UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from_____________to ____________
Commission File Number:
NO BORDERS, INC.
(Exact name of Company as specified in its charter)
Nevada
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Market Street Venice California 90291
--------------------------------------------
(Address of principal executive offices including zip code)
310-450-3257
(Company's telephone number, including area code)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [x ]
As of March 31, 2005 there were 46,936,686 outstanding shares of the Company's
Common Stock, $0.001 par value.
1
PART 1. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS AND NOTES
NO BORDERS, INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2005
(UNAUDITED)
BALANCE SHEETS
March 31, 2005 and December 31, 2004
ASSETS
March 31,
2004 2005
----------- -----------
CURRENT ASSETS
Cash $ - $ 2,745
TOTAL CURRENT ASSETS - -
----------- -----------
FIXED ASSETS
Computers 35,197 35,197
Leasehold improvements 4,200 4,200
39,397 39,397
Less accumulated depreciation (8,708) -
30,689 30,689
----------- -----------
OTHER ASSETS
Software development costs - 65,500
Deposits 64,800 64,800
License 25,000 25,000
89,800 155,300
120,489 $ 185,989
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
2004 2005
----------- -----------
CURRENT LIABILITIES
Bank overdrafts $ 17,205 $ -
Notes payable 200,000 250,000
Accounts payable 17,276 34,658
Accrued interest -
Stockholder loans - 339,000
TOTAL CURRENT LIABILITIES 234,481 613,000
----------- -----------
2
NO BORDERS, INC. AND SUBSIDIARY
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
From October 25, 2002 (Inception) through December 31. 2004
and quarter endingMarch 31, 2005
RETAINED DEFICIT
ACCUMULATED
ADDITIONAL DURING
COMMON STOCK CONTRIBUTED DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
----------- ---------- ------------- ------------- ------------
October 25, 2002
Initial shares issued 525 $ - $ - $ - $ -
Net loss - - - - -
December 31, 2002 525 - - - -
Capital contributed - 10,000 - - 10,000
Net loss - - - (337,660) (337,660)
December 31, 2003 525 10,000 - (337,660) (327,660)
Notes payable converted to stock and
Shares sold 475 2,418,998 - - 2,418,998
Merger with American Eagle Corporation (1,000) (2,428,998) 10,000 - (2,418,998)
44,871,686 44,872 2,374,126 - 2,418,998
Shares for services 4,015,000 4,015 1,255,700 - 1,259,715
Net loss - - - (3,465,045)
December 31, 2004 48,886,686 $ 48,887 $ 3,639,826 $ (3,802,705) $ (113,992)
March 31, 2005
Shares for services 3,408,000 3,408 2,016,000 - 2,019,408
Less Shares cancelled prior period (290,000) (290) (290)
Shares for penalty/loans 382,208 382 70,000 - 70,382
3
NO BORDERS, INC. AND SUBSIDIARY
(Formerly) INTERCOMMUNITY FINANCING CORP. dba NO BORDERS
(A Development Stage Company)
STATEMENT OF INCOME
For the year ended December 31, 2004, the quarter ended March 31, 2005 and for
the period beginning October 25, 2002, (Inception) through March 31, 2005).
SINCE
2004 3/31/05 inception
------------ ------------ -------------
REVENUES $ - $ - $ -
EXPENSES
Marketing and sales 12,462 21,190 33,652
General and administrative 3,452,583 2,343,566 5,796,017
3,465,045 2,364,756 5,817,107
OPERATING LOSS (3,465,045) (2,364,756) (5,817,107)
TAX PROVISIONS - - -
NET LOSS $ (3,465,045) $2,364,756 (5,817,107)
4
NO BORDERS, INC. AND SUBSIDIARY
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the years ended December 31, 2004 and the quarter ending March 31, 2005, and
for the period beginning October 25, 2002, (Inception) through March 31, 2005
SINCE
2004 3/31/05 INCEPTION
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (3,465,045) $ 2,364,756 $ (5,829,811)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities
Depreciation 8,708
Shares issued for services 1,259,715 2,016,000 3,274,715
Write off of software development costs 35,000
Changes in Current assets and liabilities:
Increase in Accounts payable 11,406 17,382 5,870
Increase in Accrued interest (3,030)
NET CASH USED BY
OPERATING ACTIVITIES (2,152,596) (348,756) (2,501,342)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed assets (29,358) (10,039)
Increase in Deposits (64,800)
Purchase of License (25,000)
Purchase of Software development costs -
NET CASH USED BY
INVESTING ACTIVITIES (119,158) (45,689)
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder loan borrowings - 362,000 514,418
Shareholder loan payments (32,989) (43,000) (119,429)
Proceeds from Notes payable 200,000 50,000 430,000
Proceeds from Stock sales 2,038,998 35,000 2,073,998
Capital contributed - - 10,000
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,206,009 404,000 2,610,009
NET INCREASE IN CASH (65,745) 19,950 48,540
CASH AT BEGINNING OF PERIOD - (17,205) -
CASH AT END OF PERIOD $ (65,745) $ 2,745 $ 48,540
5
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
The Company was incorporated on October 25, 2002 as Intercommunity Financing
Corp. in California. Beginning in 2003 the Company adopted the dba of No
Borders. On October 21, 2004 a Share Exchange Agreement was entered into between
the American Eagle Manufacturing Company and Intercommunity Financing Corp dba
No Borders, Inc. The agreement was deemed effective as of September 30, 2004,
wherein American Eagle Manufacturing Company agreed to issue 40,000,000 shares
of its restricted common stock to the shareholders of the Company in exchange
for one hundred percent of the issued and outstanding common stock of the
Company. On October 21, 2004 the American Eagle Manufacturing Company changed
its name to No Borders, Inc.
