ITEM 1. BUSINESS
Background and History
We were incorporated in the state of Wyoming on November 6, 1973 under the name DOL Resources, Inc. From inception until October 2002, our primary business activity was the acquisition, disposition, commercialization and/or exploration of interests in oil, gas and/or coal properties. In October 2002, we sold all of our oil and gas properties to Glauber Management Company whereupon we ceased any business operations and became a non-operating shell company with no revenue and minimal assets, whose activities were limited to that of seeking to merge with or acquire an operating business.
On August 1, 2007 we changed our name to Omega Commercial Finance Corp.
On September 14, 2007, we entered into a Stock Purchase Agreement and Share Exchange with Omega Capital Funding LLC, a Florida limited liability company (“Omega Capital”) pursuant to which we acquired 100% ownership of Omega Capital (the “Reorganization”). After the Reorganization, our business operations consisted of those of Omega Capital. From October 2002 until the Reorganization we were a non-operating shell company with no revenue and minimal assets, whose activities were limited to seeking to merge with or acquire an operating business. As a result of the Reorganization, we were no longer considered a shell company.
Since the Reorganization in September 2007, our business operations, through various subsidiaries, have been directed primarily at an offering financing to the real estate markets in the United States. We provide short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. We focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground-up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. Our operations are based primarily in Miami Beach, Florida.
We have yet to generate significant revenues or achieve profitable operations since the Reorganization. We currently owe over $2.3 million in legal judgments against the Company. We have accumulated losses, a working capital deficiency and we expect to incur further losses in the development of our business, all of which, according to our accountants, casts substantial doubt about our ability to continue as a going concern.
Business Developments

On February 20, 2012, CCRE Capital, LLC (“CCRE”), our wholly owned subsidiary entered into the Strategic Alliance Agreement (the “Gardens Strategic Alliance”) with Gardens VE Limited, a British Company (“Gardens”). Gardens’ manager, Flavio Zuanier, is a seasoned and proven developer that brought along his vast background, knowledge, and professionalism in construction engineering and project development. The short-term goal of the Gardens Strategic Alliance is the acquisition of the La Posta Golf Club & Luxury Hotel (“La Posta”), while its long-term goal is the refurbishment of the acquired property to both enhance it and make it operational. Our responsibility within the Gardens Strategic Alliance is the arrangement and contribution of up to $58,000,000 based on the projected cost for the Gardens Strategic Alliance stemming over the course of the operation as needed, but not to exceed ten (10) years. Mr. Zuanier is responsible for the day-to-day operation for the entire duration of the project as it pertains to the future refurbishment phase and Gardens has currently placed the property under contract with a hard deposit, to which we are not a party. In addition, Mr. Zuanier is responsible for transferring free and clear with an unencumbered title of fixed assets in order to support future financing for all phases covering the acquisition on through the refurbishment of the property. The termination of the Gardens Strategic Alliance is at the discretion of both parties or upon the completion of the refurbishment and or disposition of the stabilized income-producing asset to date. Gardens has not completed the acquisition of the La Posta and we continue to work with Mr. Zuanier to continue our efforts under the Gardens Strategic Alliance to raise additional capital to meet our funding obligations to complete this transaction. In March 2013, CCRE and Mr. Zuanier entered into an amendment to the Gardens Strategic Alliance whereby Mr. Zuanier agreed to transfer an additional forty-six percent (46%) interest in Gardens to CCRE giving CCRE a 95% ownership interest in the capital of Gardens in exchange for 1,000,000 unregistered Shares. Mr. Zuanier retains a 75% profit participating interest pro rata for all mortgages, liens, operating expenses and or encumbrances on Garden’s development/projects. As of the date of this filing, the details of the agreement have not been finalized.
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On June 27, 2012, CCRE entered into a Strategic Alliance Agreement (the “Strategic Alliance II”) with Towers Real Estate Limited, a British Company (“Towers”), and its management, which includes Flavio Zuanier, whereby the parties agreed to form a strategic alliance for the acquisition and construction of the Le Principesse real estate located in Mestre-Venice, Italy. Under the Strategic Alliance II, Towers agreed to transfer, free, clear, and unencumbered title to the fixed assets and issues equal to forty-nine (49%) percent of their ownership interests in Towers to CCRE in exchange for future fundraising for operating capital and related expenses. Omega is responsible for the arrangement and contribution of up to $375,000,000 over the course of the operation as needed per the budgeted projected cost for the Strategic Alliance II. We are seeking to raise additional capital to meet our funding obligations to complete this transaction. In March 2013, CCRE and Mr. Zuanier amended the Strategic Alliance II whereby Mr. Zuanier agreed to transfer an additional forty-six percent (46%) interest in Towers to CCRE giving CCRE a 95% ownership interest in the capital of Towers in exchange for 1,000,000 unregistered Shares. Mr. Zuanier retains a 75% profit participating interest pro rata for all mortgages, liens, operating expenses and or encumbrances on Tower’s development/projects. As of the date of this filing, the details of this agreement have not been finalized.

