AUTHENTIC HOLDINGS, INC.
10-Ks and 10-Qs
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
_______________________________
Annual Report Under Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 2014
Commission File Number: 000-1338929
Global Fashion Technologies, Inc.
(Name of small business issuer in its charter)
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Nevada
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11-3746201
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer Identification
Number)
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2001 Route 46
Waterview Plaza
Suite 201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(973 291-8900)
(ISSUER TELEPHONE NUMBER)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
(Title of each class)
Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [ X ]
Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period 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]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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X
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Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [X ]
The Issuer’s Revenues for year ended December 31, 2014 were: $193,248
Aggregate market value of the voting common stock held by non-affiliates of the registrant as of December 31, 2014, was: $635,812
Number of shares of the registrant's common stock outstanding as of December 31, 2014 is: 1,758,500 shares.
Global Fashion Technologies, Inc.
INDEX
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Page
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PART I
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4
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Item 1.
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Description of Business
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5
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Item 1A.
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Risk Factors
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6
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Item 2.
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Description of Property
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9
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Item 3.
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Legal Proceedings
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9
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Item 4.
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Mine Safety Disclosures
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10
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PART II
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10
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Item 5.
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Market for Common Equity and Related Stockholder Matters
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10
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Item 6.
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Select Financial Data
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11
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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11
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Item 7A
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Quantitative and Qualitative Disclosures About Market Risk
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13
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Item 8.
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Financial Statements and Supplementary Data
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13
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Item 9.
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Changes in and Disagreements with Accountants and Accounting and Financial Disclosure
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14
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Item 9A.
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Controls and Procedures
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14
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Item 9B.
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Other Information
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15
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PART III
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15
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Item 10.
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Directors, Executive Officers, Promoters and Corporate Governance
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15
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Item 11.
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Executive Compensation
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17
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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17
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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18
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Item 14.
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Exhibits, Financial Statement Schedules
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19
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3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K and the documents incorporated by reference herein contain forward-looking statements that are not statements of historical fact and may involve a number of risks and uncertainties. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, developments and business strategies.
We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "will," "plan," "predict," "project" and similar terms and phrases, including references to assumptions, in this annual report on Form 10-K and our incorporated documents to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
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general economic and industry conditions;
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our history of losses, deficits and negative operating cash flows;
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our limited operating history;
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industry competition;
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environmental and government regulation;
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protection and defense of our intellectual property rights;
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reliance on, and the ability to attract, key personnel;
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other factors including those discussed in "Risk Factors" in this annual report on Form 10-K and our incorporated documents
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You should keep in mind that any forward-looking statement made by us in this annual report or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this annual report after the date of filing, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this annual report or elsewhere might not occur.
In this annual report on Form 10-K the terms "Premiere," "Company," "we," "us" and "our" refer to Global Fashion Technologies, Inc. and its subsidiaries.
4
Our principal offices are located at 2001 RT 46, Suite 201,
Parsippany, New Jersey 07054. Our telephone number is 973-291-8900
Since our formation in 2004, we had operated as a magazine publishing company until 2007 when we ceased all publishing operations. We had operated principally through out two wholly-owned subsidiaries Sobe Life LLC and Poker Life LLC. Our publications included “Trump Magazine,” “Poker Life Magazine” and several poker oriented magazines we prepared and published for several on-line gaming companies. Thru the present date we have incurred losses of $8,485,689 from operations principally from the former magazine operations.
Current Business Plan
Since ceasing the publishing operations of the former company and management, our operations consist solely of utilizing the expertise of our Board Members and outside agents to further the efforts our Advisory Services business plan thru a wholly-owned subsidiary known as Trident Merchant Group, Inc which generates revenue through both cash and/or equity owned in the client company.
In 2012 Direct LED a client of our Company via Trident Merchang Group filed an S-1 registration statement which was declared effective by the Securities and Exchange Commission in January of 2013 and we expect to file a 15c2-11 with FINRA in the future to begin trading in the common stock. Trough Trident Merchant Group, the Company maintains an equity position in Direct LED.
During 2014, Trident Merchang Group continued to advise its client, Flex Fuel Technologies.
In addition, during 2013 Trident Merchant Group signed an advisory agreement with Hispanica Delights of America which is now trading on the OTC Pink. Although Trident Merchant Group’s services have been completed for Hispanica Delights of America, the Company still maintains an equity position in Hispanica Delights of America.
5
Although it is hopeful that the client companies will establish a public market for their common stock and if successful would be beneficial for Global Fashion Technologies, Inc. and its shareholders, there can be no assurance that such events will be successful.
In 2014, Global Fashion Technologies, Inc. stopped developing a footprint in the apparel business due to cash restraints and logistics and during the current year we ceased agreements with all third parties to distribute their products into SE Asia and China
We also dissolved our majority owned joint venture with Cabe Studio a US based Couture Fashion designer
We continue to use our limited resources to pay for our minimal operations as well as for our legal, accounting and professional services required to prepare and file our reports with the SEC in our efforts to stay a “fully reporting” company. Our financial resources will only be sufficient to sustain our operations for the short-term or until the point that we can either obtain additional financing and/or monetize our equity interest(s) in one or more of our client companies.
There can be no assurance that we will be able to obtain financing, monetize our equity interest(s) or even identify an acceptable operating company to combine with and complete an acquisition, nor that any business we could acquire will generate profits or increase the value of the Company and or the common stock price. If we are unable to locate additional financing within the short-term, we may be forced to suspend all public reporting with the SEC and in the extreme case possibly liquidate or dissolve the corporation..
Our indebtedness is substantial and as of December 31, 2014, we were still in the process of resolving any outstanding indebtedness.
We have written down a substantial portion of our vendor debt in order to further the efforts of cleaning up our balance sheet.
We have also eliminated thru conversions the vast majority of the Unsecured Convertible Note Holders. The total stock issued in conjunction with the conversions in 2014 was 89,000 shares.
We are now in the process of transitioning from an advisory company to a corporate uniform manufacturing and supply Company thru an exclusive license we signed with Pure System International, LLC a global leader in the fiber recycling field. The Company plans on spending all of its efforts in developing this as its sole business in 2016 and beyond. The financing of such business opportunity we expect to complete in 2016
6
Employees and Consultants
We have terminated all personnel involved in publishing. As of December 31, 2014, we have no employees.
Our business and an investment in our securities are subject to a variety of risks. The following risk factors describe the most significant events, facts or circumstances that could have a material adverse effect upon our business, financial condition, results of operations, ability to implement our business plan, and the market price for our securities. Many of these events are outside of our control.
Risks Relating To Our Business
We need additional capital and our auditors have raised substantial doubt about our ability to continue as a going concern.
We have only a modest amount of cash, which is not sufficient to support our plan of operations for the short-term.
We are actively seeking financing; however, there can be no assurances that financing will be available to us, or if available will be on terms satisfactory to us. If we are unable to obtain funds when we need them or if we cannot obtain funds on terms favorable to us within the short-term, we may not be able to maintain our operations as a going concern. In this regard, our independent registered public accounting firm has included a paragraph in its audit report on our financial statements as of December 31, 2014 and for the year then ended, raising substantial doubt about our ability to continue as a going concern.
We have a history of losses and our future profitability on a quarterly or annual basis is uncertain, which could have a harmful effect on our business and the value of our common stock.
Since the company began operations in 2004 as a publishing company and thru the most current period while initiating our new business model we have not generated enough revenue to exceed our expenditures within any twelve month fiscal period. Since our inception, we have financed our operations primarily through private offerings of our debt and equity securities. Our planned expenditures are based primarily on our internal estimates of our future ability to raise additional financing. If additional financing does not meet our expectations in any given period of time, we will have to cut our planned expenditures which could have an adverse impact on our business or force us to cease operations. As of December 31, 2014 our bank account was not overdrawn but we had under $10,000 cash on hand. Failure to achieve profitable operations may require us to seek additional financing when none is available or is only available on unfavorable terms.
We have substantial amount of debt which must be liquidated prior to entering an acquisition of an operating company.
We have made and continue to make significant progress in negotiating our debt for equity based exchange offers with our creditors.
We have converted the vast majority of the Unsecured Convertible Promissory Note Holders as well as the Secured Note held by Mr. Chris Giordano the Company's Chairman. In the event we cannot settle the balance of our debts or obtain additional financing we will we will not be able to acquire an operating business nor close a joint venture and we may be forced to suspend all public reporting with the SEC and in the extreme case possibly liquidate the company.