Description of Business
The Company is presently focused on the delivery of significantly lower cost
remittance transfers and long distance telephony services through a unified
Stored Value Card platform issued through a network of affiliated agents to
individual card-holders in both underserved U.S. migrant-receiving as well as
non-U.S. rural migrant-sending communities that need to stay connected.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities to be cash equivalents. Cash paid during the years
for:
2004
Interest $ -0-
Income taxes $ -0-
Fixed Assets
Property and equipment are carried at cost. Maintenance, repairs and renewals
are expensed as incurred. Depreciation is computed on the straight line basis
over their estimated useful life of 3 years for computers and 39 years for
leasehold improvements.
6
NO BORDERS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Software Development Costs
The Company has expended $35,650 in software development costs through December
31, 2003 for internal use software. The software being developed is to
facilitate the unified Stored Value Card platform. The software is entirely
proprietary. The Company expended an additional $403,241 in development cost in
2004. In April 2004 the management reviewed the software development to date and
determined while some of the code will be salvaged the project has been
abandoned as written. Accordingly all software development cost were expensed in
2004. The Company expended $35,000 in software development costs for the quarter
ended March 31, 2005 Licenses On February 27, 2004, the Company entered into a
License agreement to use "Balance" Mural Images for a five year period and the
right to renew for an additional five years with notification and payment of an
additional fee. This agreement will be amortized over five years using the
straight line basis. The balance at December 31, 2004 was $25,000.
Income taxes
The Company accounts for income taxes under the provisions of Statements of
Financial Accounting Standards No. 109 "Accounting for Income Taxes", which
requires a company to recognize deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in a
company's financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement carrying amounts and tax basis of assets and liabilities
using enacted tax rates. The Company has no differences between book and tax
accounting. At December 31, 2004 the Company had a net operating loss carry
forward of approximately $1,400,000.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
7
NO BORDERS, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Development Stage
The Company is classified as a development stage entity since it devotes most of
its activities to establishing business and its principal activities have not
yet commenced.
NOTE 2 - NOTES PAYABLE
During 2003 the Company entered into a series of Notes payable with individuals.
The notes are due December 28, 2004, and bear interest at 5% per annum. The
Notes' have conversion rights to shares of the Company's common stock. The
Notes' co-makers are the two shareholders of the Company. The holders of these
notes converted them to common stock in October 2004. In December 2004, the
Company borrowed $200,000 from three individuals. The individuals were given
500,000 shares of Common stock valued at $.13 per share or $65,000 as an
inducement to enter this transaction. The note was for 60 days at 12% interest.
In addition a major shareholder of the Company pledged 2,000,000 shares of his
stock as additional security for the loan. The loan was not paid by the Company
when due and the underlying lender, a bank, ceased the collateral in
satisfaction of the loan. The balance outstanding at December 13, 2004 on this
loan was $200,000. In the first quarter of 2005, shares pledged by a shareholder
of Company were sold to provide the lenders with $170,000 of the $200,000 due;
the Company borrowed an additional $100,000 from the same lenders, using the
balance of the shares pledged by a shareholder to provide security; in addition,
a loan balance of $90,000 was due Michael Bennett, for a total of loans
outstanding equal to $250,000.
NOTE 3- COMMITMENTS
On December 8, 2003, the Company entered into a consulting agreement with a
third party to provide advice and to consult concerning prepaid-bank card
programs, international remittance programs, banking products and services. The
contract is for 6 months and fixes the hourly and daily rates the Company is to
be charged for these services. The contract was not renewed. On December 15,
2004, the Company entered into a lease for office space for 3 years. The lease
is for $10,800 a month and requires a $64,800 deposit.