On October 16, 2012, we entered into a Definitive Agreement For The Share Exchange & Acquisition Of USA Tax & Insurance Services, Inc. (“USTIS”) and American Investment Services LLC (“AIS”) (the “USTIS Agreement”). Pursuant to the USTIS Agreement, we agreed to purchase all of the outstanding equity and assets of both USTIS and AIS from Stephen Hand for a purchase price of $20,000,000. In accordance with the USTIS Agreement, we were required to create and authorize Series B Preferred Stock and conduct a registered offering of these shares to raise funds to pay the purchase price under the USTIS Agreement. The USTIS Agreement required a closing of the transaction on or before December 15, 2012. We have entered into several amendments to the USTIS Agreement: (i) on January 10, 2013, the first amendment extended the closing date to January 30, 2013; (ii) on January 23, 2013, the second amendment extended the closing date to April 30, 2013; and (iii) on February 8, 2013, the third amendment modified the Agreement by reducing the purchase price from $20,000,000 to $10,400,000 plus payment of certain stock-based compensation as part of a roll-up acquisition strategy. In addition, the Third Amendment eliminated the obligation for us to issue Series B Preferred Stock and conduct a registered offering of these shares. Further, we agreed to revise the scope of matters Mr. Hand may work on following completion of the acquisition, and Mr. Hand agreed to enter into a five year non-compete agreement with us following closing. The closing did not occur by April 30, 2013 and the USTIS Agreement was terminated in accordance with its terms.

On January 3, 2014, we entered into an agreement to acquire certain assets of NuQuest Capital Matchpoint I, LLC, a Georgia limited liability company (“Matchpoint”), engaged in the development of a “crowd funding” web portal, “Capital Match Point.” Such assets included Matchpoint’s fully operation web portal and its operating business services. In consideration therefor, on February 7, 2014, we issued to Matchpoint 1,000,000 shares of our Series G Convertible Preferred Stock, which is convertible into 25 Shares, subject to adjustment in certain circumstances. The transaction was valued at the price of the common stock shares at the close of trading on such date or $502,500. The asset was subsequently adjusted for fair value and written off as of June 30, 2014. During June, 2014, the current contractors operating the website resigned and we are currently in the process of restaffing and implementing a new business plan.

On June 3, 2014, we entered into an agreement with AmericaVest CRE Mortgage Funding Trust, Inc., a Maryland corporation (“AmericaVest”), pursuant to which we acquired from AmericaVest a 51% equity interest therein, or 1,564,079 shares of AmericaVest’s common stock for a purchase price of $2,000,000 (the “AmericaVest Purchase Agreement”). The purchase price was initially payable by the issuance of a forty-five (45) day promissory note. We subsequently amended the AmericaVest Agreement to consummate the transaction in July 2014 by issuing 285,714 Shares to AmericaVest, which Shares are covered by the Registration Statement of which this prospectus makes a part. On November 11, 2014, the Company and AmericaVest mutually agreed to transfer back to AmericaVest, a total of 41% or 641,272 shares, thereby reducing our equity ownership in AmericaVest to 10%, pending completion of required audited financials by AmericaVest, at which time we will have an irrevocable option, exercisable at our sole discretion, to reacquire such AmericaVest shares for no additional consideration.

AmericaVest is a recently formed corporation which intends to qualify as a real estate investment trust (a “REIT”) for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”). AmericaVest’s intends to originate, through an affiliate, senior whole mortgage loans secured by commercial and multifamily real estate properties in the United States. AmericaVest will hold such mortgages for investment purposes and its investment strategy will be to generate current income and capital appreciation primarily through the origination of secured first position bridge loans collateralized by commercial real estate.
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On October 17, 2014 Omega entered into a definitive agreement (the “VeriTrek Agreement”) with Veritrek, Inc. (“Veritrek”) and Ronnie Hale and John Manno, VeriTrek’s majority shareholders (the “VeritTrek Shareholders”). Pursuant to which we acquired a majority ownership stake of 75% of VeriTrek’s common stock at a purchase price of $15.0 million, payable by Omega issuing 15,000,000 shares of its restricted common stock to the VeriTrek shareholders with the shares valued at $1.00.

On October 30, 2014, the VeriTrek shareholders and we amended the VeriTrek Agreement pursuant to which we transferred back 600,000 shares of VeriTrek’s common stock to the VeriTrek Shareholders and the VeriTrek shareholders transferred back to us 6,750,000 of the 15,000,00 shares of Omega common stock which we issued to them. As a result, our equity interest in VeriTrek was reduced to 15%.

On March 12, 2015, the Company and the VeriTrek Shareholders entered into a second amendment to the VeriTrek Agreement, providing for the consummation of the acquisition as originally proposed, by reissuing an additional 6,750,000 shares of Omega’s restricted common stock to the VeriTrek Shareholders in exchange for 600,000 shares of VeriTrek’s common stock held by them, thereby increasing our equity interest in VeriTrek to 75%. This transaction closed on March 23, 2015.

On November 24, 2014, our Board of Directors authorized the adoption of a share repurchase plan (the “Program”), pursuant to which the Company is authorized to purchase up to $200,000 of its shares of common stock from time to time through June 30, 2015. Share purchases under the Program will be made in the open market, through block trades, or privately negotiated transactions in accordance with applicable Securities and Exchange Commission rules.

