to its custom motorcycle manufacturing
business to its former parent company, Bad Toys Holdings, Inc. As consideration
and payment for the assets, the Company, No Borders, Inc. received 1,818,182
shares of the Bad Toys Holdings, Inc. restricted common stock and the Bad Toys
Holdings, Inc. assumed all liabilities and obligations of the American Eagle
Manufacturing Company outstanding on the date of purchase.
No Borders, Inc. remains primarily liable on these obligations until paid by
Bad Toys Holding, Inc.
9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is provided to afford the reader an understanding of
the material matters of No Borders' financial condition, results of operation,
capital resources and liquidity. It should be read in conjunction with the
financial statements and notes thereto and other information appearing elsewhere
in this report.
CAUTIONARY STATEMENT. Statements contained herein that are not based on
historical fact, including without limitation, statements containing the words
"believes," "may," "will," "estimate," "continue," "anticipates," "intends,"
"expects" and words of similar import, constitute "forward-looking statements."
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results, events or developments to be
materially different from any future results, events or developments expressed
or implied by such forward-looking statements GIVEN THESE UNCERTAINTIES, READERS
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. We
disclaim any obligation to update information concerning any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements contained in this report to reflect future results, events or
developments.
BUSINESS
History
No Borders,Inc. (.the "Company"), a Nevada corporation incorporated on May 28,
1999, as Finders Keepers, Inc. ("Finders Keepers"). In December 2001, The Bauer
Partnership, Inc., a Delaware corporation ("Bauer Delaware") entered into a
reverse merger with Finders Keepers whereby Finders Keepers issued 31,030,800
shares of its common stock for 100% of the issued and outstanding shares of
Bauer Delaware. Bauer Delaware became a wholly-owned subsidiary of Finders
Keepers which changed its name to The Bauer Partnership, Inc. The Company
changed its name to Harbour Front Holdings, Inc. in January 2003. On December 4,
2003, the Company acquired 89.3% of the issued and outstanding shares of Eagle
Corp. in exchange for 23,500,000 shares of the Company's common stock and on
January 27, 2003 Harbour Front Holdings, Inc. changed its name to American Eagle
Manufacturing company. Following that acquisition the Company had 27,290,399
shares of its common stock outstanding. On August 9, 2004 the Company's majority
shareholders sold 72.5% of the outstanding common stock of the Company to Bad
Toys, Inc. ("Bad Toys") and a change in control occurred. Bad Toys maintains its
headquarters in Kingsport, Tennessee and is the successor to a motorcycle
business, which was founded by one of its major shareholders, Larry N. Lunan.
Subsequent to the sale of the Company's stock to Bad Toys (1) senior management
of Bad Toys took control of the former Board of Directors of the Company, and
(2) on August 17, 2004 the Company performed a 1 for 10 reverse stock split of
the common stock of the Company which included a corresponding 1:10 reverse
split of Company's authorized shares of common stock, and (3) On October 22,
2004, the Company sold all of its assets to Bad Toys Holdings, Inc., a Nevada
corporation (the "Buyer"). As consideration and payment for the assets, the
Company was to receive 1,818,182 shares of the Buyer's restricted common stock
and the Company agreed to distribute the Shares pro rata to its shareholders of
record as of September 15, 2004. Bad Toys Holdings assumed all liabilities and
obligations of the Company as of the date of the asset purchase, including any
and all additional consideration, and agreed to indemnify and hold Company and
the shareholders of relieving Company .
Reverse Merger Of No Borders
A Share Exchange Agreement between the Company and Intercommunity Financing
Corp, dated October 21, 2004 (the "Share Exchange Agreement") was concluded, and
deemed effective as of September 30, 2004, wherein the Company agreed to issue
40,000,000 shares of its restricted common stock to the shareholders of
Intercommunity Financing Corp in exchangefor one hundred percent of the issued
and outstanding common stock of Inercommunity Financing Corp. On October 21,
2004 the Company changed its name to No Borders, Inc. Following the completion
of the share exchange agreement, Bad Toys Holdings, Inc. Owned approximately
2,800,000 of the 3,600,000 issued and outstanding shares of the Company's common
stock
10
DESCRIPTION OF THE BUSINESS:
No Borders is initially focused on the delivery of significantly lower cost
remittance transfers and long distance telephony services through a unified
Stored Value Card platform issued through a Network of affiliated agents to
individual card-holders in both underserved U.S. migrant-receiving as well as
non-U.S. rural migrant-sending communities that need to stay connected.