Future minimum annual payments under the above agreement are:
2005 $129,600
2006 $129,600
2007 $118,800
2008 $ -0-
8
NO BORDERS, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2005
NOTE 4 - GOING CONCERN
The Company has not generated significant revenues or profits to date. This
factor among others has led the Company's auditor to state that the Company may
be unable to continue as a going concern. The Company's continuation as a going
concern depends upon its ability to generate sufficient cash flow to conduct its
operations and its ability to obtain additional sources of capital and
financing. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
NOTE 5 - CONTINGENCIES
On October 22, 2004, the Company as American Eagle Manufacturing Company, sold
substantially all of its assets related to its custom motorcycle manufacturing
business to its former parent company, Bad Toys Holdings, Inc. As consideration
and payment for the assets, the Company, No Borders, Inc. received 1,818,182
shares of the Bad Toys Holdings, Inc. restricted common stock and the Bad Toys
Holdings, Inc. assumed all liabilities and obligations of the American Eagle
Manufacturing Company outstanding on the date of purchase.
No Borders, Inc. remains primarily liable on these obligations until paid by Bad
Toys Holding, Inc.
9
NOTE 1 - DESCRIPTION OF BUSINESS
No Borders is initially focused on the delivery of significantly lower cost
remittance transfers and long distance telephony services through a unified
Stored Value Card platform issued through a Network of affiliated agents to
individual card-holders in both underserved U.S. migrant-receiving as well as
non-U.S. rural migrant-sending communities that need to stay connected.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
Development Stage Enterprise
The Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises." The Company is devoting substantially all of its present
efforts to establish a new business, and its planned principal operations have
not yet commenced. All losses accumulated since inception have been considered
as part of the Company's development stage activities.
Comprehensive Income
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined includes
all changes in equity (net assets) during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are excluded
from net income, include foreign currency translation adjustments and unrealized
gains and losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financial statements since the Company did not have
any of the items of comprehensive income in any period presented.
Property and Equipment
Impairment of Long-Lived Assets
The Company reviews long-lived assets to be held and used for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, the Company would recognize an impairment loss based on the estimated
fair value of the asset.
10
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
encourages the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized over the periods in which the related services are rendered. The
statement also permits companies to elect to continue using the current implicit
value accounting method specified in Accounting Principles Bulletin ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," to account for
stock-based compensation issued to employees. The Company has elected to use the
intrinsic value based method and has disclosed the pro forma effect of using the
fair value based method to account for its stock-based compensation.
Software Development Costs
Development costs incurred in the research and development of new software
products are expensed as incurred until technological feasibility in the form of
a working model has been established.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
The asset and liability method accounts for deferred income taxes by applying
enacted statutory rates in effect for periods in which the difference between
the book value and the tax bases of assets and liabilities are scheduled to
reverse. The resulting deferred tax asset or liability is adjusted to reflect
changes in tax laws or rates. Because the Company has incurred losses from
operations, no benefit is realized for the tax effect of the net operating loss
carryforward and software development costs capitalized for tax purposes due to
the uncertainty of its realization.
Loss per Share
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted-average number of common shares outstanding.
Diluted loss per share is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. Because the Company has
incurred net losses, basic and diluted loss per share are the same.
Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is provided to afford the reader an understanding of
the material matters of No Borders' financial condition, results of operation,
capital resources and liquidity. It should be read in conjunction with the
financial statements and notes thereto and other information appearing elsewhere
in this report.
CAUTIONARY STATEMENT. Statements contained herein that are not based on
historical fact, including without limitation, statements containing the words
"believes," "may," "will," "estimate," "continue," "anticipates," "intends,"
"expects" and words of similar import, constitute "forward-looking statements."
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause actual results, events or developments to be
materially different from any future results, events or developments expressed
or implied by such forward-looking statements GIVEN THESE UNCERTAINTIES, READERS
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. We
disclaim any obligation to update information concerning any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements contained in this report to reflect future results, events or
developments.