We are under no obligation to repurchase shares under the Program. The timing, actual number, and value of shares that may be repurchased under the Program will depend on a number of factors including our future financial performance, available cash resources, competing uses for our corporate funds, the prevailing market price of our common stock, the number of shares that become available for sale at prices that we believes are attractive and compliance with regulatory requirements. For these reasons as well as others, there can be no assurance that our board of directors will not decide to suspend purchases of shares under the Program or terminate the Program. As of December 31, 2014, the Company has repurchased 3,677,105 shares for an aggregate of $13,913 and returned them to Treasury.
Corporate Information
We are a Wyoming corporation originally incorporated in 1973. Our executive offices are located at 1000 5th Street, Suite 200, Miami Beach, FL 33139 and our telephone number is (305) 704-3294. Our website is www.omegapublic.com. Information contained in our website shall not be deemed incorporated into this report.
Overview
Since the Reorganization in September 2007, our business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. We provide commercial real estate financing and loan brokering services for short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. We focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. Our operations are based primarily in Miami Beach, Florida.
Our core objective through our vertically integrated lending subsidiaries is to create productive synergies and business opportunities by offering loans that can garner consistent interest income and fee revenue from either brokering or originating short and medium term loans (the “Loans”). Primarily these transactional services will be solicited to borrowers consisting of commercial property owners, developers, landlords, and non-real estate owners of businesses (collectively, “Borrowers”).
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We seek to consult and/or arrange loans through various financing programs with an emphasis on Loans secured by commercial real estate such as core assets that include office buildings, multi-family residences, shopping centers, industrial, and hotels, as well as asset backed loans secured by account receivables from established companies. The Loans may consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. We seek loan opportunities with low loan to value ratios (“LTV”) for first lien senior debt mortgages and for cash flowing loans that may consist of both low LTV’s and high debt service coverage ratios.
The break-down for the allocation of the capital/investment towards various Loan types will encompass between 60% and 80% of senior debt coupled with asset-backed first position senior debt, and the remaining allocation of capital can be utilized for subordinate and mezzanine debt with limited equity financing, yet all secured by the underlying assets. The geographical areas will consist of 90% originating within the United States and no more than 10% from other common law countries. Operationally, we have yet to determine our allocation/breakdown between originating loans and purchasing them from other lending organizations.
A source for generating revenue for our subsidiaries can come from fees, which are paid upfront upon engaging the prospective borrower for providing lending services that include completing our preliminary due diligence. This non-refundable fee can range from $10,000 up to $75,000 or larger depending on the amount of information that’s required and/or the level of difficulty the prospective borrower’s request may be. Furthermore, standard loan origination fees will also be charged and can range from 2% up to 8% and in some cases as high as 10% of the gross loan amount financed. In the event the Loans are originated directly by our lending subsidiary’s finance advisors we shall split the aforementioned fee equally with the finance advisors. In the case of brokering the loan out to a third-party lender, we will split the fee equally with the third-party broker and the remaining balance 50/50 with our finance advisor.
Regardless of the type of Loan, our lending subsidiaries objective is to recognize and scrutinize various levels of risk associated with each Loan or specialty-financing program. We will utilize third party relationships with seasoned providers to independently assess the value, volatility, and adequacy of the pledged collateral for each Loan to ensure that all lending transactions made are appropriately collateralized. As part of the procedures, our third party independent asset loan manager will assess the ease and cost effectiveness of repossessing and disposing of collateral for each Loan. We ensure that underlying loans will have adequate insurance as well. Standard underwriting protocols and criteria are used by our third-party firms and are part of the credit assessment conducted prior to the final approval for any investment or Loan financing.
Plan of Operations
Our core objective is to achieve advantageous yields and consistent interest income on short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords and owners of core assets. We consult on various financing programs with an emphasis on loans secured by commercial real estate such as core assets that include office buildings, multi-family residences, shopping centers, industrial, and hotels, as well as asset backed loans secured by account receivables from established companies. The loans may consist of senior debt loans, mezzanine or subordinated loans, preferred equity and other equity participation financing structures, and in the case of specialty financing for the factoring a standard UCC-1 filing procedure.
We follow a “conservative lending” profile for the loans. We seek low leveraged first lien senior debt mortgage loans and high debt service structured financing programs, as opposed to riskier, less secure mezzanine or equity positions.
Many times when a company decides to pursue new opportunities, they find that the barriers of entry are often high or unattainable. Typically, this is due to a lack of capital and the proper advisory services and solutions necessary for these companies to achieve their business potential. We were organized as a publicly traded commercial real estate lending company primarily for the purpose of underwriting or investing in loans and/or specialty financing programs backed or secured by real estate or other types of related assets or equity interests.
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Regardless of the type of loan, our focus is on earning rates of return that exceed the commensurate level of risk associated with each loan and specialty financing program. We have utilized third party relationships with seasoned providers to independently assess the value, volatility, and adequacy of the collateral for each loan to assure that all loans made are appropriately collateralized. As part of our assurance procedures, our third party independent asset loan manager will assess the ease of repossessing and disposing of collateral for each loan. We ensure that underlying loans will have adequate insurance. The standard securitization underwriting protocols and criteria is what is used by our third party firms and are part of the credit assessment prior to the final approval for any investment.