We have experienced net losses in each fiscal year since our inception, and we expect to continue to incur losses for the foreseeable future.
Assuming we transition our business model as expected, and until we complete a business combination with an operating company, we will generate some but not significant enough revenues in the future from our advisory services clients but we will continue to incur expenses related to identifying and acquiring an operating company and meeting our compliance and reporting obligations under applicable federal securities laws. We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we cannot raise funds on acceptable terms, we may not be able to continue to execute our plan to acquire an operating company and in the extreme case, we may then liquidate the Company.
7
In order to raise any financing, we may need to increase our authorized capital stock.
We are presently authorized to issue 300,000,000 shares of common stock, approximately 1,134,304 of which have been issued in 2014. All of our unissued shares are reserved for issuance to cover issuance obligations and for the potential exercise of outstanding options, warrants and conversion of notes. We do not have sufficient authorized and unissued shares to cover the exercise of currently outstanding options, warrants, and conversion obligations, in view of our current stock price, our authorized and unissued shares will not be sufficient should we need to raise additional funding through the sale of our securities.
Our Board of Directors has sole discretion to identify and evaluate acquisition candidates and complete acquisitions without approval of our stockholders.
We have not developed any specific acquisition guidelines and we are not obligated to follow any particular operating, financial, geographic or other criteria in evaluating candidates for potential acquisitions or business combinations. We will target companies that we believe will provide the best potential long-term financial return for our stockholders and we will determine the purchase price and other terms and conditions of acquisitions without review or approval of our stockholders. Accordingly, our stockholders will not have the opportunity to evaluate the relevant economic, financial and other information that our Board, which at that time may only consist of one person, will use and consider in deciding whether or not to enter into a particular transaction.
We will not generate any significant revenue or earnings in the near future .
Upon completion of the liquidation of our debts, if such event occurs, we will have minimal assets and no operations. As a result, we do not expect to generate any revenue or realize revenue unless and until we successfully merge with or acquire an operating business.
Risks Relating To Our Stock
Our common stock is traded on the OTC Bulletin Board and could be subject to extreme volatility.
Our common stock is currently quoted on the OTC Bulletin Board, which is characterized by low trading volume. Because of this limited liquidity, stockholders may be unable to sell their shares. The trading price of our shares has from time to time fluctuated widely and may be subject to similar fluctuations in the future. The trading price of our common stock may be affected by a number of factors, including events described in these risk factors, as well as our operating results and financial condition. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock. These fluctuations may have a negative effect on the market price of our common stock.
We will seek to raise additional funds in the future, and such additional funding will likely be dilutive to shareholders or impose operational restrictions.
We need to raise additional capital in the immediate term to help fund operating expenses and execute our new plan of operations
. If additional capital is raised through the issuance of equity securities, the percentage ownership of our shareholders will be reduced. These shareholders may experience additional dilution in net book value per share and any additional equity securities may have rights, preferences and privileges senior to those of the holders of our common stock.
The influx of additional shares of our common stock onto the market may create downward pressure on the trading price of our common stock.
The initial sale or secondary resale of substantial amounts of our common stock in the public markets could have an adverse effect on the market price of our common stock and make it more difficult for us to sell our equity securities in the future at prices which we deem appropriate.
Substantial voting power is concentrated in the hands of our principal stockholders.
We do not anticipate paying cash dividends.
We have not paid any cash dividends on our common stock since our inception and we do not anticipate paying cash dividends in the foreseeable future. For the foreseeable future, we anticipate that we will retain any earnings which we may generate from our operations to finance and develop our growth and that we will not pay cash dividends to our stockholders.
We are not subject to certain of the corporate governance provisions of the Sarbanes-Oxley Act of 2002.
Since our common stock is not listed for trading on a national securities exchange, we are not subject to certain of the corporate governance requirements established by the national securities exchanges pursuant to the Sarbanes-Oxley Act of 2002. These include rules relating to independent directors, director nomination, audit and compensation committees, retention of audit committee financial expert and the adoption of a code of ethics. Unless we voluntarily elect to fully comply with those obligations, which we have not to date, the protections that these corporate governance provisions were enacted to provide, will not exist with respect to the Company.
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We are not required to comply with Section 404 of the Sarbanes-Oxley Act of 2002.
On July 21, 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act permanently relieved small reporting companies (under $75,000,000 market cap) from Section 404 compliance under Sarbanes Oxley. GFTI is not required to have an audit of its internal controls.
The Company currently leases office space in Parsippany, New Jersey.
As of December 31, 2014, there were no pending legal proceedings involving the Company.
As of the date of this filing, the Company is a party to one pending litigation matter entitled
Randazzo LLC v. Avani Holdings LLC & Global Fashion Technologies, Inc.
This litigation was initiated by the plaintiff in order to evict Avani Holdings LLC from its rented premises in California and to recover unpaid rent. GFTI does not operate out of the premises in question and has never signed any leases or other documents with the plaintiff. A judgment of eviction was entered, but GFTI does not operate out of the premises in question and therefore did not appear in the matter to oppose the judgment of eviction. The plaintiff is also seeking unpaid rent in the amount of $26,595.45.
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None.
Our common stock currently trades on the OTC Bulletin Board under the symbol “GFTI.” The following table states the range of the high and low bid-prices per share of our common stock for each of the calendar quarters for fiscal year 2014, as reported by the OTC Bulletin Board. These quotations represent inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual transactions. The last price of our common stock as reported on the OTC Bulletin Board on December 31, 2014 was $1.00 per share. As of December 31, 2014, there were 126 shareholders of record of our common stock. This number does not include beneficial owners from whom shares are held by nominees in street name.
Fiscal Year 2014
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First Quarter
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$
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2.45
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$
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2.04
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Second Quarter
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$
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3.15
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$
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1.40
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Third Quarter
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$
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3.50
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$
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1.50
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Fourth Quarter
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$
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3.50
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$
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1.50
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Dividend Policy and Holders
No dividends have been paid to date on our common stock and no change of this policy is under consideration by our board of directors. Our board of directors is not required to declare or pay dividends on our securities. The payment of dividends in the future will be determined by our board of directors in light of conditions then existing, including our earnings, financial requirements, general business conditions, reinvestment opportunities, and other factors. There are otherwise no restrictions on the payment of dividends existing at this time. We had 126 stockholders of record of our common stock on December 31, 2014.
10
The Company qualifies as a smaller reporting company as defined by §229.10(f)(1) and therefore is not required to provide the information required by this Item.
This Management’s Discussion and Analysis and other parts of this report contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this report are based on information available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned "Risk Factors" in Item 1A and elsewhere in this report. The following should be read in conjunction with our audited financial statements and the related notes included elsewhere herein.
A. Discontinued Operations
We have continued to incur significant losses since our inception. During fiscal 2014, we recognized losses of $1,463,926 attributable to Global Fashion Technologies, Inc. , and we had an accumulated deficit of $9,779,153 as of December 31, 2014.
For the year ended December 31, 2014, we have incurred a net loss from discontinued operations of $870,045 from the losses in the subsidiary, Leading Edge Fashions, LLC.
We have a working capital deficit of $2,973,281 as of December 31, 2014.
On September 20, 2007 several of our creditors filed for involuntary bankruptcy liquidation of our principal operating subsidiary Sobe Life LLC (“Sobe”). As of 2007 the operating subsidiary has been abandoned and the Secured Lien held by RR Donnelly & Co, Inc. was purchased by Chris Giordano our Co-Chairman and is held in the form of a Secured Promissory Note.
Overview and Recent Transactions.
To date the company has been and continues to be funded primarily by our Co-Chairman Chris Giordano during what is our development stage. In the event the as needed funding were to be interrupted the Company may be forced to suspend all public reporting with the SEC.
The Company has signed an investment banking agreement with Network 1 Financial a fully licensed FINRA member to advise and on a best efforts basis raise capital when needed for the future venue of the Company.
The company in 2010 made the decision of transitioning from a publishing company to a corporate advisory company which will render expertise to both private and public companies in the areas of capital structure, capital markets access, mergers and acquisitions, management led buyouts out of court restructurings, recapitalization and bankruptcy planning.
The company continued to fortify this effort by continually seeking out and bringing highly qualified and talented individuals to the Board of Directors as well as agents for the company whom are willing to work for stock options.
We have not paid any salaries and do not expect to in the near future until there is adequate financing for the Company and its intended business. Our Board members will be reimbursed for any out of pocket expenses related to their service as a Board Member but not be paid for attending Board meetings.