The lower cost remittance transfer service offered is designed to facilitate the
expeditious creation and expansion of this Network of affiliated agents and
their customers using the No Borders' Stored Value Card platform. It will
provide our current and future financial and commercial partner companies with
the ability to access and deliver their vast menu of low cost products and
services to the growing transnational Latino market in a very cost efficient
manner. The No Borders mission and focus is designed to provide our affiliated
agents and cardholders with significant benefits well beyond those offered by
other providers of remittance services.
In general, No Borders is a vertically integrated company with the mission of
becoming the lowest cost provider of electronic payment mediums to the vast
unbanked, uninsured and unconnected Latin American, Asian, Indian and Caribbean
immigrant population in the U.S and the families they left back home. No
Borders' stored-value and debit card platform, together with its unique business
models, should enable the Company to provide significantly lower-cost remittance
and prepaid telephony services, as compared to its competitors, to this vast and
growing market. US remittances to Latin America are estimated to reach over $45
Billion this year and over $150 Billion worldwide, while estimated household
expenditures by Latin American immigrants in the US are estimated to exceed $450
Billion this year. The Company intends leverage these remittance business and
customer relationships to offer stored-value cards, debit cards and payroll
cards, as well as VoIP telephony and direct bill payment services, while teaming
with intended alliance partners to offer a panoply of additional products and
services, at a lower cost than now available to this market, through its stored
value and debit card platform, including life insurance, health insurance
(Mexican residents), discount health programs and low-cost mortgage, business
and personal loans. The Company is aggressively pursuing additional alliances to
add to its product and service offerings.
The No Borders recent creation of No Borders Processing LLC, a card processing
company which is 60% owned by No Borders, should facilitate the Company's
ability to reduce transaction fees applicable to usage of its stored value and
debit cards since those fees would otherwise be payable to third parties and at
retail rates. The processing operations also should provide the Company with an
ancillary and very significant source of revenue as it intends to offer its
processing services to other card providers.
To facilitate distribution of its intended products and services, No Borders
intends to affiliate with existing remittance merchants and has entered into one
agreement to acquire an existing remittance company and intends to pursue the
acquisition of a limited number of mid-sized remittance companies with their own
affiliated merchant networks. Agreements with credit unions in the U.S., Mexico,
El Salvador and Ecuador provide expanded presence for No Borders' customers to
transfer and receive funds at even a lower cost. In addition, to further
increase its market penetration opportunities, the Company has created One
Border LLC, owned 50% by No Borders, for the purpose of concluding agreements
with existing prepaid phone card distributors to purchase and distribute prepaid
debit and stored value cards through existing prepaid phone card distribution
networks.
11
THE TARGET MARKET:
Remittances from the U.S. to Latin America will exceed $45 Billion in 2005 and
$150 Billion worldwide. Household expenditures of Latin American immigrants
residing in the U.S. exceed $450 Billion. Expenditures for telephony, U.S-Mexico
will exceed $5 Billion in 2005 and for $9 Billion for telephony U.S-Latin
Amerce.
NO BORDERS' PRODUCTS AND SERVICES
In addition to remittance services and low cost telephony, No Borders intends to
offer services and products through its Platform, including:- Payroll Cards -
Direct payment of bills by cardholders through the Platform;
- Master and Visa debit cards issued by financial institutions within and
outside the US
- Low cost financial services and commercial products offered by No Borders
alliance partners and accessed through the No Borders cards and Platform,
such as life insurance, airline tickets, health insurance outside of the
US and discount medical programs in the US, mortgages, small business
loans and product purchase financing.
- Videoconferencing at merchant sites
- Card Processing Services through 60% owned subsidiary
DISTRIBUTION CHANNELS
No Borders' products and services will be distributed through the following
channels:
- Affiliations with existing remittance merchants with loyal customers
- The acquisition of or affiliation with existing licensed remittance
companies with affiliated networks of remittance merchants
- Affiliations with credit unions and micro financial institutions and
banking institutions (global)
- Affiliations with hometown associations and other community groups
comprised of immigrants from specific areas outside of the US and issuing
Affinity Cards for distribution of the constituents of these associations
and groups;
- Agreements to distribute prepaid stored value and debit cards through
current distributors of pre-paid telephone cards to retail outlets
(global)
- Agreements with Employers to distribute provide payroll cards to their
employees (global);
SOURCES OF REVENUE:
1. Remittance transactions through existing merchants affiliating with No
Borders
2. Remittance transactions through merchants affiliated with licensed
remittance companies either acquired by No Borders or which are obtain
licenses to deploy the No Borders Platform.