We have authority to invest in a wide variety of securities, loans, and real estate related investments, domestic or foreign, of all kinds and descriptions, whether publicly traded or privately placed, including but not limited to common and preferred stocks, bonds and other debt securities, direct ownership interests in real estate, interests in real estate investment funds, loans of all kind (including luxury residential loans and other loans described herein), accounts receivable, notes, convertible securities, limited partnership interests, limited liability company interests, mutual fund shares, options, warrants, derivatives, currencies, monetary instruments and cash and cash equivalents. We do not trade commodities or financial futures.
Business Objectives and Strategy
Our lending subsidiary’s core business objective is to achieve advantageous and consistent yields on charged interest rates from short and medium term Loans to Borrowers when often times traditional financing is unavailable to such Borrowers for either acquisitions, refinancing of commercial property loans, and asset backed loans. We evaluate various alternative commercial real estate financing with an emphasis on Loans secured by commercial real estate and also seek to invest in the financing of core assets that include office buildings, multi-family residences, shopping centers, hospitality, plus ground up entitled land developments. We generally follow a conservative loan profile for our pipeline of deals, which means creating portfolios consisting of loans with low loan to value and high debt service cover ratios. We evaluate Loans that are first lien, senior debt mortgage loans, and specialty financing programs and riskier less secure, yet much more profitable mezzanine or equity positions in order to conclude which opportunities serve as prudent investments.
With respect to asset backed loans, we plan to prudently originate receivable based lines of credit better known as factoring. Factoring assists small to medium sized business owners with resolving their short-term working capital needs. A back office underwriting, due diligence, sales, marketing, servicing, training, and collections third-party provider will support this service. In order to effectively manage and provide quality control, we will utilize state of the art software that allows us to facilitate and organize a seamless stream of completed transactions. Furthermore, we plan to leverage our assets at a customary multiple of up to 6(x) times, which will maximize our future capital.
The products and services we provide entail two dimensions of credit risk, customer and client. The largest risk is the customer credit risk in factoring transactions. Customer risk relates to the financial inability of a customer to pay on undisputed trade accounts receivables due from such customer to the factor. While smaller than customer credit exposure, there is also client credit risk in providing cash advances to factoring clients. Client risk relates to a decline in the credit worthiness of a borrowing client, their consequent inability to repay their loan and the possible insufficiency of the underlying collateral (including the aforementioned customer accounts receivable) to cover any loan repayment shortfall.
Furthermore, we plan to leverage these receivable assets at a customary multiple between 3(x) and 6(x) times. Therefore, our factoring financing is subject to a variety of business risks including operational, regulatory, financial, as well as business risks related to competitive pressures from banks, boutique factors, and credit insurers. These pressures create risk of reduced pricing and volume for our lending subsidiary operations. In addition, client de-factoring can occur if retail credit conditions are benign for a long period and clients no longer demand factoring services for credit protection.
Use of Loan Servicers
In carrying out our business strategy, we may seek out and utilize third-party firms that specialize in loan origination and servicing (“Servicers”). Our objective is to perform due diligence on each Servicer in order to evaluate the firm’s experience and expertise in servicing loans that satisfy our investment criteria. Upon completion and review of the due diligence process, those firms that best meet the criteria will be eligible to enter into Loan origination and servicing agreements with us.
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Use of Other Third Party Feasibility and Evaluation Providers
We intend to utilize various third-party organizations that specialize in providing services associated and in connection with our products and services such as providing evaluation and feasibility services, closings and escrow services, and fund administration services.
Sale of Participations
In the discretion of management, we may sell participation rights in various loans we originate to other entities.
Lending
Through our vertically integrated lending subsidiaries, our core competencies are within the commercial real estate mortgage sector and will focus on advisory, originating, and funding commercial mortgage loans including loans that are asset backed with collateral such as inventory, equipment, purchase orders, and some intellectual property rights.
Our Core Lending Product - Commercial Real Estate Lending
Through our subsidiaries our objective is to focus on taking advantage of the vast domestic commercial real estate lending market. In order to create a sound, proven back-office, we have access to commercial real estate (“CRE”) and financial-market loan processors as well as underwriters, credit analysts, and servicing professionals that are now available as a result of the earlier credit crisis.
Our lending business model is similar to those of traditional banks or financing companies within the lending industry. However to compete within this industry, our lending subsidiaries can create an advantage through our vertically integrate corporate structure which provides seamless deal flow in addition to reducing overhead cost associated to facilitating our loan origination model as a direct balance sheet lender.
The Loans are expected to fall principally in the following categories:
Acquisition -- Loans made to acquire or refinance commercial and multi-family real estate properties, such as:
·
Office
·
Hotels / Flagged or Boutique
·
Multifamily
·
Urban Apartment Complexes
·
Retail (Anchored or Non Anchored)
·
Condominiums (and Conversions)
·
Master Planned Multifamily Resort Development
Other Commercial Real Estate -- Loans secured by real estate and made for the purpose of providing working capital or allowing owners to take equity capital out of a business, and warehouse lines of credit facilities to provide “Hard Money” to small commercial real estate lenders.
Asset Backed Loans -- Loans secured by account receivables, inventory, purchase orders, or equipment.
The following table shows the anticipated loan program mix by type of Loans:
Acquisition Financing/Refinancing of Commercial Real Estate Properties
85%
Other Non-Core Commercial Real Estate and Land Loans
15%
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The above table is only an illustration of the proposed loan mix. The Company shall determine, in its discretion, what portion of the Company’s investments shall be allocated to each type of Loan transaction and therefore the Company may alter the foregoing mix as it deems necessary or advantageous. Regardless of the type of Loan, the Company’s focus s expected to include the following goals, considerations and credit procedures:

