UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2004
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Venice Blvd, Los Angeles Calif
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(Address of principal executive offices including zip code)
310-578-1299
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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 September 30, 2004 there were outstanding shares of 46,936,686 shares
of the Company's Common Stock, $0.001 par value.
The Form 10Q report we filed on November 22, 2004 for the quarterly period
ending September 30, 2004 incorrectly set forth that Carlos Melcer was our Chief
Financial Officer. Carlos Melcer acted as a financial and accounting consultant
for us and was not employed as our Chief Financial Officer. His signature and
Certification of the report should be deemed replaced by the signatures and
Certifications set forth below and the report we filed for the quarterly period
ending September 30, 2004 is fully incorporated herein and confirmed by the
signatures and Certifications set forth below.
1
NO BORDERS, INC
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements........................................
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .........................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................................
Item 2. Changes in Securities................................................
Item 3. Defaults Upon Senior Securities......................................
Item 4. Submission of Matters to a Vote of Security Holders..................
Item 5. Other Information....................................................
Item 6. Exhibits and Reports on Form 8-K.....................................
SIGNATURES ...................................................................
CERTIFICATIONS................................................................
Unless otherwise indicated, all references to "No Borders," "we," "us" and
"our"and Company refer to No Borders, Inc. and its predecessor.
CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements that we believe are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "should," "intend,"
"estimate," "anticipate," "believe," "plan," "continue" or similar terminology.
We undertake no obligation to publicly update or revise any forward-looking
statements contained in this report. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties and
other factors, some of which are beyond our control, that could cause actual
results to differ materially from those we express or imply in those
forward-looking statements. These risks, uncertainties and other factors
include, but are not limited to, the raising of additional capital, the
acceptance of our products in the market, competition, the status of our
intellectual property and our dependence on obtaining remittance agents to
provid4 our initial customer base, our business strategy, expected benefits of
any acquisition, future financial position, budgets, projected costs and plans
and objectives of management. Other uncertainties related to our business and
securities, which are traded on the OTC Bulletin Board, are outlined in.the
Management Discussion and Analysis section,
2
NO BORDERS, INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 2004
(UNAUDITED)
NO BORDERS, INC.
C0NSOLIDATED BALANCE SHEETS
September 30, 2004
ASSETS
2004
CURRENT ASSETS
Cash $ -
Prepaid expenses 39,598
TOTAL CURRENT ASSETS 39,598
FIXED ASSETS
Furniture & fixtures 61,797
Leasehold improvements 3,150
64,947
Other Assets
Other assets 34,000
Software development costs 485,870
Investments 690,840
1,210,710
---------------
$ 1,315,255
LIABILITIES AND STOCKHOLDERS' EQUITY
2004
CURRENT LIABILITIES
Bank overdrafts $ 18,675
Accounts payable 377
TOTAL CURRENT LIABILITIES 19,052
STOCKHOLDERS' EQUITY
Common stock 45,932
Additional contributed capital 2,685,639
Retained deficit (1,435,368)
1,296,203
---------------
$ 1,315,255
3
NO BORDERS, INC.
CONSOLIDATED STATEMENT OF INCOME
For the Nine Months Ended September 30, 2004
2004
REVENUES $ -
EXPENSES
General and administrative 1,085,632
1,085,632
OPERATING LOSS (1,085,632)
TAX PROVISIONS -
NET LOSS $ (1,085,632)
4
NOTE 1 - DESCRIPTION OF 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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Development Stage Enterprise
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises." The Company is devoting
substantially all of its present efforts to establish a new business,
and its planned principal operations have not yet commenced. All losses
accumulated since inception have been considered as part of the
Company's development stage activities.
Comprehensive Income
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting comprehensive income
and its components in a financial statement. Comprehensive income as
defined includes all changes in equity (net assets) during a period
from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include
foreign currency translation adjustments and unrealized gains and
losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financial statements since the Company did
not have any of the items of comprehensive income in any period
presented.