3. Remittance transactions by holders of stored value cards distributed via
prepaid phone card distributors and through other licensees of the No
Borders' Platform;
4. VoIP telephone minutes sold
5. Other telephone minutes sold via prepaid phone cards integrated with
stored value and debit cards;
6. Processing fees paid for each transaction attributed to prepaid debit
cards and stored value cards managed through the No Borders' Platform;
7. Processing fees paid for each transaction involving all other debit cards
issued by banks using the No Borders processing division
8. Fees derived from the sale of all other services and products via the
stored value and debit cards managed through the No Borders' Platform;
9. Transaction fees (in addition to processing fees) relating to use of
prepaid debit cards distributed at No Borders merchant sites and at retail
outlets via distribution agreements with prepaid phone card distributors;
10. The distribution and use of payroll cards;
11. Sponsorship and endorsement fees;
12
RESULTS OF OPERATIONS
REVENUES
For the year ending December 31, 2004 and for the quarterly period ending June
30, 2005, the Company had $0 in revenues. For the period from January 2003
through December 31, 2003, Intercommunity Financing Corp., d/b/a No Borders
("IFC") the entity acquired by Company through the reverse merger into American
Eagle Manufacturing Company, had no revenue
COSTS AND EXPENSES.
. For the quarter ended June 30, 2005, the Company's costs and expenses were
$811.916 inclusive of $367,051in costs and expenses based on shares issued for
services, as compared to $3,465,045 for the period January 1, 2004 through
December 31, 2004, which include $1,259,715 based on shares issued for services
during 2004
LOSS FROM OPERATIONS
The Company had a loss from operations of $811,916 for the quarter ended June,
30, 2005, which included $367,051 in costs based on shares issued for services,
as compared to $3,465,045 for the year ended December 31, 2004
NET LOSS PER SHARE
The Company had a net loss per share of $.08 for the year ended December 31,
2004 and .$.01 for the quarter ended June 30, 2005 based on a average of
55,862,741 shares issued (a portion of which were not issued as of June 30, 2005
but were contractually due to be issued during the calendar quarter ending June
30,2005)....
LIQUIDITY AND CAPITAL RESOURCES
During 2004, the Company raised $2,038,000 from the issuance of 12,250,000
shares of stock pursuant to conversions of loans. During the quarter ended March
31, 2005, the Company raised a total of $404,000 in the form of loans to the
Company from Robert M Rosenfeld in the amount of $309,000 , loan to the company
in the amount of $10,000 from James Tierney, loans to the Company in the sum of
$50,000 which were secured by shares of stock issued previously to Robert M
Rosenfeld, and in the form sale of stock in the amount of $35,000.. During the
quarter ended June 30, 2005, the Company raised a total of $370,000 in sales of
its securities and in loans provided the Company.
For the year ended December 31, 2004 and for the first six months ending June
30, 2005, the Company produced $0 in revenues. As a result, the Company will
require additional working capital to rollout its business operations until the
Company achieves a level of revenues adequate to generate sufficient cash flows
from operations or obtains additional financing necessary to support its working
capital requirement. The Company estimates that it requires a minimum of
$1,500,000 during the next six months in order to cover its projected costs of
operations and development during that same period. Management believes that
these sums will be obtained by generating revenue, commencing in October, 2005,
and by the sale of securities via a private placement or placements. The Company
had estimated that it would generate revenue from its operations in excess of
$1,000,000 by the end of the second quarter of 2005, but this would have
required more capital than it had been able to obtain so as to launch its
services and thus its launch of operations was delayed. The Company now
estimates that it will commence to generate revenue from operations in
mid-September 2006 (in addition to nominal revenue generated from its pilot
operations which commenced in July 2005) and that it will reach break-even by
March 2006.
As of June 30, 2005, the Company's assets equaled $220,410 as compared to
$120,489 as of December 31, 2004 .
13
RISK FACTORS
SECURING REMITTANCE AGENTS
The Company's performance depends upon its ability to secure remittance agents
and convert them to use the NB SVC platform There is no assurance that the
Company can secure the volume of agents so as to create a viable network of
customers and cardholders.
WORKING CAPITAL REQUIREMENTS
The successful operation of the Company depends to a substantial extent on the
Company's ability to finance is initial operations so as to secure a base of
agents and customers. The Company has done extensive research and exploration
relating to the market but there can be no assurance that the revenues generated
by the initial intended activities will meet the requirements of Company's
minimum " requirements.