Earn rates of return that exceed the commensurate level of risk associated with each Loan and structured financing program;

Independently assess the value, volatility and adequacy of the collateral for each Loan;

Make Loans that are appropriately collateralized;

Assess the ease with which the Company can repossess and dispose of the collateral for each Loan;

Ensure that each Loan or other investment has the proper legal documentation;

Ensure that the underlying projects and properties have adequate insurance, including but not limited to flood insurance , fire insurance, key-man insurance, and surety bonds;

Require evaluation, appraisals and feasibility reports by third party firms as part of the credit assessment prior to the final approval of any investment;

Require title commitment policies in the name of the Company prior to a Loan approval;

Require investments to have a minimum debt coverage ratio.

Obtain a fair market value of the asset(s) as determined by a certified MAI appraisal and evaluation firm selected by the Company.
Key Operational Highlights
The overall CRE core property lending market is vast and global offering us significant growth opportunities.
This lending model will allow for smaller increments of loan transactions designed for quicker closings to permit investors to monitor the development of our ongoing balance sheet and enable us to achieve our benchmarks and milestones.
Trepp.com a top CMBS research firm believes this commercial property loan market is currently estimated to be valued at $650-billion with $80-billion of underlying mortgages maturing between now and 2017.
Seasoned commercial real estate securitization specialists have been hired to coordinate our loan underwriting model centered on mitigating loan-loss risks and to perform all other related and required third-party due diligence.
Since the securitization industry has standardized the underwriting criteria, it will enable each hired third-party organization and back-office operation to integrate and exchange information effectively and efficiently.
Low cost and prudent leverage is available to us for these types of loan originations.
We feel our overall business structure coupled with a CRE investment banker’s expertise, our public platform, and prudent determination to become a leading small cap growth company in this lending market could add significant value for us and for our current market price moving forward.
We will receive and be presented commercial real estate loan originations generated from a proven and well-experienced loan processing sales force as well as from top-rated REITS.
We shall utilize our own internal industry knowledge as well extensive loan origination, structuring, and closing experience of our strategic partners to serve our specific needs vital for growing our top-line.
These experienced industry veterans have all contributed to the creation of this loan strategy, which has yielded us immediate loan production opportunities consisting of quality loans.
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Deal Generation
General
Deal generation and origination is maximized through long-standing and extensive relationships with industry contacts, brokers, commercial and investment bankers, entrepreneurs, service providers such as lawyers, financial advisors, accountants and current and former portfolio companies and investors. Through our subsidiaries management teams focuses their deal generation and through advisory services or direct loan origination efforts to develop a reputation as a knowledgeable, reliable and active source of capital and assistance in the commercial real estate and asset backed lending markets.
Screening
During the screening process, if a transaction initially meets our investment criteria, we will perform preliminary due diligence, taking into consideration some or all of the following information:
a.
a comprehensive review of financials statements and or model based on quantitative analysis of historical financial performance, projections and pro forma adjustments to determine the estimated internal rate of return;
b.
a brief industry and market analysis;
c.
preliminary qualitative analysis of the management team's track record and backgrounds;
d.
potential lending structures and pricing terms; and
e.
regulatory compliance.
Upon successful screening of a proposed loan transactions, the subsidiary management teams makes a recommendation to typically issue a non-binding term sheet to the prospective borrower.
Term Sheet
For proposed transactions, the non-binding term sheet will include the key economic terms based upon our analysis performed during the screening process as well as a proposed timeline and our qualitative expectation for the transaction. While the term sheet for the loan programs is non-binding, we typically receive an non refutable due diligence fee in order to move the transaction to the due diligence phase. Upon execution of a term sheet, we begin our formal due diligence process.
Due Diligence
Due diligence on a proposed loan programs is performed by a minimum 3rd parties commercial real estate, asset backed professionals, whom we refer to collectively as the Due Diligence Process, in addition certain external resources, who together conduct due diligence to understand the borrowers business plan, operations and financial performance. The Company’s due diligence review includes some or all of the following:
a.
site visits with management and key personnel;
b.
detailed review of historical and projected financial statements;
c.
operational reviews and analysis;
d.
interviews with customers and suppliers;
e.
detailed evaluation of company management, including background checks;
f.
review of material contracts;
g.
in-depth industry, market, and strategy analysis;
h.
regulatory compliance analysis; and
i.
review by legal, environmental or other consultants, if applicable.
j.
company history and overview;
k.
transaction overview, history and rationale, including an analysis of transaction strengths and risks;
l.
analysis of key customers and suppliers and key contracts;
m.
a working capital analysis;
n.
an analysis of the company's business strategy;
o.
a management and key equity investor background check and assessment;
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p.
third-party accounting, legal, environmental or other due diligence findings;
q.
investment structure and expected returns;
r.
anticipated sources of repayment and potential exit strategies;
s.
pro forma capitalization and ownership;
t.
an analysis of historical financial results and key financial ratios;
u.
sensitivities to management's financial projections;
v.
regulatory compliance analysis findings; and
w.
detailed reconciliations of historical to pro forma results.
Competition
A number of much larger proven commercial real estate lenders currently have established operations with large balance sheets and back office staff. However, we are a non-banking institution and are not regulated like the larger banks or typical CMBS lender in that we are not “pigeon holed” into immediately securitizing our assets. Rather we elect to use the standardized securitization underwriting characteristics to originate loans, consequently to mitigate liquidly-risk (i.e. recapitalization) with the ability to hold these loans on the un-tainted balance sheet in order to garner stable income to yield strong growth and market share.
Finally, upon closing a minimum of $5 million dollars of loans and meeting other listing criteria, we expect to apply to be listed on the AMEX or other national stock exchange enabling our investors to have robust liquidity and more importantly will allow for us to implement additional proven, balance sheet, capital markets growth-strategies to compete with other top tier financial firms like CapitalSource Inc, Goldman Sachs Commercial Real Estate, Morgan Stanley Real Estate, JP Morgan Chase, etc.