BUSINESS
History N
No Borders,Inc. (.the "Company"), a Nevada corporation incorporated on
May 28, 1999, as Finders Keepers, Inc. ("Finders Keepers"). In December 2001,
The Bauer Partnership, Inc., a Delaware corporation ("Bauer Delaware") entered
into a reverse merger with Finders Keepers whereby Finders Keepers issued
31,030,800 shares of its common stock for 100% of the issued and outstanding
shares of Bauer Delaware. Bauer Delaware became a wholly-owned subsidiary of
Finders Keepers which changed its name to The Bauer Partnership, Inc. The
Company changed its name to Harbour Front Holdings, Inc. in January 2003. On
December 4, 2003, the Company acquired 89.3% of the issued and outstanding
shares of Eagle Corp. in exchange for 23,500,000 shares of the Company's common
stock and on January 27, 2003 Harbour Front Holdings, Inc. changed its name to
American Eagle Manufacturing company. Following that acquisition the Company had
27,290,399 shares of its common stock outstanding. On August 9, 2004 the
Company's majority shareholders sold 72.5% of the outstanding common stock of
the Company to Bad Toys, Inc. ("Bad Toys") and a change in control occurred. Bad
Toys maintains its headquarters in Kingsport, Tennessee and is the successor to
a motorcycle business, which was founded by one of its major shareholders, Larry
N. Lunan. Subsequent to the sale of the Company's stock to Bad Toys (1) senior
management of Bad Toys took control of the former Board of Directors of the
Company, and (2) on August 17, 2004 the Company performed a 1 for 10 reverse
stock split of the common stock of the Company which included a corresponding
1:10 reverse split of Company's authorized shares of common stock, and (3) On
October 22, 2004, the Company sold all of its assets to Bad Toys Holdings, Inc.,
a Nevada corporation (the "Buyer"). As consideration and payment for the assets,
the Company was to receive 1,818,182 shares of the Buyer's restricted common
stock and the Company agreed to distribute the Shares pro rata to its
shareholders of record as of September 15, 2004. Bad Toys Holdings assumed all
liabilities and obligations of the Company as of the date of the asset purchase,
including any and all additional consideration, and agreed to indemnify and hold
Company and the shareholders of relieving Company .
Reverse Merger Of No Borders
A Share Exchange Agreement between the Company and Intercommunity Financing
Corp, dated October 21, 2004 (the "Share Exchange Agreement") was concluded, and
deemed effective as of September 30, 2004, wherein the Company agreed to issue
40,000,000 shares of its restricted common stock to the shareholders of
Intercommunity Financing Corp in exchangefor one hundred percent of the issued
and outstanding common stock of Inercommunity Financing Corp. On October 21,
2004 the Company changed its name to No Borders, Inc. Following the completion
of the share exchange agreement, Bad Toys Holdings, Inc. Owned approximately
2,800,000 of the 3,600,000 issued and outstanding shares of the Company's common
stock
12
Description of the Business:
No Borders is initially focused on the delivery of significantly lower cost
remittance transfers and long distance telephony services through a unified
Stored Value Card platform issued through a Network of affiliated agents to
individual card-holders in both underserved U.S. migrant-receiving as well as
non-U.S. rural migrant-sending communities that need to stay connected.
The lower cost remittance transfer service offered is designed to facilitate the
expeditious creation and expansion of this Network of affiliated agents and
their customers using the No Borders' Stored Value Card platform. It will
provide our current and future financial and commercial partner companies with
the ability to access and deliver their vast menu of low cost products and
services to the growing transnational Latino market in a very cost efficient
manner. The No Borders mission and focus is designed to provide our affiliated
agents and cardholders with significant benefits well beyond those offered by
other providers of remittance services.
In general, No Borders is a vertically integrated company with the mission of
becoming the lowest cost provider of electronic payment mediums to the vast
unbanked, uninsured and unconnected Latin American, Asian, Indian and Caribbean
immigrant population in the U.S and the families they left back home. No
Borders' stored-value and debit card platform, together with its unique business
models, should enable the Company to provide significantly lower-cost remittance
and prepaid telephony services, as compared to its competitors, to this vast and
growing market. US remittances to Latin America are estimated to reach over $45
Billion this year and over $150 Billion worldwide, while estimated household
expenditures by Latin American immigrants in the US are estimated to exceed $450
Billion this year. The Company intends leverage these remittance business and
customer relationships to offer stored-value cards, debit cards and payroll
cards, as well as VoIP telephony and direct bill payment services, while teaming
with intended alliance partners to offer a panoply of additional products and
services, at a lower cost than now available to this market, through its stored
value and debit card platform, including life insurance, health insurance
(Mexican residents), discount health programs and low-cost mortgage, business
and personal loans. The Company is aggressively pursuing additional alliances to
add to its product and service offerings.
The No Borders recent creation of No Borders Processing LLC, a card processing
company which is 60% owned by No Borders, should facilitate the Company's
ability to reduce transaction fees applicable to usage of its stored value and
debit cards since those fees would otherwise be payable to third parties and at
retail rates. The processing operations also should provide the Company with an
ancillary and very significant source of revenue as it intends to offer its
processing services to other card providers.
To facilitate distribution of its intended products and services, No Borders
intends to affiliate with existing remittance merchants and has entered into one
agreement to acquire an existing remittance company and intends to pursue the
acquisition of a limited number of mid-sized remittance companies with their own
affiliated merchant networks. Agreements with credit unions in the U.S., Mexico,
El Salvador and Ecuador provide expanded presence for No Borders' customers to
transfer and receive funds at even a lower cost. In addition, to further
increase its market penetration opportunities, the Company has created One
Border LLC, owned 50% by No Borders, for the purpose of concluding agreements
with existing prepaid phone card distributors to purchase and distribute prepaid
debit and stored value cards through existing prepaid phone card distribution
networks.