We are now in the process of transitioning from an advisory company to a corporate uniform manufacturing and supply Company thru an exclusive license we signed with Pure System International, LLC a global leader in the fiber recycling field. The Company plans on spending all of its efforts in developing this as its sole business in 2016 and beyond. The financing of such business opportunity we expect to complete in 2016.
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B. Plans to Divest the Advisory Business Model
Our operations in the past has consisted of building our advisory services business, attempting to settle our considerable debt, and also to identify and complete a business combination or joint venture as well to comply with our reporting obligations under federal securities laws.
At this time we expect to concentrate fully on the creation and expansion of our corporate uniform manufacturing business and divest Trident Merchant Group, Inc a subsidiary of Global Fashion Technologies. In the process of the divestiture we will explore the idea of distributing to our shareholders the proportionate amount of common stock held by Trident Merchant Group, Inc in each client company.
In the event it becomes too expensive, complex or problematic to do so then the shares in such companies will be held by Global Fashion Technologies until such time that they can be liquidated to enhance the Company's cash position or pay down debt.
Liquidity and Capital Resources
Net cash at the end of December 31st, 2014 was $755.
Net cash used in operations was $607,135 for the year ended December 31, 2014.
Net cash provided by financing activities was $590,500 for the year ended December 31, 2014.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses. These estimates are based on information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary significantly from those estimates under different assumptions and conditions.
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Critical accounting policies are defined as those significant accounting policies that are most critical to an understanding of a company’s financial condition and results of operation. We consider an accounting estimate or judgment to be critical if (i) it requires assumptions to be made that were uncertain at the time the estimate was made, and (ii) changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.
We believe that the following significant accounting policies are the most critical to an evaluation of our future financial condition and results of operations.
Revenues.
Revenues are recognized only when realized / realizable and earned, in accordance with accounting principles generally accepted in the United States.
Stock Based Compensation.
We account for our stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” We recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.
Long-Lived Assets.
We account for long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to their estimated fair value based on the best information available.
Indemnification of officers and directors
Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the corporation or its shareholders or creditors for any damages as a result of any act or failure to act in his capacity as a director or officer unless it is proven that (1) his act or failure to act constituted a breach of his fiduciary duties as a director or officer and (2) his breach of those duties involved intentional misconduct, fraud or a knowing violation of law.
This provision is intended to afford our directors and officers protection against and to limit their potential liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. As a consequence of this provision, shareholders of our company will be unable to recover monetary damages against directors or officers for action taken by them that may constitute negligence or gross negligence in performance of their duties unless such conduct falls within one of the foregoing exceptions. The provision, however, does not alter the applicable standards governing a director’s or officer’s fiduciary duty and does not eliminate or limit the right of our company or any shareholder to obtain an injunction or any other type of non-monetary relief in the event of a breach of fiduciary duty.
The Company is a smaller reporting company as defined by §229.10(f)(1) and is therefore not required to provide the information required by this Item.
See pages F-1 through F-13.
13
None.
Disclosure Controls and Procedures
Christopher Giordano, the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report (December 31, 2014), as is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosures.
Based on that evaluation, Christopher Giordano concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures were effective.
Our management has concluded that the financial statements included in this Form 10-K present fairly, in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
14
Our President/Treasurer conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal Control - Integrated Framework. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2014.
This annual report does not include an audit or attestation report of our registered public accounting firm regarding our internal control over financial reporting as the Company is neither an accellerated filer nor a large accelerated filer as defined by §240.12b-2.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Evaluation of Changes in Internal Control over Financial Reporting
Our President/Treasurer also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the fourth quarter of 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our management concluded that there were no such changes during the quarter. As of the end of the period covered by this Annual Report, no deficiencies were identified in our internal controls over financial reporting which constitute a “material weakness.”
On September 16, 2014, the Company elected Robert Schneidermann and Michael Breen to be directors of the Company. Pursuant to the Company’s by-laws, all of the directors shall serve a term of one year, or until the next annual meeting of stockholders, or until a successor is elected. The number of directors of the Company was amended to six(6). None of the directors of the Company will receive any compensation at this time for serving as a director of the Company. None of the directors will serve on any committees as none exist at this time. In addition, none of the directors have any family relationships with any other director or officer of the Company, and there are no transactions in which the directors have an interest requiring disclosure under Item 404(a) of Regulation S-K.
15
Our directors and officers, as of December 31, 2014, are set forth below. The directors hold office for their respective term and until their successors are duly elected and qualified. Vacancies in the existing Board are filled by a majority vote of the remaining directors. The officers serve at the will of the Board of Directors.
(a) & (b) Directors and executive officers
:
|
Name
|
Age
|
Position
|
Director Since
|
|
Omar Barrientos
|
72
|
Director
|
December 14, 2007
|
|
Michael A. Breen
|
56
|
Director
|
September 16, 2014
|
|
Christopher H. Giordano
|
60
|
President, Treasurer and Director
|
August 4, 2010
|
|
Michael Rosenbaum
|
77
|
Director
|
May 8, 2014
|
|
Robert Schneiderman
|
71
|
Director
|
September 16, 2014
|
|
Thomas Witthun
|
60
|
Secretary and Director
|
May 8, 2014
|
16
The directors of the Company are elected to serve until the next annual shareholders' meeting or until their respective successors are elected and qualified. Officers of the Company hold office until the meeting of the Board of Directors immediately following the next annual shareholders' meeting or until removal by the Board of Directors.
(c)
Identification of certain significant employees
.
As of December 31, 2014, there were no persons who were not directors and/or executive officers that were expected to make significant contributions to the business of the Company.
(d)
Family relationships
.
There are no family relationships between any directors and/or executive officers.
(e) The business experience of the directors and executive officers.
Christopher A. Giordano - Mr. Giordano is the owner of Birchwood Capital Advisors, LLC., which provides financial and business consulting services to small and medium size businesses primarily in the bankruptcy and work-out arenas. Birchwood was the manager of the Distressed Opportunities Fund, LP from the period of 1990 thru 2001. The fund was a principal investor and or advisor to 37 Bankruptcies and Out of Court Restructurings. From 1980 thru 1990, Mr. Giordano served as a Senior VP in the Asset Management division Paine Webber. Mr. Giordano formed and owned Manchester Rhone Securities, an NASD member firm which underwrote several IPO's, until its sale in 1993.
Omar G. Barrientos - Mr. Barrientos was the president, treasurer and a director of U.S.A. Sunrise Beverages Inc., from August 1990, until September 2002. From September 2002 to June 2006 Mr. Barrientos was the president, treasurer and a director of Sunrise U.S.A. Incorporated. Mr. Barrientos received a license as a Real Estate Mortgage Broker under the South Dakota Banking Commission in 1981 and was the principal of Ombar Financial Services, and its affiliates Tri-Star Financial Services Brokerage and Moody Trust Co., in Rapid City SD. From 1986 to 1990, Mr. Barrientos served as president of Mexico U.S.A. (member of a chain of Mexican restaurants) located in Rapid City, SD. Mr. Barrientos is the owner of 4,000,000 shares of the Company's common stock.
Michael Rosenbaum-Now retired was formerly the Executive VP and Director of Vector Group, Inc a NYSE public company. He was also vice chairman of Skybox, Inc which was sold for over 300 million cash to Marvel Group. Within the last 18 months he sold his interest in a luxury beachfront real estate development project in Virgin Gorda BVI. He is a director of Common Sense- a feminine hygiene co and Lithotech Grou- a medical device co. He has a BA from yale and MIA and LLB from Columbia University.
Michael A. Breen has been serving as a member of our Board of Directors since September 16, 2014. Since 1991, Mr. Breen has been practicing law in his own private practice with offices in Bowling Green and Scottsville, Kentucky. Mr. Breen graduated from the University of Kentucky College of Law in Lexington, Kentucky in 1983. In 1980, Mr. Breen earned a B.A. from the University of Kentucky, in Lexington, Kentucky and was Phi Beta Kappa. Mr. Breen is a member of the Kentucky and Tennessee Bar Associations. Mr. Breen’s career has been marked by a number of noteworthy accomplishments. In 1995, Mike was certified as a civil trial specialist by the National Board of Trial Advocacy. He also enjoys speaking and writing on the law and in 1996 published a book on insurance called Bad Faith in Kentucky: a Primer. It is the leading work on the subject. In 1996, Mr. Breen received his "AV" rating from Martindale-Hubbell, a national attorney rating service. It is the highest ranking a lawyer can receive. Mr. Breen’s legal acumen makes him a valuable resource to the Company’s Board of Directors
.