Employees
We have no employees. We have contractual agreements with our officers and sales representatives. We plan to rely on third party commercial real estate professionals in areas such as credit, underwriting, due diligence, and loan servicing, plus a team of seasoned commercial real estate attorneys to secure our assets on an as needed basis. We also intend to rely on proven mortgage bankers to generate production for stabilized commercial property loans.
Government Regulation
Protection of Customer and Client Information
Certain aspects of the Company’s business are subject to legal requirements concerning the use and protection of customer information, including those adopted pursuant to the Gramm-Leach-Bliley Act and the Fair and Accurate Credit Transactions Act of 2003 in the U.S., the E.U. Data Protection Directive, and various laws in Asia and Latin America. In the U.S., the Company is required periodically to notify its customers and clients of its policy on sharing nonpublic customer or client information with its affiliates or with third party non-affiliates, and, in some circumstances, allow its customers and clients to prevent disclosure of certain personal information to affiliates and third party non-affiliates. In many foreign jurisdictions, the Company is also restricted from sharing customer or client information with third party non-affiliates.
Other Regulations
In addition to U.S. banking regulation, our operations are subject to supervision and regulation by other federal, state, and various foreign governmental authorities. Additionally, our operations may be subject to various laws and judicial and administrative decisions. This oversight may serve to:
regulate credit granting activities, including establishing licensing requirements, if any, in various jurisdictions;
establish maximum interest rates, finance charges and other charges; regulate customers’ insurance coverages;
require disclosures to customers;
govern secured transactions;
set collection, foreclosure, repossession and claims handling procedures and other trade practices;
prohibit discrimination in the extension of credit and administration of loans; and
regulate the use and reporting of information related to a borrower’s credit experience and other data collection.
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Changes to laws of states and countries in which we do business could affect the operating environment in substantial and unpredictable ways. We cannot accurately predict whether such changes will occur or, if they occur, the ultimate effect they would have upon our financial condition or results of operations.
ITEM 1A.
ITEM 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.
Risks Related to Our Business
We have a limited operating history upon which an evaluation of our prospects can be made.
We were incorporated in November 1973, but only since September 2007, when we acquired Omega Capital Funding, LLC, a Florida limited liability company (“Omega Capital”), have we been conducting business operations aimed primarily at offering financing to the real estate markets in the United States. From 2002, when we sold our prior oil and gas properties to a third party, and until our 2007 Reorganization with Omega, we were a non-operating shell company with no revenue and minimal assets and no operations, whose activities were limited to that of seeking to merge with or acquire an operating business. Our current and future operations are contingent upon increasing revenues and raising capital for operations. Because we have a limited operating history, you will have difficulty evaluating our business and future prospects. This limited operating history, and the unpredictability of the real estate market, makes it difficult for investors to evaluate our business and future operating results. An investor in our securities must consider the risks, uncertainties and difficulties frequently encountered by companies in the real estate market. The risks and difficulties we face include challenges in accurate financial planning as a result of limited historical data and the uncertainties resulting from having had a limited time period in which to implement and evaluate our business strategies as compared to older companies with longer operating histories.
We have a history of losses, our accountants expressed doubts about our ability to continue as a going concern and we need additional capital to execute our business plan.
As of December 31, 2014, we have not yet achieved profitable operations. We have accumulated losses, a working capital deficiency and we expect to incur further losses in the development of our business, all of which, according to our accountants, casts substantial doubt about our ability to continue as a going concern. We will require additional funds through the receipt of conventional sources of capital or through future sales of our common stock, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations. There is no assurance we will be successful in raising additional capital when needed on commercially reasonable term s or achieving profitable operations. Wherever possible, our board of directors (the “Board”) will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock and preferred stock. These actions will result in dilution of the ownership interests of existing stockholders and may further dilute our book value, and that dilution may be material.
As an “emerging growth company,” we are permitted to rely on exemptions from certain disclosure requirements.
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of our Chief Executive’s compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Until such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We have incurred a substantial amount of judgment debt, the affect of which impairs our financial performance and ability to prosper.
We have incurred over $2.3 million of judgment debt due to negative outcomes of the litigation described in the section “Legal Proceedings” and our financial statements for the year ended December 31, 2013 and the nine months ended September 30, 2014. This debt negatively affects our financial performance and ability to borrow additional funds. Consequently, our ability to prosper and implement our business plan is severely hampered.
We depend highly on our current chief executive officer whose unexpected loss may adversely impact our business and with whom we do not have a formal employment agreement.
We rely heavily on the expertise, experience and continued services of Jon S. Cummings, IV, our Chief Executive Officer. We presently do not have an employment agreement with Mr. Cummings and there can be no assurance that we will be able to retain him or, should he choose to leave us for any reason, to attract and retain a replacement or additional key executives. The unexpected loss of our CEO may have a material adverse effect on our business, our financial condition, including liquidity and profitability, and our results of operations.
Any loans we retain will be highly illiquid therefore we may not be able to liquidate such investments in a timely manner.
Although our primary business strategy is to originate or resell real estate backed loans, any loans that we retain will likely be highly illiquid with no established market, and there can be no assurance that we will be able to liquidate such investments in a timely manner. Although loans and other investments we seek to make may generate current income, the return of capital and the realization of gains, if any, from such investments generally will occur only upon the partial or complete realization or disposition of such loan or investment.
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Loans made by us may become uncollectible and large amounts of uncollectible debt may materially affect our performance.