Property and Equipment
Impairment of Long-Lived Assets
The Company reviews long-lived assets to be held and used for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If the sum of
the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, the Company
would recognize an impairment loss based on the estimated fair value of
the asset.
5
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes
and encourages the use of the fair value based method of accounting for
stock-based compensation arrangements under which compensation cost is
determined using the fair value of stock-based compensation determined
as of the date of grant and is recognized over the periods in which the
related services are rendered. The statement also permits companies to
elect to continue using the current implicit value accounting method
specified in Accounting Principles Bulletin ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," to account for stock-based
compensation issued to employees. The Company has elected to use the
intrinsic value based method and has disclosed the pro forma effect of
using the fair value based method to account for its stock-based
compensation.
Software Development Costs
Development costs incurred in the research and development of new
software products are expensed as incurred until technological
feasibility in the form of a working model has been established.
Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. The asset and liability method accounts for deferred
income taxes by applying enacted statutory rates in effect for periods
in which the difference between the book value and the tax bases of
assets and liabilities are scheduled to reverse. The resulting deferred
tax asset or liability is adjusted to reflect changes in tax laws or
rates. Because the Company has incurred losses from operations, no
benefit is realized for the tax effect of the net operating loss
carryforward and software development costs capitalized for tax
purposes due to the uncertainty of its realization.
Loss per Share
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted-average number of common shares
outstanding. Diluted loss per share is computed similar to basic loss
per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional
common shares were dilutive. Because the Company has incurred net
losses, basic and diluted loss per share are the same.
Estimates
The preparation of financial statements 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
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
6
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
This report contains forward looking statements within the meaning of section
27a of the Securities Act of 1933, as amended and section 21e of the Securities
Exchange Act of 1934, as amended. The Company's actual results could differ
Materially from those set forth on the forward looking statements as a result of
The risks set forth in the Company's filings with the Securities and Exchange
Commission, general economic conditions, and changes in the assumptions used in
making such forward looking statements.
On December 4, 2003, the Company acquired 89.3% of the issued and outstanding
shares of American Eagle Corp.in exchange for 23,500,000 shares of the Company's
common stock.100% of the shareholders of American Eagle Corp. approved the
exchange.
On September 30, 2003 substantially all of the holders of the notes due from
American Eagle Corp elected to convert their notes to common stock of American
Eagle Manufacturing Co. Therefore Notes Payable with a value of $1,045,233.34 on
September 30, 2003 were converted to 1,045,234 shares of American Eagle
Manufacturing Co. restricted common stock.
The Company No Border,Inc was originally incorporated as Finders Keepers,Inc.,a
Nevada Corporation on May 28, 1999. Finders Keepers, Inc. changed its name to
The Bauer Partnership, Inc. on December 5, 2000. The Bauer Partnership, Inc.
changed its name to Harbour Front Holdings, Inc. on January 27, 2003. Harbour
Front Holdings, Inc. changed its name to American Eagle Manufacturing Co.on
September 25, 2003.
On October 22, 2004, the Company sold substantially all of its assets related
to its prior custom motorcycle manufacturing business to its former parent
company, Bad Toys Holdings, Inc., a Nevada corporation (the "Buyer"). The
disposed assets included, but were not limited to, all real and personal
property (tangible and intangible) of the Company previously used by the Company
in its custom motorcycle manufacturing business. As consideration and payment
for the assets, the Company received 1,818,182 shares of the Buyer's restricted
common stock (the "Shares") and the Buyer assumed all liabilities and
obligations of the Company (the "Purchase Price").In addition to the foregoing,
the Company agreed to distribute the Shares pro rata to its shareholders of
record as of September 15, 2004; provided however, that such a distribution
complied with both Nevada corporate law and Federal and State securities law. As
of September 30, 2004, the Shares had not been distributed. A copy of the Asset
Purchase Agreement is set forth in Company's Form 8K filed on October 21, 2004..