17
Robert Schneiderman was the founder of ScripsAmerica Inc., (SCRC) which started operations in 2010. As of December 31, 2014, he was its CEO as well as a member of the Board of Directors. He has guided the Company to its status of generating over $30,000,000 in revenue in 2014 and becoming a profitable operation. Mr. Schneiderman has an extensive background of accomplishments. His experience includes using his established network to facilitate the financing of public and non public companies and assisting with mergers and acquisitions. He has been involved with marketing and consulting on a vast array of projects. These projects have included expansion of clients’ customer base via product development, placement into mass retail, development of marketing programs, and effectively establishing and maintaining communications between all involved parties. Mr. Schneiderman possesses expertise in implementing marketing strategies, developing advertising-media programs, project management, structuring of operational systems, facilitation of client needs, procedures, expanding marketing channels, liaison between marketing channels-services and clients, as well as contract negotiations. Mr. Schneiderman has had personnel, operations, financial management and supervisory experience for 32 years as CEO of a prominent Philadelphia recruiting firm. In addition, he has served as committee chairman for charity and community service organizations guiding, advising, recruiting and motivating volunteers and has engaged in hands-on supervision and activity in the areas of fundraising, gala events, special event planning, social event planning, enhancement of membership recruitment procedures, writing of newsletter articles, and speeches. Mr. Schneiderman earned a B.S. in Business from Temple University
As of December 31, 2014, Thomas Witthun was the Secretary of the Company and a member of its Board of Directors. Since 2009, Mr. Witthuhn has been serving as the Chief Executive Officer and Managing Director of Avani Holdings, LLC (d/b/a Avani Activewear). Mr. Witthuhn has been serving a member of the board of directors of Heritage Sportswear, a $200 million distributor of core apparel that services non-end use consumers. From 1998 to 2006, Mr. Witthuhn served as the Senior VP of International Operations & Global Licensing. Mr. Witthuhn has over thirty years of senior management and sales experience and has held senior positions in substantial public companies such as Fruit of the Loom, Jockey International and most recently before purchasing Avani Clothing as CEO at Delta Galil USA.
(f)
Involvement in certain legal proceedings.
None.
(g)
Promoters and control persons
.
None.
(h) Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based on our review of the copies of such forms we received, we believe that during the fiscal year ended December 31, 2014 all other such filing requirements applicable to our officers and directors were complied with.
18
(i) Code of Ethics
We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of our Code of Ethics to an appropriate person or persons identified in the code; and (v) accountability for adherence to our Code of Ethics. We will provide any person without charge a copy of our code of ethics upon receiving a written request which may be mailed to our office at 2001 Route 46, Suite 201, Parsippany, New Jersey 07054.
The following table sets forth certain information with respect to annual compensation paid in 2014 to the Company's executive officers.
|
Name and Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-
Equity
Incentive
Plan Comp.
|
Change in
pension value
& nonqualified
deferred
compensation
earnings
|
All
Other
Comp.
|
Total
|
|
Christopher H. Giordano
President, Treasurer & Director (PEO)
|
2014
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
|
Thomas Witthun
Secretary & Director
|
2014
|
$93,461
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
|
Omar Barrientos
Director (PFO)
|
2014
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
$0.00
|
On November 15, 2014, the Company granted the following stock options to its executive officers, each intended to qualify as a “incentive stock option” as defined under Section 422 of the Internal Revenue Code:
|
Optionee:
|
Number of Option Shares:
|
Exercise Price:
|
|
Christopher H. Giordano
-President, Treasurer and Director
|
500,000
|
$2.00
|
|
Michael J. Rosenbaum
-Director
|
250,000
|
$2.00
|
|
TOTAL:
|
750,000
|
--
|
The options granted to Messrs. Giordano and Rosenbaum have the following identical terms: The term of each option is 10 years from the date of grant each option vests according to the following schedule: 50% upon the Company generating $3 million in EBITDA in any 12 month period following the grant date of the option. The remaining 50% shall vest upon the Company generating in excess of $6 million in EBITDA in any subsequent period following the vesting of the first 50% of the option. The option may be exercised, to the extent vested, for up to one (1) year optionee ceases to be a service provider, or such longer period as may be applicable upon the death of disability of the optionee, but in no event later than the expiration date of the option. The Company has the right of first refusal to purchase any of the shares of Common Stock issued upon the exercise of the option, unless such shares of Common Stock are to be sold to the public pursuant to an effective registration statement (e.g. Form S-8)
In 2014, the Company issued the following restricted stock grants to Messrs. Barrientos, Schneiderman and Breen in consideration for serving as members of the Company’s Board of Directors:
|
Grantee:
|
Number of Shares:
|
|
Omar G. Barrientos
-Director
|
50,000
|
|
Robert Schneiderman
-Director
|
50,000
|
|
Michael A. Breen
-Director
|
50,000
|
19
Director Compensation
The Company has not compensated our Board members for their participation on the Board and does not have any standard or other arrangements for compensating them for such services. The Company may issue shares of common stock or options to acquire shares of the Company’s common stock to members of teh Board in consideration for their services as members of the Board. The Company does expect to reimburse Directors for expenses incurred in connection with their attendance at meetings of the Board.
Securitty Ownership of Management and Certain Beneficial Owners
The following table indicates the number of shares of our common stock that were beneficially owned as of December 31, 2014, by (1) each person known by us to be the owner of more than 5% of our outstanding shares of common stock, (2) our directors, (3) our executive officers, and (4) our directors and executive officers as a group. In general, "beneficial ownership" includes those shares a director or executive officer has sole or shared power to vote or transfer (whether or not owned directly) and rights to acquire common stock through the exercise of stock options or warrants exercisable currently or that become exercisable within 60 days. Except as indicated otherwise, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them. We based our calculation of the percentage owned on 1,908,500 beneficially owned shares outstanding on December 31, 2014 . The address of each director and executive officer listed below is c/o Global Fashion Technologies, Inc., 2001 RT 46, Waterview Plaza, Suite 201, Parsippany, New Jersey.
|
Title of Class
|
Name and Title
|
Number of Shares
Beneficially Owned
|
Percentage
of Class
|
|
Directors &
Officers
|
Christopher H. Giordano
President, Treasurer & Director
|
35,359 (1)
|
1.9%
|
|
Directors &
Officers
|
Thomas Witthun
Secretary & Director
|
0
|
*
|
|
Directors &
Officers
|
Michael J. Rosenbaum
Director
|
190,076 (2)
|
10.0%
|
|
Directors &
Officers
|
Omar G. Barrientos
Director
|
61,432
|
3.2%
|
|
Directors &
Officers
|
Robert Schneiderman
Director
|
50,000
|
2.6%
|
|
Directors &
Officers
|
Michael A. Breen
Director
|
50,000
|
2.6%
|
|
Officers & Directors as a group
(6 persons)
|
386,867
|
20.0%
|
|
|
5% Shareholders
|
Neil Bortz
|
250,000
|
13.0%
|
*Represents less than 1%
Notes:
(1)
Includes: (a) 5,715 shares of Common Stock held by Birchwood Capital Advisors, LLC, of which Christopher H. Giordano has voting and dispositive control, (b) 13,072 shares of Common Stock held by Bella Capital Holdings, (c) 16,572 shares of Common Stock held by Isabella Giordano.
(2) Inclues shares of Common Stock held by Maj Rosenbaum.
20
In addition to the foregoing, Christopher Giordano beneficially owns 100,000 shares of Class B Preferred Stock, which is 100% percent of the outstanding shares in the class. The Class B Preferred shareholders vote together with the common stock as a single class and the holders of Class B Preferred are entitled to 10,000 votes per share.
Securities Authorized for Issuance Under Executive Compensation Plans
As of December 31, 2014, the Company’s only equity compensation plain was with Thomas Witthuhn. Mr. Witthuhn was the holder of an option which would allow him to purchase up to five-percent(5%) of the Company’s common stock at a price of $0.01 per share. Two-and-one-half-percent (2.5%) was exerciseable upon gross revenues of $1,000,000, and the remaining two-and-one-half-percent (2.5%) was exerciseable upon gross revenues of $2,000,000. Since December 31, 2014, Mr. Witthuhn is no longer with the Company and this option no longer exists.
Transactions with related persons.
Other than as disclosed below, none of the present directors, officers or principal shareholders of the Company, nor any family member of the foregoing, have or have had any interest, direct or indirect, in any transaction, the amount of which exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at year-end for the last three completed fiscal years.