INDUSTRY COMPETITION
The Company will encounter competition from remittance companies, financial
institutions and telephone companies which are already offering, or will offer
in the future, the same or similar services as those proposed to be offered by
the Company, albeit at significantly greater cost. Some competitors of the
Company have greater financial resources and more experience in the area
Management believes the Company's platform, pricing models and delivery
mechanisms are competitive in the current market. Nonetheless, there can be no
assurance that the Company's offerings will be marketed successfully, or once
successful, will continue to be marketed successfully. Moreover, there can be no
assurance that the Company's solutions will be able to compete on a
technological or cost basis with other solutions which may become available in
the future. Entities may develop platforms that are competitive with or superior
to the Company's solutions or which can be marketed more effectively.
IF THE COMPANY DOES NOT ADAPT TO RAPID TECHNOLOGICAL CHANGE, THE
BUSINESS MAY FAIL.
NO Borders success depends on its ability to develop new and enhanced services,
and related products that meet changing customer needs. The market however, is
characterized by rapidly changing technology, evolving industry standards,
emerging competition and frequent new and enhanced software, service and related
product introductions. In addition, the software market is subject to rapid and
substantial technological change. To remain successful, No Borders must respond
to new developments in hardware and semiconductor technology, operating systems,
programming technology and computer capabilities. In many instances, new and
enhanced services, products and technologies are in the emerging stages of
development and marketing, and are subject to the risks inherent in the
development and marketing of new software, services and products. The Company
may not successfully identify new service opportunities, and develop and bring
new and enhanced services and related products to market in a timely manner.
If THE COMPANY'S SOFTWARE FAILS, AND IT NEEDS TO REPAIR OR REPLACE IT,
COSTS COULD INCREASE.
No Borders stored value card platform could contain errors or "bugs" that could
adversely affect the performance of services. Despite the existence of various
security precautions, the computer infrastructure may also be vulnerable to
viruses or similar disruptive problems caused by the Company's customers or
third parties gaining access to the No Borders processing system. If the
software fails, and thus the Company needs to replace or repair it, No Borders
services could be delayed and costs could increase.
IF THE COMPANY DOES NOT MANAGE ITS GROWTH, IT MAY NOT ACHIEVE OR
SUSTAIN PROFITABILITY.
No Borders may experience a period of rapid growth that could place a
significant strain on resources. In order to manage growth successfully, No
Borders will have to continue to improve the Company's operational, management
and financial systems and expand its work force. A significant increase in No
Borders customer base, as anticipated, necessitates the hiring of a significant
number of additional personnel, qualified candidates for which, at the time
needed, may be in short supply. In addition, the expansion and adaptation of the
Company's computer and administrative infrastructure will require substantial
operational, management and financial resources. Although No Borders believes
that its current infrastructure is adequate to meet the needs of increased
customers and customer demand in the foreseeable future, the Company may not be
able to expand and adapt its personnel requirements and its infrastructure to
meet additional demand on a timely basis, at a commercially reasonable cost, or
at all. If management is unable to manage growth effectively, hire needed
personnel, and improve its operational and management, and financial systems and
controls, the Company may not attain or sustain profitability.
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IF NO BORDERS DOES NOT MANAGE ITS CREDIT RISKS RELATED TO ITS REMITTANCE
TRANSACTIONS AND MERCHANT ACCOUNTS, IT MAY INCUR SIGNIFICANT LOSSES.
No Borders shall rely in part on the Federal Reserve's ACH system for electronic
fund transfers. The Company shall rely on different networks for the settlement
of payments through our stored value card platform. No Borders shall also rely
on its affiliated remittance merchants to collect and deposit funds collected.
And the Company shall rely on different networks for the settlement of
remittance payments through the No Borders stored value card platform on behalf
of merchant customers. In the use of these established paymentclearance systems,
we generally, in the last analysis. bear the credit risks arising from stop
payment orders, closed accounts, unauthorized use, disputes, customer charge
backs, theft or fraud. Moreover, No Borders assumes the credit risk of merchant
or remittance agent dispute, fraud, insolvency or bankruptcy in the event we
attempt to recover funds related to such transactions from our remittance
agents, merchants and customers. No Borders utilizes a number of systems and
procedures to manage and limit credit risks, but if these actions are not
successful in managing such risks, the Company may incur significant losses.