13
The Target Market:
Remittances from the U.S. to Latin America will exceed $45 Billion in 2005 and
$150 Billion worldwide. Household expenditures of Latin American immigrants
residing in the U.S. exceed $450 Billion. Expenditures for telephony, U.S-Mexico
will exceed $5 Billion in 2005 and for $9 Billion for telephony U.S-Latin
Amerce.
No Borders' Products and Services
In addition to remittance services and low cost telephony, No Borders intends to
offer services and products through its Platform, including: - Payroll Cards -
Direct payment of bills by cardholders through the Platform;
- Master and Visa debit cards issued by financial institutions within
and outside the US
- Low cost financial services and commercial products offered by No
Borders alliance partners and accessed through the No Borders cards
and Platform, such as life insurance, airline tickets, health
insurance outside of the US and discount medical programs in the US,
mortgages, small business loans and product purchase financing.
- Videoconferencing at merchant sites
- Card Processing Services through 60% owned subsidiary
Distribution Channels
No Borders' products and services will be distributed through the following
channels:
- Affiliations with existing remittance merchants with loyal customers
- The acquisition of or affiliation with existing licensed remittance
companies with affiliated networks of remittance merchants
- Affiliations with credit unions and micro financial institutions and
banking institutions (global)
- Affiliations with hometown associations and other community groups
comprised of immigrants from specific areas outside of the US and
issuing Affinity Cards for distribution of the constituents of these
associations and groups;
- Agreements to distribute prepaid stored value and debit cards through
current distributors of pre-paid telephone cards to retail outlets
(global) - Agreements with Employers to distribute provide payroll
cards to their employees (global);
Sources of Revenue:
1. Remittance transactions through existing merchants affiliating with No
Borders
2. Remittance transactions through merchants affiliated with licensed
remittance companies either acquired by No Borders or which are obtain
licenses to deploy the No Borders Platform.
3. Remittance transactions by holders of stored value cards distributed
via prepaid phone card distributors and through other licensees of the
No Borders' Platform;
4. VoIP telephone minutes sold
5. Other telephone minutes sold via prepaid phone cards integrated with
stored value and debit cards;
6. Processing fees paid for each transaction attributed to prepaid debit
14
cards and stored value cards managed through the No Borders' Platform;
7. Processing fees paid for each transaction involving all other debit
cards issued by banks using the No Borders processing division
8. Fees derived from the sale of all other services and products via the
stored value and debit cards managed through the No Borders' Platform;
9. Transaction fees (in addition to processing fees) relating to use of
prepaid debit cards distributed at No Borders merchant sites and at
retail outlets via distribution agreements with prepaid phone card
distributors;
10. The distribution and use of payroll cards;
11. Sponsorship and endorsement fees;
RESULTS OF OPERATIONS
Revenues
For the year ending December 31, 2004 and for the quarterly period ending March
31, 2005, the Company had $0 in revenues. For the period from January 2003
through December 31, 2003, Intercommunity Financing Corp., d/b/a No Borders
("IFC") the entity acquired by Company through the reverse merger into American
Eagle Manufacturing Company, had no revenue
Costs and Expenses.
. For the quarter ended March 31, 2005, the Company's costs and expenses were
$348,000 plus $2,016,000_in costs and expenses based on shares issued for
services, as compared to $3,465,045 for the period January 1, 2004 through
December 31, 2004, which include $1,259,715 based on shares issued for services
during 2004
Loss from Operations
The Company had a loss from operations of $2,364,000 for the quarter ended March
31, 2005, which included $2,016,000 in costs based on shares issued for
services, as compared to $3,465,045 for the year ended December 31, 2004
Net Loss Per Share
The Company had a net loss per share of $.08 for the year ended December 31,
2004 and .05 for the quarter ended March 31, 2005 based on a average of
50,000,000 shares issued....
15
Liquidity and Capital Resources
During 2004, the Company raised $2,038,000 from the issuance of 12,250,000
shares of stock pursuant to conversions of loans. During the quarter ended March
31, 2005, the Company raised a total of $404,000 in the form of loans to the
Company from Robert M Rosenfeld in the amount of $309,000 , loan to the company
in the amount of $10,000 from James Tierney, loans to the Company in the sum of
$50,000 which were secured by shares of stock issued previously to Robert M
Rosenfeld, and in the form sale of stock in the amount of $35,000..