Corporate Governance
The Company has not had a promoter at any time during the last five fiscal years. In addition, there are no parents of the Company.
Director Independence
The directors of the Company are also the executive officers of the Company as well as direct and/or beneficial shareholders of the Company and therefore are not independent directors. Members of the Company's management may become associated with other firms involved in a range of business activities. Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of the Company. Insofar as the officers and directors are engaged in other business activities, management anticipates they will devote as much time to the Company's affairs as is reasonably needed.
The officers and directors are, so long as they are officers or directors of the Company, subject to the restriction that all opportunities contemplated by the Company's plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to the Company and the companies that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If the Company or the companies in which the officers and directors are affiliated with both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of opportunities if the Company should decline to do so. Except as set forth above, the Company has not adopted any other conflict of interest policy with respect to such transactions.
21
Board meetings and committees; annual meeting attendance; Nominating committee
The Board of Directors do not meet on a regular basis and take action as and when required. The Company does not have any standing audit, nominating, or compensation committees of the Board of Directors.
Exhibits have been filed separately with the United States Securities and Exchange Commission in connection with the Annual Report on Form 10-K or have been incorporated into the report by reference.
|
Exhibit
|
Description
|
|
|
3.1
|
Articles of Incorporation*
|
|
|
3.2(i)
|
By-Laws*
|
|
|
3.2(ii)
|
First Amended and Restated By-Laws of Premiere Publishing Group, Inc. dated December 14, 2007**
|
|
|
4.1
|
Form of 8% Convertible Promissory Note*
|
|
|
4.2
|
Form of 8% Senior Convertible Promissory Note*
|
|
|
10.1
|
Joint Venture Agreement with Cabe Studio, LLC dated April 9, 2014***
|
|
|
10.2
|
Letter of Intent with Global Products Holding Corp., Inc. dated June 24, 2012***
|
|
|
10.3
|
Letter of Intent with Avani Holdings, LLC dated March 25, 2014***
|
|
|
Code of Ethics****
|
||
|
31.1
|
Certification of Principal Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002***
|
|
| 31.2 |
Certification of Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002***
|
|
|
32.1
|
Rule 1350 Certification by Principal Executive Officer and Principal Financial and Accounting Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002***
|
|
|
*
|
Incorporated by reference to the Registration Statement filed with the Commission on November 29, 2005 (333-129977)
|
|
**
|
Incorporated by reference to Form 8-K filed with the Commission on December 12, 2007 (000-52047)
|
|
***
|
Filed herewith
|
|
****
|
Incorporated by reference to Form 10-KSB filed with the Commission on April 14, 2008 (000-52047)
|
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
|
Global Fashion Technologies, Inc
|
||
|
Dated: February 2, 2016
|
By: /s/ Christopher Giordano
|
|
|
Christopher Giordano
|
||
|
Principal Executive Officer,, President, Treasurer and Chairman
|
||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
||
|
By: /s/ Omar Barrientos
Omar Barrientos
|
Principal Accounting Officer, Principal
Financial Officer andDirector
|
|
February 2, 2016
|
|
|
By: /s/ Christopher Giordano
Christopher Giordano
|
Principal Executive Officer, President,
Treasurer and Chairman
|
February 2, 2016
|
||
23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders of Global Fashion Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Global Fashion Technologies, Inc. as of December 31, 2014 and 2013 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Fashion Technologies, Inc. as of December 31, 2014 and 2013 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to consolidated financial statements, the Company has incurred accumulated deficits of $9,779,153 and $8,315,227 as of December 31, 2014 and 2013, respectively that include losses of $1,890,248 and $101,185 for the years ended December 31, 2014 and 2013, respectively. These factors raise substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Yichien Yeh, CPA
Oakland Gardens, New York
January 19, 2016
F - 1
|
Global Fashion Technologies, Inc. and Subsidiaries
|
||||||||
|
(f/k/a Premiere Opportunities Group, Inc. and Subsidiaries)
|
||||||||
|
Consolidated Balance Sheets
|
||||||||
|
December 31,
|
||||||||
|
2014
|
2013
|
|||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash
|
$ | 755 | $ | 17,389 | ||||
|
Deposits on inventory
|
- | 45,000 | ||||||
|
Total current assets
|
755 | 62,389 | ||||||
|
Total Assets
|
755 | 62,389 | ||||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
98,471 | 75,057 | ||||||
|
Accrued compensation
|
340,000 | 340,000 | ||||||
|
Secured note and accrued interest payable
|
1,032,556 | 978,006 | ||||||
|
Unsecured notes and accrued interest payable
|
115,718 | 109,012 | ||||||
|
Convertible notes and accrued interest,
|
430,115 | 410,115 | ||||||
|
Advances from related party
|
87,131 | 79,599 | ||||||
|
Current liabilities from discontinued operations
|
870,045 | - | ||||||
|
Total current liabilities
|
2,974,036 | 1,991,789 | ||||||
|
Commitments and contingencies
|
||||||||
|
Stockholders' deficit
|
||||||||
|
Preferred stock $0.001 par value, 1,000,000
|
||||||||
|
shares authorized, 200,000 issued and
|
||||||||
|
outstanding
|
200 | 200 | ||||||
|
Common stock $0.35 par value, 300,000,000
|
||||||||
|
shares authorized, 1,758,500 and
|
||||||||
|
624,196 shares issued and outstanding
|
614,869 | 218,254 | ||||||
|
Additional paid-in capital
|
5,825,806 | 5,317,854 | ||||||
|
Stock subscriptions received
|
791,319 | 849,519 | ||||||
|
Accumulated deficit
|
(9,779,153 | ) | (8,315,227 | ) | ||||
|
Total Global Fashions Technology Group, Inc. stockholders' deficit
|
(2,546,959 | ) | (1,929,400 | ) | ||||
|
Non-controlling interest
|
(426,322 | ) | - | |||||
|
Total stockholders' deficit
|
(2,973,281 | ) | (1,929,400 | ) | ||||
|
Total liabilities and stockholders' deficit
|
$ | 755 | $ | 62,389 | ||||
The accompanying notes are an integral part of these financial statements
F - 2
|
Global Fashion Technologies, Inc. and Subsidiaries
|
||||||||
|
(f/k/a Premiere Opportunities Group, Inc. and Subsidiaries)
|
||||||||
|
Consoloidated Statements of Operations
|
||||||||
|
For the Years Ended December 31, 2014 and 2013
|
||||||||
|
Years Ended December 31,
|
||||||||
|
2014
|
2013
|
|||||||
|
Revenues
|
$ | 193,248 | $ | 50,223 | ||||
|
Operating expenses:
|
||||||||
|
General and administrative
|
1,185,495 | 109,990 | ||||||
|
Loss from operations
|
(992,247 | ) | (59,767 | ) | ||||
|
Other income (expense)
|
||||||||
|
Interest expense and financing costs
|
(27,956 | ) | (41,418 | ) | ||||
|
Loss from continuing operations before income tax
|
(1,020,203 | ) | (101,185 | ) | ||||
|
Provision for income taxes
|
- | - | ||||||
|
Loss from continuing operations
|
(1,020,203 | ) | (101,185 | ) | ||||
|
Loss from discontinued operations, net of tax
|
(870,045 | ) | - | |||||
|
Net loss
|
(1,890,248 | ) | (101,185 | ) | ||||
|
Net loss attributable to non-controlling interests
|
426,322 | - | ||||||
|
Net loss attributable to Global Fashions Technology Group, Inc.