THE ELECTRONIC COMMERCE MARKET IS RELATIVELY NEW AND IF IT DOES NOT GROW, WE MAY
NOT BE ABLE TO SELL SUFFICIENT SERVICES TO MAKE OUR BUSINESS VIABLE.
The electronic commerce market is a relatively new and growing service industry.
If the electronic commerce market fails to grow or grows slower than
anticipated, or if the Company, despite an investment of significant
resources,is unable to adapt to meet changing customer requirements or
technological changes in this emerging market, or if the Company's services and
related products do not maintain a proportionate degree of acceptance in this
growing market, No Borders business may not grow and could even fail.
Additionally, the security and privacy concerns of existing and potential
customers may inhibit the growth of the electronic commerce market in general,
and the No Borders intended customer base and revenues, in particular. Similar
to the emergence of the credit card and automatic teller machine, or ATM,
industries, No Borders and other organizations serving the electronic commerce
market must educate users that electronic transactions use encryption technology
and other electronic security measures that make electronic transactions more
secure than paper-based transactions.
CHANGES IN REGULATION OF ELECTRONIC COMMERCE AND RELATED FINANCIAL SERVICES
INDUSTRIES COULD INCREASE OUR COSTS AND LIMIT OUR BUSINESS OPPORTUNITIES.
No Borders believes that it is not required to be licensed by the Office of the
Comptroller of the Currency, the Federal Reserve Board, or other federal or
state agencies that regulate or monitor banks. It is possible that a federal or
state agency will attempt to regulate providers of electronic commerce services,
which could impede the Company's ability to do business in the regulator's
jurisdiction. The Company is subject to various licensing laws and regulations
relating to remittance transactions in certain States of the United States, and
to the extent the Company does not obtain such licenses directly or via
partnerships or acquisitions or affiliations with licensed remittance companies
or banking institutions, the Company's ability to conduct remittance
transactions would be impeded in those States. Given the expansion of the
electronic commerce market, the Federal Reserve Board might revise Regulation E
or adopt new rules for electronic funds affecting users other than consumers.
Because of growth in the electronic commerce market, Congress has held hearings
on whether to regulate providers of services and transactions in the electronic
commerce market. It is possible that Congress or individual states could enact
laws regulating the electronic commerce market. If enacted, such laws, rules and
regulations could be imposed on the Company's business and industry
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ADDITIONAL FINANCING IS REQUIRED
The conduct of the Company's business requires availability of additional funds.
The Company may encounter difficulty in obtaining these funds. Moreover, even if
financing were to become available, there is no assurance that it would be upon
terms acceptable to the Company or favorable to its existing shareholders.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
General. The Officers and Directors of the Company are accountable to the
Company as fiduciaries and such Officers and Directors are required to exercise
good faith and integrity in managing the Company's affairs and policies. Each
investor or his or her duly authorized representative may inspect the books and
records of the Company at any time during normal business hours. An investor may
be able to bring a class action or on behalf of himself or herself and all other
similarly situated investors who have suffered losses in connection with the
purchase of the Common Stock due to a breach of fiduciary duty by an Officer or
Director of the Company in connection with such sale or purchase, including the
misapplication by any such Officer or Director of the proceeds from the sale of
these securities, and may be able to recover such losses from the Company.
Indemnification. Indemnification may be permitted by a company to directors,
officers or controlling persons pursuant to the General Corporation Law of the
State of Nevada and the Company's By-laws. Indemnification may include expenses,
such as attorney's fees, and, in certain circumstances, judgments, fines and
settlement amounts actually paid or incurred in connection with actual or
threatened actions, suits or proceedings involving such person and arising from
his or her relationship with the Company except in certain circumstances where a
person is adjudged to be guilty of gross negligence or willful misconduct unless
a court determines that such indemnification is fair and reasonable under the
circumstances.
PRODUCT RESEARCH AND DEVELOPMENT:
During the next 12 months the Company intends to scale its stored value and
debit card platform to include servicing and interfacing to facilitate the mass
marketing of pre-paid cards at retail outlets, to interface with partnership
affinity cards, to interface with vendors of services and products and to
interface with merchant accounts and banking institutions. . It is anticipated
that this development will cost $150,000 during the next ten months...
.
EMPLOYEES.
The company ,as of June 30, 2005, had 10 employees and consultants. Company's
CEO, and President have not received any salaries.. During the second quarter of
2005, the Company intends to convert prior consulting agreements to employment
agreements with management personnel, including the President, the Acting CEO
and Executive Vice President, the General Manager and Executive Vice President
of Corporate Strategy, the VP of Sales, the VP of Business and the Company
intends to engage a CEO/COO to replace the Acting CEO, a Chief Financial
Officer, a Controller and a VP of Marketing, as well operational, sales and
marketing staff personnel.