For the year ended December 31, 2004 and for the quarter ended March 31, 2005,
the Company produced $0 in revenues. As a result, the Company will require
additional working capital to rollout its business operations until the Company
achieves a level of revenues adequate to generate sufficient cash flows from
operations or obtains additional financing necessary to support its working
capital requirement. The Company estimates that it requires a minimum of
$3,000,000 during the next six months in order to cover its projected costs of
operations and development during that same period. Management believes that
these sums will be obtained by generating revenue, commencing in the second
quarter of 2005, and by the sale of securities via a private placement or
placements. The Company estimates that it will generate revenue from its
operations in excess of $1,000,000 by the end of the second quarter of 2005 and
will reach break-even by the end of the fourth quarter, 2005. The estimated
$3,000,000 in capital requirements is comprised approximately $200,000 in
development costs, $700,000 in the purchase of computers and POS devices for
remittance merchants assuming the conversion of the projected 1050 remittance
merchants during the next 12 months, general overhead and administration
expenses, inclusive of the overhead related to its processing operations.
As of March 31, 2005, the Company's assets equaled $185,000 as compared to
$120,489 as of December 31, 2004 .
RISK FACTORS
Securing Remittance Agents
The Company's performance depends upon its ability to secure remittance agents
and convert them to use the NB SVC platform There is no assurance that the
Company can secure the volume of agents so as to create a viable network of
customers and cardholders.
Working Capital Requirements
The successful operation of the Company depends to a substantial extent on the
Company's ability to finance is initial operations so as to secure a base of
agents and customers. The Company has done extensive research and exploration
relating to the market but there can be no assurance that the revenues generated
by the initial intended activities will meet the requirements of Company's
minimum " requirements.
Industry Competition
The Company will encounter competition from remittance companies, financial
institutions and telephone companies which are already offering, or will offer
in the future, the same or similar services as those proposed to be offered by
the Company, albeit at significantly greater cost. Some competitors of the
Company have greater financial resources and more experience in the area
Management believes the Company's platform, pricing models and delivery
mechanisms are competitive in the current market. Nonetheless, there can be no
assurance that the Company's offerings will be marketed successfully, or once
successful, will continue to be marketed successfully. Moreover, there can be no
assurance that the Company's solutions will be able to compete on a
technological or cost basis with other solutions which may become available in
the future. Entities may develop platforms that are competitive with or superior
to the Company's solutions or which can be marketed more effectively.
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IF THE COMPANY DOES NOT ADAPT TO RAPID TECHNOLOGICAL CHANGE, THE
BUSINESS MAY FAIL.
NO Borders success depends on its ability to develop new and enhanced services,
and related products that meet changing customer needs. The market however, is
characterized by rapidly changing technology, evolving industry standards,
emerging competition and frequent new and enhanced software, service and related
product introductions. In addition, the software market is subject to rapid and
substantial technological change. To remain successful, No Borders must respond
to new developments in hardware and semiconductor technology, operating systems,
programming technology and computer capabilities. In many instances, new and
enhanced services, products and technologies are in the emerging stages of
development and marketing, and are subject to the risks inherent in the
development and marketing of new software, services and products. The Company
may not successfully identify new service opportunities, and develop and bring
new and enhanced services and related products to market in a timely manner.
If THE COMPANY'S SOFTWARE FAILS, AND IT NEEDS TO REPAIR OR REPLACE IT,
COSTS COULD INCREASE.
No Borders stored value card platform could contain errors or "bugs" that could
adversely affect the performance of services. Despite the existence of various
security precautions, the computer infrastructure may also be vulnerable to
viruses or similar disruptive problems caused by the Company's customers or
third parties gaining access to the No Borders processing system. If the
software fails, and thus the Company needs to replace or repair it, No Borders
services could be delayed and costs could increase.
IF THE COMPANY DOES NOT MANAGE ITS GROWTH, IT MAY NOT ACHIEVE OR
SUSTAIN PROFITABILITY.
No Borders may experience a period of rapid growth that could place a
significant strain on resources. In order to manage growth successfully, No
Borders will have to continue to improve the Company's operational, management
and financial systems and expand its work force. A significant increase in No
Borders customer base, as anticipated, necessitates the hiring of a significant
number of additional personnel, qualified candidates for which, at the time
needed, may be in short supply. In addition, the expansion and adaptation of the
Company's computer and administrative infrastructure will require substantial
operational, management and financial resources. Although No Borders believes
that its current infrastructure is adequate to meet the needs of increased
customers and customer demand in the foreseeable future, the Company may not be
able to expand and adapt its personnel requirements and its infrastructure to
meet additional demand on a timely basis, at a commercially reasonable cost, or
at all. If management is unable to manage growth effectively, hire needed
personnel, and improve its operational and management, and financial systems and
controls, the Company may not attain or sustain profitability.
IF NO BORDERS DOES NOT MANAGE ITS CREDIT RISKS RELATED TO ITS
REMITTANCE TRANSACTIONS AND MERCHANT ACCOUNTS, IT MAY INCUR
SIGNIFICANT LOSSES.