|
(1,463,926 | ) | (101,185 | ) | ||||
|
Net loss per share from continuing operations
|
$ | (0.91 | ) | $ | (0.20 | ) | ||
|
Net loss per share from discontinued operations
|
$ | (0.40 | ) | $ | 0.00 | |||
|
Total
|
$ | (1.31 | ) | $ | (0.20 | ) | ||
|
Weighted average common shares outstanding
|
1,121,283 | 497,235 | ||||||
The accompanying notes are an integral part of these financial statements
F - 3
|
Global Fashion Technologies, Inc. and Subsidiaries
|
||||||||||||||||||||||||||||||||||||
|
(f/k/a Premiere Publishing Group, Inc. and Subsidiaries)
|
||||||||||||||||||||||||||||||||||||
|
Consolidated Statements of Stockholders' Deficit
|
||||||||||||||||||||||||||||||||||||
|
For the Years Ended December 31, 2014 and 2013
|
||||||||||||||||||||||||||||||||||||
|
Global Fashion Technologies , Inc. Stockholders
|
||||||||||||||||||||||||||||||||||||
|
Additional
|
||||||||||||||||||||||||||||||||||||
|
Class B Preferred Stock
|
Common Stock
|
Paid-In
|
Accumulated
|
Subscriptions
|
Non-Controlling
|
|||||||||||||||||||||||||||||||
|
Total
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
Received
|
Interest
|
||||||||||||||||||||||||||||
|
Balance, December 31, 2012
|
$ | (1,867,715 | ) | 200,000 | $ | 200 | 436,582 | $ | 152,654 | $ | 5,326,054 | $ | (8,214,042 | ) | $ | 867,419 | $ | - | ||||||||||||||||||
|
Stock subscriptions received
|
39,500 | - | - | - | - | - | - | 39,500 | - | |||||||||||||||||||||||||||
|
Common stock issued
|
0 | - | - | 187,614 | 65,600 | (8,200 | ) | - | (57,400 | ) | - | |||||||||||||||||||||||||
|
Net loss
|
(101,185 | ) | - | - | - | - | - | (101,185 | ) | - | - | |||||||||||||||||||||||||
|
Balance, December 31, 2013
|
$ | (1,929,400 | ) | 200,000 | $ | 200 | 624,196 | $ | 218,254 | $ | 5,317,854 | $ | (8,315,227 | ) | $ | 849,519 | - | |||||||||||||||||||
|
Common stock issued to convert notes payable
|
146,700 | - | - | 270,089 | 94,438 | 52,262 | - | - | - | |||||||||||||||||||||||||||
|
Common stock issued for services
|
316,698 | - | - | 114,538 | 40,049 | 276,649 | - | - | - | |||||||||||||||||||||||||||
|
Common stock issued for proceeds
|
382,969 | - | - | 725,654 | 253,729 | 129,240 | - | - | - | |||||||||||||||||||||||||||
|
Common stock issued for subscription
|
- | - | - | 24,023 | 8,400 | 49,800 | - | (58,200 | ) | - | ||||||||||||||||||||||||||
|
Net loss
|
(1,890,248 | ) | - | - | - | - | - | (1,463,926 | ) | - | (426,322 | ) | ||||||||||||||||||||||||
|
Balance, December 31, 2014
|
$ | (2,973,281 | ) | 200,000 | $ | 200 | 1,758,500 | $ | 614,869 | $ | 5,825,805 | $ | (9,779,153 | ) | $ | 791,319 | $ | (426,322 | ) | |||||||||||||||||
The accompanying notes are an integral part of these financial statements
F - 4
|
Global Fashion Technologies, Inc. and Subsidiaries
|
||||||||
|
(f/k/a Premiere Publishing Group, Inc. and Subsidiaries)
|
||||||||
|
Consolidated Statements of Cash Flows
|
||||||||
|
Years Ended December 31,
|
||||||||
|
2014
|
2013
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$ | (1,890,248 | ) | $ | (101,185 | ) | ||
|
Loss from discontinued operations
|
870,045 | - | ||||||
|
Net loss from continuing operations
|
(1,020,203 | ) | (101,185 | ) | ||||
|
Stock issued for services
|
316,698 | - | ||||||
|
Changes in assets and liabilities:
|
||||||||
|
Deposit in inventory
|
45,000 | (45,000 | ) | |||||
|
Accounts payable
|
23,414 | 3,057 | ||||||
|
Accrued interest
|
27,956 | 41,418 | ||||||
|
Net cash used in operating activities of continued operations
|
(607,135 | ) | (101,710 | ) | ||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from issuance of notes payable
|
200,000 | - | ||||||
|
Proceeds from issuance coomon stock
|
382,969 | - | ||||||
|
Advances from related party
|
7,532 | 79,599 | ||||||
|
Stock subscriptions received
|
- | 39,500 | ||||||
|
Total cash flows provided by financing activities
|
590,500 | 119,099 | ||||||
|
Net increase in cash
|
(16,634 | ) | 17,389 | |||||
|
Cash at beginning of period
|
17,389 | - | ||||||
|
Cash at end of period
|
$ | 755 | $ | 17,389 | ||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Cash paid during the periods for:
|
||||||||
|
Interest
|
- | - | ||||||
|
Income taxes
|
$ | - | $ | - | ||||
|
Supplemental schedule of non-cash investing
|
||||||||
|
and financing activities:
|
||||||||
|
For the year ended December 31, 2014
|
||||||||
|
During the year ended December 31, 2014 the Company issued 270,089 shares of
|
||||||||
|
common stock to convert notes payable totaling $146,700.
|
||||||||
|
During the year ended December 31, 2014, the Company issued 24,023 shares of
|
||||||||
|
common stock from subscriptions received in prior years.
|
||||||||
|
For the year ended December 31, 2013
|
||||||||
|
During the year ended December 31, 2013, the Company issued 187,614 shares of
|
||||||||
|
common stock from subscriptions received in prior years.
|
||||||||
The accompanying notes are an integral part of these financial statements
F - 5
Global Fashion Technologies, Inc. and Subsidiaries
(f/k/a Premiere Opportunities Group, Inc. and Subsidiaries)
December 31, 2014
Global Fashion Technologies, Inc. (“the Company”) was incorporated in Nevada on March 25, 2005. On July 19, 2012 the Company filed an amendment with the Nevada Secretary of State to increase its authorized common stock shares to 200,000,000. On December 9, 2013 the Company filed an amendment with the Nevada Secretary of State to increase its authorized common stock shares to 300,000,000.
On August 4, 2014, the Board of Directors of the Company and the majority shareholders of the Company, approved a reverse stock split of the outstanding shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-350 (the “Reverse Stock Split”) effective at 5:00 p.m. EDT on August 15, 2014. The Amendment was filed with the Secretary of State of Nevada on August 6, 2014, and took effect on August 15, 2014 at 5:00 p.m EDT. As a result of the reverse stock split, every 350 shares of the Company’s old authorized common stock will be converted into one share of the Company’s new authorized common stock. All references to common stock shares have been adjusted to reflect the results of the reverse stock split.
Global Fashion Technologies, Inc. is the holding company. During the fourth quarter, 2013 the Company became involved in the manufacturing and global distribution of ladies apparel. Trident Merchant Group, Inc. is an operating subsidiary which is a “value added” strategic advisory services company specializing in rendering expertise in the areas of capital planning and procurement, licensing and branding as well as financial engineering and restructuring of its client company’s balance sheet and going public process. During the second quarter, 2014 the Company formed Leading Edge Fashions, LLC which it controls 51% of. The non-controlling interest is recorded in the stockholders’ equity section. Effective December 31, 2014 the Company’s Board of Directors determined it was in the best interest of the Company to discontinue the operations of Leading Edge Fashions, LLC.
Going Concern
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company has an accumulated deficit of $9,779,153 and $8,315,227 as of December 31, 2014 and 2013, respectively that include losses of $1,890,248 and $101,185 for the years ended December 31, 2014 and 2013, respectively. Consequently, the aforementioned items raise substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to repay its substantial indebtedness, acquire an operating business and raise capital through equity and debt financing or other means on desirable terms. If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to, liquidate available assets, restructure the company or cease operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Principles of Consolidation
The accompanying consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiary Trident Merchant Group, Inc. and Leading Edge Fashion, LLC which is 51% owned. All significant intercompany accounts and transactions have been eliminated.
F - 6
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and investments in money market funds. The Company considers all highly-liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.
Trade Accounts Receivable
Trade accounts receivable are stated at outstanding balances, less an allowance for doubtful accounts. The allowance for doubtful accounts is established through provisions charged against income. Accounts deemed to be uncollectible are charged against the allowance and subsequent recoveries, if any, are credited to the allowance. The allowance for doubtful accounts is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on past experience, aging of the receivables, adverse situations that may affect a customer’s ability to pay, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires estimates that may be susceptible to significant change. Unpaid balances remaining after the stated payment terms are considered past due. The Company’s accounts receivable balances were $-0- and $-0- as of December 31, 2013 and 2014.
Inventory
Inventory consists of women’s fashions held for sale and valued at the lower of cost or market. Cost is determined on the first-in, first-out method and includes the cost of merchandise and other costs, including freight and export and import taxes and agent commissions. A periodic review of inventory is performed in order to determine if inventory is properly stated at the lower of cost or market. Factors related to current inventories such as future expected consumer demand and fashion trends, current aging, current and anticipated retail markdowns or wholesale discounts, and class or type of inventory are analyzed to determine estimated net realizable value. Criteria utilized by the Company to quantify aging trends include factors such as average selling cycle and seasonality of merchandise, the historical rate at which merchandise has sold below cost during the average selling cycle, and the value and nature of merchandise currently priced below original cost. A provision is recorded to reduce the cost of inventories to the estimated net realizable values, if appropriate.