The loans made by us are relatively illiquid and substantial risks are involved in making loans. Most, and possibly all, of the loans will not be personally guaranteed. We will attempt to use information to help eliminate uncollectible debt resulting from bankruptcy, but no assurance can be made that we will be able to do so. If our debt portfolio contains a large portion of uncollectible debt, our performance may be negatively affected. In addition, if any borrower defaults on a loan, we may be required to expend monies in connection with foreclosure proceedings and other remedial actions which could adversely affect our performance. Certain loans may be affected negatively by economic, political, interest rate and other risks, any of which could result in an adverse change in the value of the asset that is used as collateral for the loan.
We intend to obtain credit lines as part of our investment strategy which may substantially increase our risk of loss.
We have anticipated that certain loans will be originated or purchased using leverage available to us, thus increasing both net returns as well as risk. We are depending on procuring credit facilities to originate loans as part of our investment strategy. There is no guarantee that we will be able to procure credit facilities on favorable terms or at expected rates. Although the use of leverage may enhance returns and increase the number of investments that can be made, it may also substantially increase our risk of loss.
We intend to use significant leverage and accordingly we will be subject to the risks arising therefrom.
The Company anticipates that it will use significant leverage (up to 6x) in originating or purchasing certain loans, thus increasing both net returns as well as risk. Although the use of leverage may enhance returns and increase the number of investments that can be made, it may also substantially increase the risk of loss as the company may not be able to pay interest obligations due to high leverage.
Our investment strategy is dependent upon Servicers to originate and administer loans; failure of our Servicers to originate loans in sufficient quantity and quality may cause us to fail to effectively implement our investment strategy.
We will be largely dependent upon Servicers (i.e., third-party firms that specialize in loan origination and servicing) to originate and administer loans in our portfolio. Should our Servicers fail to originate the loans in sufficient quantity and quality, we will be unable to effectively implement our investment strategy. Should Servicers fail to properly administer and service loans, including monitoring borrower’s compliance with the terms of the relevant loan documents, collecting and forwarding loan payments to us, and adequately pursuing and protecting our rights under the loan documents, any such failure could have a material adverse effect on us and our investment operations. In addition, should any Servicer default on its guaranty, if any, of a borrower’s obligation to repay a loan, such default could have a material adverse effect on us and our investment operations.
In addition to Servicers, we may retain mortgage brokers to introduce loans to us that satisfy our investment criteria, and pay commissions to such mortgage brokers based on the value of such loans. Some of these mortgage brokers may be deemed to be affiliates of management. We believe that all commissions payable to such persons or other affiliates of management will be reasonable and consistent with industry standards.
We may appraise loans at a value that is materially different from the value ultimately realized.
We make and value loans, in part, on the basis of information and data gathered from independent appraisal professionals. Although we evaluate all such information and data and may seek independent corroboration when appropriate and reasonably available, we are not in a position to confirm the completeness, genuineness or accuracy of such information and data, and in some cases, complete and accurate information may not be available. It is possible that the appraised value of a loan may differ materially from the actual value ultimately realized by us with respect to such loan.
Our loan strategy will likely be concentrated which could lead to increased risk.
Due to the nature of our collateralized loan strategy, any portfolio we acquire will likely be concentrated in a limited number of loan investments. Thus, our stockholders will have limited diversification. In addition, if we make an investment in a single transaction with the intent of refinancing or selling a portion of the investment, there is a risk that we will be unable to successfully complete such a financing or sale. This could lead to increased risk as a result of having an unintended long term investment and reduced diversification.
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We may make investments in foreign countries which may lead to additional risks not inherent to domestic lending.
We may make loan investments in foreign countries, some of which may prove to be unstable. As with any investment in a foreign country, there exists the risk of adverse political developments, including nationalization, acts of war or terrorism, and confiscation without fair compensation. Furthermore, any fluctuation in currency exchange rates will affect the value of investments in foreign securities or other assets and any restrictions imposed to prevent capital flight may make it difficult or impossible to exchange or repatriate foreign currency. In addition, laws and regulations of foreign countries may impose restrictions or approvals that would not exist in the United States and may require financing and structuring alternatives that differ significantly from those customarily used in the United States. Foreign countries also may impose taxes on us. We will analyze risks in the applicable foreign countries before making such investments, but no assurance can be given that a political or economic climate, or particular legal or regulatory risks, might not adversely affect our investments.
We may make collateralized real estate loans which may subject us to certain risks associated with the real estate industry.
We may make loans collateralized by real estate. Therefore, an investment in us may be subject to certain risks associated with the real estate industry in general. These risks include, without limitation: possible declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates. To the extent that our investments, or the assets of underlying or collateralizing our investments, are concentrated geographically, by property type or in certain other respects, we may be subject to the foregoing risks to a greater extent.
If third parties default or enter bankruptcy, we could suffer losses.
We may engage in transactions in securities and financial instruments that involve counterparties. Under certain conditions, we could suffer losses if counterparty to a transaction were to default or if the market for certain securities and/or financial instruments were to become illiquid. In addition, we could suffer losses if there were a default or bankruptcy by certain other third parties, including brokerage firms and banks with which we do business, or to which securities have been entrusted for custodial purposes.
We will face significant competition from many well established companies in implementing our various business segments.
In all of our planned business segments, we will likely face competition from existing entrants in the market, virtually all of whom have longer operating histories and greater financial resources than we do. In addition, there may be barriers to entry in certain market segments which may be difficult for us to overcome, given our limited assets, staffing and expertise. There can be no assurance given that even if we are able to increase our financial and operational resources, we will be able to successfully enter the various market segments we intend to or that if we do, that we can successfully compete. Failure to do so would substantially harm our business prospects and operations.