No Borders shall rely in part on the Federal Reserve's ACH system for electronic
fund transfers. The Company shall rely on different networks for the settlement
of payments through our stored value card platform. No Borders shall also rely
on its affiliated remittance merchants to collect and deposit funds collected.
And the Company shall rely on different networks for the settlement of
remittance payments through the No Borders stored value card platform on behalf
of merchant customers. In the use of these established paymentclearance systems,
we generally, in the last analysis. bear the credit risks arising from stop
payment orders, closed accounts, unauthorized use, disputes, customer charge
backs, theft or fraud. Moreover, No Borders assumes the credit risk of merchant
or remittance agent dispute, fraud, insolvency or bankruptcy in the event we
attempt to recover funds related to such transactions from our remittance
agents, merchants and customers. No Borders utilizes a number of systems and
procedures to manage and limit credit risks, but if these actions are not
successful in managing such risks, the Company may incur significant losses.
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THE ELECTRONIC COMMERCE MARKET IS RELATIVELY NEW AND IF IT DOES NOT
GROW, WE MAY NOT BE ABLE TO SELL SUFFICIENT SERVICES TO MAKE OUR
BUSINESS VIABLE.
The electronic commerce market is a relatively new and growing service industry.
If the electronic commerce market fails to grow or grows slower than
anticipated, or if the Company, despite an investment of significant
resources,is unable to adapt to meet changing customer requirements or
technological changes in this emerging market, or if the Company's services and
related products do not maintain a proportionate degree of acceptance in this
growing market, No Borders business may not grow and could even fail.
Additionally, the security and privacy concerns of existing and potential
customers may inhibit the growth of the electronic commerce market in general,
and the No Borders intended customer base and revenues, in particular. Similar
to the emergence of the credit card and automatic teller machine, or ATM,
industries, No Borders and other organizations serving the electronic commerce
market must educate users that electronic transactions use encryption technology
and other electronic security measures that make electronic transactions more
secure than paper-based transactions.
CHANGES IN REGULATION OF ELECTRONIC COMMERCE AND RELATED FINANCIAL
SERVICES INDUSTRIES COULD INCREASE OUR COSTS AND LIMIT OUR BUSINESS
OPPORTUNITIES.
No Borders believes that it is not required to be licensed by the Office of the
Comptroller of the Currency, the Federal Reserve Board, or other federal or
state agencies that regulate or monitor banks. It is possible that a federal or
state agency will attempt to regulate providers of electronic commerce services,
which could impede the Company's ability to do business in the regulator's
jurisdiction. The Company is subject to various licensing laws and regulations
relating to remittance transactions in certain States of the United States, and
to the extent the Company does not obtain such licenses directly or via
partnerships or acquisitions or affiliations with licensed remittance companies
or banking institutions, the Company's ability to conduct remittance
transactions would be impeded in those States. Given the expansion of the
electronic commerce market, the Federal Reserve Board might revise Regulation E
or adopt new rules for electronic funds affecting users other than consumers.
Because of growth in the electronic commerce market, Congress has held hearings
on whether to regulate providers of services and transactions in the electronic
commerce market. It is possible that Congress or individual states could enact
laws regulating the electronic commerce market. If enacted, such laws, rules and
regulations could be imposed on the Company's business and industry
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Additional Financing Is Required
The conduct of the Company's business requires availability of additional funds.
The Company may encounter difficulty in obtaining these funds. Moreover, even if
financing were to become available, there is no assurance that it would be upon
terms acceptable to the Company or favorable to its existing shareholders.
Indemnification Of Officers And Directors
General. The Officers and Directors of the Company are accountable to the
Company as fiduciaries and such Officers and Directors are required to exercise
good faith and integrity in managing the Company's affairs and policies. Each
investor or his or her duly authorized representative may inspect the books and
records of the Company at any time during normal business hours. An investor may
be able to bring a class action or on behalf of himself or herself and all other
similarly situated investors who have suffered losses in connection with the
purchase of the Common Stock due to a breach of fiduciary duty by an Officer or
Director of the Company in connection with such sale or purchase, including the
misapplication by any such Officer or Director of the proceeds from the sale of
these securities, and may be able to recover such losses from the Company.
Indemnification. Indemnification may be permitted by a company to directors,
officers or controlling persons pursuant to the General Corporation Law of the
State of Nevada and the Company's By-laws. Indemnification may include expenses,
such as attorney's fees, and, in certain circumstances, judgments, fines and
settlement amounts actually paid or incurred in connection with actual or
threatened actions, suits or proceedings involving such person and arising from
his or her relationship with the Company except in certain circumstances where a
person is adjudged to be guilty of gross negligence or willful misconduct unless
a court determines that such indemnification is fair and reasonable under the
circumstances.