Adjustments to reserves related to the net realizable value of inventories are primarily based on the market value of the Company’s physical inventories, cycle counts and recent historical trends. The Company expects the amount of its reserves and related inventories to increase over time as it expands its store base and increases direct-to-consumer sales.
Equipment
Property and equipment are stated at cost. Costs of replacements and major improvements are capitalized, and maintenance and repairs are charged to operations as incurred. Depreciation expense is provided primarily by the straight-line method over the estimated useful lives of the assets, seven years.
Revenue Recognition
Revenue for the women’s fashion division is recognized at the point-of-sale for retail store sales, net of estimated customer returns. Revenue is recognized at the completion of a job or service for the consulting division. Revenue is presented on a net basis and does not include any tax assessed by a governmental or municipal authority. Payment for merchandise at stores and through the Company’s direct-to-consumer channel is tendered by cash, check, credit card, debit card or gift card. Therefore, the Company’s need to collect outstanding accounts receivable for its retail and direct-to-consumer channel is negligible and mainly results from returned checks or unauthorized credit card transactions. The Company maintains an allowance for doubtful accounts for its consulting service accounts receivable, which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments. Deposits for consulting services are recognized as a sale upon completion of service.
F - 7
The Company accounts for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer. A liability is established and remains on the Company’s books until the card is redeemed by the customer, at which time the Company records the redemption of the card for merchandise as a sale or when it is determined the likelihood of redemption is remote, based on historical redemption patterns. Revenues attributable to gift card liabilities relieved after the likelihood of redemption becomes remote are included in sales and are not material.
Sales Return Reserve
The Company records a reserve for estimated product returns where the sale has occurred during the period reported, but the return is likely to occur subsequent to the period reported and may otherwise be considered in-transit. The reserve for estimated in-transit product returns is based on the Company’s most recent historical return trends. If the actual return rate or experience is materially higher than the Company’s estimate, additional sales returns would be recorded in the future.
Advertising expenses
Advertising costs are expensed when the advertising takes place. The total advertising expenses included in the consolidated statement of operations for the years ended December 31, 2014 and 2013 was $186 and $-0-.
Income taxes
Income taxes are accounted for under the asset and liability method as stipulated by A5C 740 "Income Taxes". Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. 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. Under A5C 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized by the use of a valuation allowance. A valuation allowance is applied when in management's view it is more likely than not (50%) that such deferred tax will not be utilized.
The Company adopted certain provisions under A5C Topic 740, which provide interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective with the Company's adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes.
In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would be recorded if the Company determined it is probable that a position would not be sustained upon examination or if payment would have to be made to a taxing authority and the amount is reasonably estimated. As of December 31, 2014 and 2013, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. The Company's tax returns are subject to examination by the federal and state tax authorities for the years ended 2011 through 2014.
Impairment or Disposal of Long-Lived Assets:
ASC Topic 360 (formerly FASB issued Statement No. 144), "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144") clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to their estimated fair value based on the best information available.
F - 8
In September, 2015 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-16,
Business Combinations (Topic 805): Simplifying the Accounting for Measurement Period Adjustments or ASU 2015-16.
This amendment requires the acquirer in a business combination to recognize in the reporting period in which adjustment amounts are determined, any adjustments to provisional amounts that are identified during the measurement period calculated as if the accounting had been completed at the acquisition date. Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of the acquisition date for adjustments to provisional amounts. The amendments in ASU 2015-16 are to be applied prospectively upon adoption. The adoption of the provisions of ASU 2015-16 upon issuance did not have a material impact on our consolidated financial position, results of operations or cash flows.
There are no other new accounting pronouncements adopted or enacted during the year ended December 31, 2014 that had, or are expected to have, a material impact on our financial statements.
Use of Accounting Estimates
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. Actual results could differ from those estimates.
Fair Value
FASB ASC 820,
Fair Value Measurements and Disclosure
s (“ASC 820”) establishes a framework for all fair value measurements and expands disclosures related to fair value measurement and developments. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:
Level 1
—
Quoted market prices for identical assets or liabilities in active markets or observable inputs;
Level 2
—
Significant other observable inputs that can be corroborated by observable market data; and
Level 3
—
Significant unobservable inputs that cannot be corroborated by observable market data.
The carrying amounts of cash, accounts receivable, accrued compensation, accounts payable and other liabilities, accrued interest payable, and short-term portion of notes payable approximate fair value because of the short-term nature of these items.
Concentration of credit risk
The carrying value of short-term financial instruments, including cash, restricted cash, trade accounts receivable, accounts payable, accrued expenses and short-term debt, approximates the fair value of these instruments. These financial instruments generally expose the Company to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market. The Company maintains cash balances at financial institutions that are insured by the FDIC. At December 31, 2014 or 2013 the Company had no amounts in excess of the FDIC limit.
Earnings (loss) per share
In accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common 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.
F - 9
Preferred stock
The Company has designated a “Class B Convertible Preferred Stock” (the “Class B Preferred”. The number of authorized shares totals 1,000,000 and the par value is $.001 per share. The Class B Preferred shareholders vote together with the common stock as a single class. The holders of Class B Preferred are entitled to receive all notices relating to voting as are required to be given to the holders of the Common Stock. The holders of shares of Class B Preferred shall be entitled to 10,000 votes per share. The Class B Preferred Stock will have the rights to liquidation as all classes of the Common Stock of the company. The Class B Preferred stock holders are entitled to receive dividends at the rate of 8% per annum, and are accrued daily. The Class B Preferred Stock shall be redeemed by the Corporation for 100% of the original purchase price plus the amount of cash dividends accrued on the earlier of 6 months from the date of issuance, or the date that the Corporation received its funding from any outside source in conjunction with a merger, reverse merger or any change of control. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the Class B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any assets of the Corporation to the holders of the Common Stock, the amount of $.035 per share plus any and all accrued but unpaid dividends.
During the fourth quarter, 2011, a total of 200,000 shares of the Series B Preferred Stock were issued to a related party for legal and accounting fees paid for the Company’s benefit in the amount of $7,500.
Common Stock
As of December 31, 2014 and December 31, 2013, the Company has 1,758,500 and 624,196 shares of its $0.35 par value common stock issued and outstanding, respectively. In addition, common stock subscriptions of $791,319 and $849,519 have been received on December 31, 2014 and December 31, 2013, respectively.
Secured Note Payable
The Company and its former consolidated subsidiaries entered into a settlement agreement with R.R. Donnelly & Sons Company (“Donnelly”) on June 6, 2007. As part of the settlement, the Company issued to Donnelly a Secured Promissory Note in the principal sum of $601,048, with an interest rate of 9% per annum and a requirement for monthly payments of $43,577, and granted Donnelly a first lien security interest in all of the Company’s assets. The Company was unable to meet the monthly payments and Donnelly obtained judgment in the amount of $601,048. This note was subsequently sold to a Director of the Company. The balance of this note plus accrued interest totals $ 931,306 and $ 978,006 December 31, 2014 and December 31, 2013 respectively. On March 31, 2013 the Company’s Board of Directors issued a “Moratorium on Accrued Interest” stating that the interest accrual on this note would cease indefinitely at March 31, 2013 and that all past due accrued interest would be added to the principal portion of the note.
On May 2, 2014 the Company issued a secured promissory note to an individual in the amount of $100,000 payable at 10% interest and due on June 2, 2014. After the due date, this note accrued interest at a rate of 15% annually until paid. The note was converted to 180,000 shares on June 1, 2014. The accrued interest for this note is $417 at December 31, 2014.
On November 25, 2014 the Company issued a secured promissory note to an individual in the amount of $100,000 at 10% interest and due on April 1, 2015. At December 31, 2014 this note has not been paid. The balance of this note plus accrued interest totals $100,833 at December 31, 2014.
F - 10
Unsecured Notes Payable
The Company has an unsecured note payable in the principal amount of $67,057. This note was issued to a vendor on August 23, 2007. The note bears interest at the rate of 10% per annum and required monthly payments of $4,500 with final payment due on July 15, 2008. The Company has made no payments under this note and the note is in default. The balance of this note plus accrued interest totals $115,718 and $109,012 at December 31, 2014 and December 31, 2013 respectively. The Statute of Limitations has expired on this obligation and it will be recorded as debt forgiveness during the first quarter, 2015 since it is no longer collectible.