A Share Exchange Agreement between the Company and Intercommunity Financing
Corp,; Raul Hinojosa-Ojeda; and Robert M. Rosenfeld dated October 21, 2004 (the
"Share Exchange Agreement") was concluded, And deemed effective as of September
30, 2004, wherein the Company agreed to issue40,000,000 shares of its restricted
common stock to the shareholders of Intercommunity Financing Corp in exchange
for 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.
Inc.
7
Plan Of Operation
Description of Business
During the next 12 months, 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.
Key-Advantages:
No Borders believes that combining the technological advantages of a
unified Stored-Value-Card platform using Internet connectivity through
both satellite and dial up services to reach rural and urban
communities with lower cost remittance and telephone services, it will
successfully convert existing remittance agents and their clients in
transnational migrant sending and receiving communities to the NBSVC
platform. This will initially be accomplished by:
a) acquiring operating licensed remittance companies with an
existing network of affiliated remittance agents, targeting
specific remittance companies, using No Borders' publicly traded
securities as the consideration provided to the acquired
companies; and
b) targeting individual or specific groups of agents, focused
initially on those agents which have the highest volume of
remittance transactions from the U.S. to Mexico and providing
them with "founder" or other special status inducements, and
those agents which have less volume but reside in areas where
immediate increases in remittance transactions are readily
attainable using the No Borders' pricing structure and platform;
and
c) partnering with credit unions and other community, national and
international financial institutions and other corporate entities
to facilitate offering through the NBSVC platform low-cost
services and products to this significant demographic, thus
providing values to agents and customers well beyond lower priced
remittance services.
8
Company has initiated these activities. The Company completed an
alliance agreement with the Department of Water & Power Credit Union
in California which calls for the co-marketing of both entities, with
No Borders to provide a recruitment area for union employees at No
Borders' site at El Rescate in downtown Los Angeles and with the union
to offer the No Borders card to its members. The Company also entered
into agreements with the AMUCSS, a federation of micro-financial
institutions in Mexico, and Fedecaces, a federation of credit unions
in El Salvador, each such agreement designed to cause the member
institutions and credit unions within each federation to serve as No
Borders payout sites with VoIp telephone offerings. Fedecaces have
various branches in 14 different states of El Salvador. In addition,
No Borders has an executed letter of intent with Alpimed, a network of
microfinance institutions in El Salvador, each institution to serve as
payout sites for No Borders' remittance transactions...In addition,
the Company concluded an agreement with El Rescate, a community based
non profit organization with over 20 years of activities providing
various services for El Salvadorina migrants located in downtown Los
Angeles. El Rescate is to provide community based marketing No Borders
remittance services.
In addition to penetrating the market via networks of existing agents,
the Company intends to provide Affinity Cards, meaning cards with a
joint logo of No Borders and third parties, including hometown
associations of migrants from various areas outside of the US now
residing in specific areas in the US, as well as vendors of certain
products and services.. Moreover, the Company intends to distribute
its stored value/debit cards to retail outlets via existing prepaid
telephone card distributors. The Company intends to develop and deploy
its platform and models so as to commence these additional revenue
producing activities in the Spring, 2005.
The Company will need to attain $3,000,000 so as to implement this plan of
operation during the next 12 months. The Company intends to generate these
funds through revenue from operations and through the sale of its securities
via a private placement or private placements.
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. It is anticipated that this development will
cost $600,000..
Expected purchase or sale of equipment:
The company anticipates purchasing computers and pin pads for distribution to
its affiliated remittance agents and payout sites at a cost of $700,000,
assuming the acquisition of the projected 1050 US remittance agents and 835
payout sites during the next 12 months.
Any expected change in employees;
During the next twelve months the Company intends to convert prior consulting
agreements to employment agreements with management personnel, including the
Chief Technology Officer, the VP of Sales, the VP of Business Development, VP of
Marketing, General Counsel and Controller as well as operational, sales and
marketing personnel. By the end of the next twelve months, Company intends to
employ 132-personnel in total based upon the projected demand, transactions and
other activities of Company. The cost is anticipated to equal $4,680,000. These
projected costs assume the Company converts the projected 1050 US remittance
agents and 835 payout sites to its stored value/debit card platform and assumes
a projected 2,904,000 in remittance transactions.