DESCRIPTION OF PROPERTY
Company owns no real properties and has leased premises at a total cost of
$4,500 per month. In December, Company moved into its offices in Venice
California, with space rented approximately 4,500 square feet at a cost of
$10,800 per month commencing in February, 2005.
Description of Products and Services: No Borders has developed a stored value
card platform which allows for the loading of funds into a closed network system
managed by a treasury management system, and further allow the transfer of funds
from that card to other cards, all in real time, with security and in compliance
with applicable Federal and State regulations. The card may hold funds and
access point of sale devices at merchant sites compatible with the No Borders
software.. Moreover the developed system will allow for transferring funds from
the closed system to a so-called open network, such as the Visa and MasterCard
networks. The closed network system allows for lower cost transaction fees when
loading, transferring or withdrawing funds, and does not mandate any rate of
exchange surcharges when transferring funds from the U.S. to other countries. In
addition, design for the stored value and debit card platform to interface with
various vendors and others providing services and products has been developed by
Company and as deployed, holders of the No Borders stored value cards may pay
for services and products offered by specified third party vendors.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
These legal proceedings were described in prior filings by American Eagle
Motorcycle Company prior to the reverse merger of No Borders. Pursuant to the
provisions of the Exchange Agreement, Badtoys Holdings Inc has agreed to assume
all of these potential liabilities and claims which had been asserted against
subsidiary or subsidiaries of American Eagle Manufacturing Company, such
subsidiary having been purchased by Badtoys Holdings immediately following the
reverse merger of Intercommunity Financing Corp, d/b/a No Borders into Company.
In addition, Badtoys Holdings agreed to indemnify and hold Company harmless from
and against any of such claims. The proceedings: Gregory Spak vs. American Eagle
Motorcycles filed February 27, 2003, Case No. GIN 027138 in the Superior Court
of North San Diego County. The Court denied the claim finding for American
Eagle.
Comerica Bank vs. American Eagle and American Eagle vs. Gregory Spak and A.E.
Technologies, Inc. and Fastrak Motorcycles and Hellbent Motorcycles filed suit
on June 20, 2003, Case No. Gv-818041 in the Superior Court of Santa Clara
County. Comerica Bank is seeking to recover equipment that secured a loan to
A.E. Technologies and Gregory Spak. A portion of the equipment has been received
by American Eagle and is being stored awaiting instructions to return it to
Comerica Bank.
Comerica Bank is seeking $689,335. The management of American Eagle feels it has
no liability in this case.
A.E. Technologies, Inc. and Gregory Spak vs. Aemrican Eagle Corporation, Et Al
filed November 6, 2003 Case No. 03CC00518 Superior Court of Orange County
California. Gregory Spak and A.E. Technologies, Inc. are suing to recover assets
and damages for the breach of the contract that was rescinded by American Eagle.
A.E. Technologies and Gregory Spak are seeking $15,750,000 in damages. American
Eagle Management feels that they have very little if any liability in this
matter. If the court should find American Eagle liable in either of these cases
it could require American Eagle to issue more shares of stock to pay the
damages. The Superior Court has ordered all action in this case stayed until the
case filed in Santa Clara county has been settled.
In the second quarter, 2005, Nobosoft Corporation commenced legal proceedings in
Ontario Canada against No Borders Inc and Michael Rosenfeld, Raul Hinojosa and
Ruben Sanchez claiming damages of $750,000 (USD) and asking for a declaration
for the property created for No Borders Inc by Nobosoft. No Borders has engaged
Charles Wagner Esq in Ontario Canada to seek among other things to remove the
proceedings from Canada and/or to defend and file counterclaims against
Nobosoft. It is No Borders' position that Nobosoft failed to deliver any
software that was able to be implemented and that Nobosoft owes No Borders a
significant amount of funds for its failures.
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ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(b) Reports on Form 8-K.filed on October 21, 2004 and October 22, 2004 13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this report to be signed on its behalf by the
undersigned on its behalf by the undersigned thereunto duly authorized.
NO BORDERS, INC.
/s/ Robert M. Rosenfeld
May 23, 2005 ---------------------------------
Robert M. Rosenfeld
Senior Financial Officer
Acting CEO
/s/ Raul Hinojosa
May 23, 2005 ---------------------------------
/s/ Raul Hinojosa
President
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