Convertible Notes Payable
The Company’s convertible notes payable consist of two series of unsecured convertible promissory notes; (i) $250,000 in principal amount of 8% convertible notes issued in 2005 to two investors as part of the Company’s 2005 bridge note financing (the “Bridge Notes”), and (ii) $480,000 in aggregate principal amount of 6% convertible notes issued in 2006 and 2007 to sixteen investors pursuant to a private placement offering conducted by Divine Capital Markets LLC (the “Divine Notes”). The balance of the convertible notes payable plus accrued interest and the accrued derivative liability is $430,115 and $410,115 at December 31, 2014 and December 31, 2013.
The Bridge Notes
The Company’s $250,000 Bridge Notes had an original maturity date of October, 2005. The Bridge Notes have not been repaid and are currently in default, and are included in the accompanying financial statements as current liabilities. The conversion feature currently expired. The Company and the maker of the note have agreed to convert the note to 50,000 common stock shares in 2015.
The Divine Notes
The Company’s $480,000 Divine Notes have an original maturity date of November, 2009. The principal amount of each Divine Note is convertible, at the option of the holder into shares of the Company’s common stock. The convertible debentures accrue interest at 6% annum and are due three years after issuance. The Company paid $69,800 in fees and commissions to Divine Capital Markets LLC as debt issue costs. Debt issue costs were amortized over the term of the notes and is fully amortized at December 31, 2011.
Upon the occurrence of an event of default, the full unpaid amount of the Divine Notes becomes, at the election of the holder, immediately due and payable. The Company is in default under the terms of the Divine Notes and the notes are included in the accompanying financial statements as current liabilities.
During the year ended December 31, 2012 the Company and the Divine Note holders agreed to the issuance of 89,000 shares of common stock to convert the notes payable and related accrued interest totaling $810,019. The balance is recorded as stock subscriptions received but not issued.
The Company uses the liability method, whereby deferred taxes and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. On December 31 2013 and 2012, the company has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $10,000,000 at December 31, 2014, and will expire in the years 2026 through 2034.
At December 31, 2014, deferred tax assets consisted of the following:
|
2014
|
||||
|
Deferred tax assets
|
||||
|
Net operating loss carryforward
|
$
|
3,500,000
|
||
|
Valuation allowance
|
(3,500,000
|
)
|
||
|
Net deferred tax asset
|
$
|
---
|
F - 11
The utilization of the carryforwards is dependent upon the Company's ability to generate sufficient taxable income during the carryforward period. In addition, utilization of these carryforwards may be limited due to ownership changes as defined in the Internal Revenue Code.
During the year ended December 31, 2011 the Company acquired a 15% ownership of Direct LED, Inc. (formerly LuminX, Inc.) in exchange for consulting services. The Company has not assigned a value to the investment at December 31, 2014 and 2013 due to the lack of marketability of the minority interest and the company is still in its start-up. Direct LED, Inc. filed its S-1 Registration Statement with the Securities and Exchange Commission on July 18, 2012 which became effective on January 23, 2013.
On April 1, 2014 the Company announced that it has signed a Letter of Intent to purchase 100% of Avani Holdings LLC., the parent company and 100% owner of the Avani Clothing line
http://www.avaniclothing.com
which is a "Made in USA" active wear brand sold nationally in department store, sports specialty stores, specialty stores, gyms, studios and online. Avani Activewear's earth-friendly collections and sustainable business practices reflect its mission "to leave the earth a little more beautiful than we have found it" by offering organic and sustainable garments to its customer. During the fourth quarter, 2015 the Company’s Board of Directors determined it was in the best interest of the Company to discontinue the proposed acquisition.
On September 22
nd
2014 the Company announced that it has completed agreements with Pure System International Ltd. that call for joint efforts to develop a new business dedicated to fiber rejuvenation. Addressing the a worldwide problem that results in trillions of pounds of textiles being disposed of annually, the partnership will produce a sustainable textile fiber through a highly patented process that returns the textile to a fiber state and prepares the fiber for a variety of new textile end uses. Global Fashion Technologies, Inc. is dedicated to marketing branded apparel and related textiles throughout the worldwide markets. Pure System International and Pure Sustainable Product Technologies Inc are dedicated to finding innovative procedures to "up cycle" components found within the global waste stream to develop superior performing products.
On October 31, 2014 Global Fashion Technologies, Inc. entered into a contract to purchase a 40 acre site including a 165,000 sq. ft. manufacturing facility in Belen New Mexico. Global is partnering with Pure Systems International, LTD to create and operate a new state of the art Textile Fiber Rejuvenation plant at this location. Sustainable products is a very large silo of opportunity since it at the top of the list of the most important things that CEOS of Fortune 500 companies are concentrating on according to research that was done by Verdantix. This paradigm shift in corporate policy positions the Company right in the middle of the vast sustainable fiber need of many major consumer product companies. The Company has decided to abandon the acquisition of this property and are considering other options to either lease or purchase a suitable facility.
For the year ended December 31, 2014 the Company’s revenues from continuing operations were $193,248 from consulting, all of which was from sources within the United States.
During 2014, the Company’s Leading Edge Fashions, LLC retail businesses in which it owned 51% was classified as discontinued operations. Based on the Company’s strategy to allocate resources to its businesses relative to their growth potential and those with the greater right to win in the marketplace, the Company determined that this business did not align with the Company’s long-term growth plans.
F - 12
The following table provides a summary of amounts included in discontinued operations,
|
Year Ended
December 31
2014
|
||||
|
Loss from discontinued operations before income taxes
|
$ | (870,045 | ) | |
|
Income tax expense
|
-- | |||
|
Loss from discontinued operations
|
(870,045 | ) | ||
|
Net gain on disposal
(1)
|
-- | |||
|
Loss from discontinued operations, net of tax
|
$ | (870,045 | ) | |
| Loss from discontinued operations attributable to Global | $ | (443,723 | ) | |
| Loss from discontinued operations attributable to minority interest | $ | (426,322 | ) |
As of December 31, 2014, $870,045 of current liabilities from discontinued operations include $785,764 loan payable and $84,281 accounts payable.
The Company has received advances from an Officer and member of the Board of Directors of the Company in the amount of $87,131 and $79,599 at December 31, 2014 and 2013, respectively.
The Company has accrued compensation in the amount of $340,000 at December 31, 2014 and 2013 to an Officer and member of the Board of Directors.
As of January 18, 2016, the Company is a party to one pending litigation matter entitled Randazzo LLC v. Avani Holdings LLC & Global Fashion Technologies, Inc. This litigation was initiated by the plaintiff in order to evict Avani Holdings LLC from its rented premises in California and to recover unpaid rent. The Company does not operate out of the premises in question and has never signed any leases or other documents with the plaintiff. The case has been recently filed, and there appears to be no legitimate cause of action against the Company. However, the Company is attempting to resolve the matter due to the relatively-small amount in controversy. The unpaid rent being sought by the plaintiff is $26,595.45.
As of January 18, 2016, the Company has been named as a defendant in the matter of Patrick Kalashyan v. Avani Holdings, LLC & Global Fashion Technologies, Inc. This litigation was initiated by the plaintiff to recover monies owed on a September 23, 2011 settlement agreement signed between the Plaintiff and Avani Holdings, LLC. The Company was never a party to this agreement and never acquired Avani Holdings, LLC. Consequently, there is no legitimate cause of action against the Company. In the event that the Company is ever served in this litigation, it intends to vigorously defend itself as it has no legal liability for a debt of Avani Holdings, LLC. The amount being sought by the plaintiff is $150,000 plus interest.
F - 13
TABLE OF CONTENTS
Part IItem 1. Description Of Business Our CompanyItem 1A. Risk FactorsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Common Equity and Related Stockholder MattersItem 6. Select Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition Andresults Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management Andrelated Stockholder MattersItem 13. Certain Relationships and Related Transactions, and DirectorindependenceItem 14. ExhibitsNote 1 Description Of BusinessNote 2 Summary Of Significant Accounting PoliciesNote 3 Capital StockNote 4 Accounts and Notes PayableNote 5 Income TaxesNote 6 Luminx Holdings, IncNote 7 Other EventsNote 8 - Operating SegmentsNote 9 Discontinued OperationsNote 10 Related Party TransactionsNote 11 Subsequent Events