Liquidity and Capital Resources.
The Company estimate sthat it requires a total of $3,000,000 during the next 12
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 the first quarter of 2005, and by the sale of
securities via a private placement or placements. The Company estimates that it
will generate revenue from its operations in excess of $3,000,000 by the end of
the second quarter of 2005 and will reach break-even by the end of the third
quarter, 2005.
9
COMPETITIVE BUSINESS CONDITIONS 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. However,
there can be no assurance that the Company's offerings will be marketed
successfully, or once successful, will continue to be marketed successfully
PATENTS, TRADEMARKS & LICENSES:
The Company intends to file for a process patent protection relating to its
stored value/debit card and treasury management platform by January 31, 2005.
RESEARCH & DEVELOPMENT:.
The Company expended $420,000 in developing its stored value/debit card and
treasury management platform during the nine month period ending September 30,
2004. 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. It is anticipated that this development
will cost $600,000.
EMPLOYEES.
The company currently has three employees and consultants. The employees (its
CEO, President and CFO) have not received any salaries; its consultants have
received fees during the nine- month period ending 9/30/2004 in the amount of
$725,000. During the Quarter ending 12/31/04, the Company intends to convert
prior consulting agreements to employment agreements with management personnel,
including the Chief Technology Officer, the VP of Sales, the VP of Business
Development, VP of Marketing, General Counsel and Controller as well as
operational, sales and marketing staff personnel. By the end of the next twelve
months, Company intends to employ 132-personnel in total based, assuming that
Company's estimated demand, transaction volume and other activities are reached,
at a cost of 4,680,000. If such demand, transaction volume and activities
are less than estimated, the number of employees estimated will be reduced
DESCRIPTION OF PROPERTY
Company owns no real properties and has leased premises at a total cost of
$4,500 per month. Company intends to move into other offices in Venice
California, with space rented approximately 4,500 square feet at a cost of
approximately $8,500 per month.
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.
10
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 remittance and telephone activities will meet the
requirements of Company's minimum " Investors in the Company should consider
their investment herein to be for the long term." See "The Business," "Use of
Proceeds" and "Financial Projections"
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.
DEPENDENCE ON KEY PERSONNEL
The future success or failure of the Company is dependent in the near term upon
the efforts of Dr. Hinojosa, Co-founder, Chairman and President. Upon completion
of this Offering, the Company intends to obtain an insurance policy covering Dr.
Hinojosa's life in the aggregate amount of $2,000,000 with the Company as sole
beneficiary, which in the event of his death could be used to obtain a
replacement. If for any reason other than death Dr. Hinojosa's services became
unavailable to the Company, the Company's future operations could be materially
and adversely affected. See "Management." Management has developed employment
contracts to guarantee the employment of key personnel over a prescribed period
of time. Additionally, these contracts specifically describe the individual's
principal employment objectives, time frame for accomplishment and outline their
incentive compensation opportunities.
IF WE DO NOT ADAPT TO RAPID TECHNOLOGICAL CHANGE, OUR BUSINESS MAY FAIL.
Our success depends on our ability to develop new and enhanced services, and
related products that meet changing customer needs. The market for our services,
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, we 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. We may not
successfully identify new service opportunities, and develop and bring new and
enhanced services and related products to market in a timely manner. Even if we
do bring such services, products or technologies to market, they may not become
commercially successful. Additionally, services, products or technologies
developed by others may render our services and related products noncompetitive
or obsolete. If we are unable, for technological or other reasons, to develop
and introduce new services and products in a timely manner in response to
changing market conditions or customer requirements, our business may fail
11
If OUR SOFTWARE FAILS, AND WE NEED TO REPAIR OR REPLACE IT, OUR COSTS COULD
INCREASE.