Product Research and Development:
During the next 12 months the Company intends to scale its stored value and
debit card platform to include servicing and interfacing to facilitate the mass
marketing of pre-paid cards at retail outlets, to interface with partnership
affinity cards, to interface with vendors of services and products and to
interface with merchant accounts. It is anticipated that this development will
cost $150,000..
Expected purchase or sale of equipment:
The company anticipates purchasing computers and pin pads for distribution to
its affiliated remittance agents and payout sites at a cost of $700,000,
assuming the acquisition of the projected 1050 US remittance agents and 835
payout sites during the next 12 months.
Employees.
The company currently (as of May 23, 2005) has 15 employees and consultants.
Company's CEO, and President have not received any salaries.. During the second
quarter of 2005, the Company intends to convert prior consulting agreements to
employment agreements with management personnel, including the President, the
Acting CEO and Executive Vice President, the General Manager and Executive Vice
President of Corporate Strategy, the VP of Sales, the VP of Business and the
Company intends to engage a CEO/COO to replace the Acting CEO, a Chief Financial
Officer, a Controller and a VP of Marketing, as well operational, sales and
marketing staff personnel.
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DESCRIPTION OF PROPERTY
Company owns no real properties and has leased premises at a total cost of
$4,500 per month. In December, Company moved into its offices in Venice
California, with space rented approximately 4,500 square feet at a cost of
$10,800 per month commencing in February, 2005.
Description of Products and Services: No Borders has developed a stored value
card platform which allows for the loading of funds into a closed network system
managed by a treasury management system, and further allow the transfer of funds
from that card to other cards, all in real time, with security and in compliance
with applicable Federal and State regulations. The card may hold funds and
access point of sale devices at merchant sites compatible with the No Borders
software.. Moreover the developed system will allow for transferring funds from
the closed system to a so-called open network, such as the Visa and MasterCard
networks. The closed network system allows for lower cost transaction fees when
loading, transferring or withdrawing funds, and does not mandate any rate of
exchange surcharges when transferring funds from the U.S. to other countries. In
addition, design for the stored value and debit card platform to interface with
various vendors and others providing services and products has been developed by
Company and as deployed, holders of the No Borders stored value cards may pay
for services and products offered by specified third party vendors.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
These legal proceedings were described in prior filings by American Eagle
Motorcycle Company prior to the reverse merger of No Borders. Pursuant to the
provisions of the Exchange Agreement, Badtoys Holdings Inc has agreed to assume
all of these potential liabilities and claims which had been asserted against
subsidiary or subsidiaries of American Eagle Manufacturing Company, such
subsidiary having been purchased by Badtoys Holdings immediately following the
reverse merger of Intercommunity Financing Corp, d/b/a No Borders into Company.
In addition, Badtoys Holdings agreed to indemnify and hold Company harmless from
and against any of such claims. The proceedings: Gregory Spak vs. American Eagle
Motorcycles filed February 27, 2003, Case No. GIN 027138 in the Superior Court
of North San Diego County. The Court denied the claim finding for American
Eagle.
Comerica Bank vs. American Eagle and American Eagle vs. Gregory Spak and A.E.
Technologies, Inc. and Fastrak Motorcycles and Hellbent Motorcycles filed suit
on June 20, 2003, Case No. Gv-818041 in the Superior Court of Santa Clara
County. Comerica Bank is seeking to recover equipment that secured a loan to
A.E. Technologies and Gregory Spak. A portion of the equipment has been received
by American Eagle and is being stored awaiting instructions to return it to
Comerica Bank. Comerica Bank is seeking $689,335. The management of American
Eagle feels it has no liability in this case.
A.E. Technologies, Inc. and Gregory Spak vs. Aemrican Eagle Corporation, Et Al
filed November 6, 2003 Case No. 03CC00518 Superior Court of Orange County
California. Gregory Spak and A.E. Technologies, Inc. are suing to recover assets
and damages for the breach of the contract that was rescinded by American Eagle.
A.E. Technologies and Gregory Spak are seeking $15,750,000 in damages. American
Eagle Management feels that they have very little if any liability in this
matter. If the court should find American Eagle liable in either of these cases
it could require American Eagle to issue more shares of stock to pay the
damages. The Superior Court has ordered all action in this case stayed until the
case filed in Santa Clara county has been settled.
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ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(b) Reports on Form 8-K.filed on October 21, 2004 and October 22, 2004 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Company has duly caused this report to be signed on its behalf by the
undersigned on its behalf by the undersigned thereunto duly authorized.
NO BORDERS, INC.
/s/ Robert M. Rosenfeld
May 23, 2005 ----------------------------
Robert M. Rosenfeld
Senior Financial Officer
Acting CEO
/s/ Raul Hinojosa
May 23, 2005 -----------------------------
/s/ Raul Hinojosa
President