Our stored value card platform could contain errors or "bugs" that could
adversely affect the performance of services. Despite the existence of various
security precautions, our computer infrastructure may also be vulnerable to
viruses or similar disruptive problems caused by our customers or third parties
gaining access to our processing system. If our software fails, and we need to
replace or repair it, our services could be delayed and our costs could
increase.
OUR BUSINESS STRATEGY INCLUDES IDENTIFYING NEW BUSINESSES TO ACQUIRE, AND IF WE
CANNOT INTEGRATE ACQUISITIONS INTO OUR COMPANY SUCCESSFULLY, WE MAY NOT REACH
THE GOALS ESTABLISHED
Our success partially depends upon our ability to identify and acquire
undervalued businesses within our industry. Although we believe that there are
companies available for potential acquisition that are undervalued and might
offer attractive business opportunities, we may not be able to make any
acquisitions, and if we do make acquisitions, they may not be profitable. As a
result, our business may not grow and we may not achieve or sustain desired
profitability.
IF WE DO NOT MANAGE OUR GROWTH, WE MAY NOT ACHIEVE OR SUSTAIN PROFITABILITY.
We may experience a period of rapid growth that could place a significant strain
on our resources. In order to manage our growth successfully, we will have to
continue to improve our operational, management and financial systems and expand
our work force. A significant increase in our 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 our computer and administrative
infrastructure will require substantial operational, management and financial
resources. Although we believe that our current infrastructure is adequate to
meet the needs of our customers in the foreseeable future, we may not be able to
expand and adapt our infrastructure to meet additional demand on a timely basis,
at a commercially reasonable cost, or at all. If our management is unable to
manage growth effectively, hire needed personnel, expand and adapt our computer
infrastructure and improve our operational, management, and financial systems
and controls, we may not attain or sustain profitability.
IF WE DO NOT MANAGE OUR CREDIT RISKS RELATED TO OUR REMITTANCE TRANSACTIONS AND
OUR MERCHANT ACCOUNTS, WE MAY INCUR SIGNIFICANT LOSSES.
We shall rely in part on the Federal Reserve's ACH system for electronic fund
transfers. We shall rely on different networks for the settlement of payments
through our stored value card platform. We shall rely on our remittance agents
to collect and deposit funds collected. And we shall rely on different networks
for the settlement of remittance payments through our stored value card platform
on behalf of our merchant customers. In our use of these established payment
clearance 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, we assume 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. We utilize a number of systems and
procedures to manage and limit credit risks, but if these actions are not
successful in managing such risks, we 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 we, despite an investment of significant resources, are
unable to adapt to meet changing customer requirements or technological changes
in this emerging market, or if our services and related products do not maintain
a proportionate degree of acceptance in this growing market, our 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 our customer base and revenues, in particular.
Similar to the emergence of the credit card and automatic teller machine, or
ATM, industries, we 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.
12
CHANGES IN REGULATION OF ELECTRONIC COMMERCE AND RELATED FINANCIAL SERVICES
INDUSTRIES COULD INCREASE OUR COSTS AND LIMIT OUR BUSINESS OPPORTUNITIES.
We believe that we are 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 our ability to do business in the regulator's jurisdiction.
We may be subject to various licensing laws and regulations relating to
remittance transactions in certain States of the United States, and to the
extent we do not obtain such licenses directly or via partnerships or
acquisitions or affiliations with banking institutions, our 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 our business and industry
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.
13
RESULTS OF OPERATIONS
Revenue
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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Not Applicable.
Item 2. Changes in Securities.
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Not Applicable.
Item 3. Defaults Upon Senior Securities.
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Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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Not Applicable.
Item 5. Other Information.
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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
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
December 19, 2005 ----------------------------
Robert M. Rosenfeld
Chief Executive Officer
/s/ Raul Honojosa
December 19, 2005 -----------------------------
Raul Hinojosa
President