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If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting which, in turn, could harm our business and the trading price of our common stock.
We are subject to reporting obligations under the U.S. securities laws. The SEC as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on its internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our management’s assessment or may issue a report that is qualified if they are not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting at a reasonable assurance level. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our common stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. As of the date of this prospectus we do not have an estimate of our costs to comply with our obligations under the Sarbanes-Oxley Act.
We have not yet begun preparing for compliance with Section 404 of the Sarbanes-Oxley Act, but we are aware we must do so by strengthening, assessing and testing our system of internal controls to provide the basis for our report. The process of strengthening our internal controls and complying with Section 404 is expensive and time consuming, and requires significant management attention. We cannot be certain that these measures will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, as we grow our business, our internal controls will become more complex and will require significantly more resources to ensure our internal controls overall remain effective. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price.
We do not pay dividends on our common stock.
We have not paid any dividends on our common stock since our inception and do not anticipate paying dividends on our common stock in the foreseeable future. We plan to retain earnings, if any, to finance the development and expansion of our business.
We need additional capital in the future which will dilute the ownership of current stockholders or make our cash flow vulnerable to debt repayment requirements.
Historically, we have raised equity and debt capital to support our operations. To the extent that we raise additional equity capital, existing stockholders will experience a dilution in the voting power and ownership of their common stock, and earnings per share, if any, would be negatively impacted. Our inability to use our equity securities to finance our operations could materially limit our growth. Any borrowings made to finance operations could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions, or increases in interest rates on borrowings that are subject to interest rate fluctuations. If our cash flow from operations is insufficient to meet our working capital needs, we could be required to sell additional equity securities in order to meet these needs or satisfy judgments payables. There can be no assurance that any financing will be available to us when needed or will be available on terms acceptable to us. Our failure to obtain sufficient financing on favorable terms and conditions could have a material adverse effect on our growth prospects and our business, financial condition and results of operations.
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We have outstanding preferred stock and we may issue additional shares of preferred stock, which could prevent a change in our control.
Our Articles of Incorporation authorize the issuance of preferred stock with such rights and preferences as may be determined from time to time by our Board. Accordingly, under the Articles of Incorporation (the “Articles”), the Board, without stockholder approval, may issue preferred stock with dividend, liquidation, conversion, voting, redemption or other rights that could adversely affect the voting power or other rights of the holders of our common stock.
Our Board of Directors has authorized the creation of a number of classes of preferred stock, of which 2,048,362 shares are presently outstanding, 2,048,362 of which have (superior) voting, dividend and liquidation rights. The outstanding shares of preferred stock and the future issuance of any shares of our preferred stock having rights superior to our common stock, may result in a decrease in the value or market price of our common stock and could prevent a change in control of our company. We have no other anti-takeover provisions in our Articles or Bylaws. Prospective holders of our preferred stock may also have the right to receive dividends, certain preferences in liquidation and conversion rights.
Risk Factors Related to Our Common Stock
Our common stock is quoted on the OTCPINK, which may limit its liquidity and price more than if our common stock were quoted or listed on the OTC Bulletin Board, the Nasdaq Stock Market or other national exchange.
Our securities are currently quoted on the OTCPINK, an inter-dealer automated quotation system for equity securities. Quotation of our securities on the OTCPINK may limit the liquidity and price of our securities more than if our securities were quoted or listed on the OTC Bulletin Board, the Nasdaq Stock Market or other national exchange. As an OTCPINK listed company, we do not attract the extensive analyst coverage that accompanies companies listed on other exchanges. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded on the OTCPINK. These factors may have an adverse impact on the trading and price of our common stock.
The trading price of our common stock may decrease due to factors beyond our control.
The stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging growth companies and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our common stock. If our stockholders sell substantial amounts of their common stock in the public market, the price of our common stock could fall. These sales also might make it more difficult for us to sell equity, or equity-related securities, in the future at a price we deem appropriate.
The market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
·
variations in our quarterly operating results,
·
changes in general economic conditions and in the real estate industry,
·
changes in market valuations of similar companies,
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announcements by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments,
·
loss of a major customer, partner or joint venture participant; and
·
the addition or loss of key managerial and collaborative personnel.
Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
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The application of the “penny stock” rules could adversely affect the market price of our common stock and increase transaction costs to sell those shares.
The SEC has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
·
that a broker or dealer approve a person’s account for transactions in penny stocks, and
·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
·
obtain financial information and investment experience objectives of the person, and
·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
·
sets forth the basis on which the broker or dealer made the suitability determination and
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
The market price for our common stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price, which may result in substantial losses to you.
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common stock is sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of Shares by our stockholders may disproportionately influence the price of those Shares in either direction. The price for our Shares could, for example, decline precipitously in the event that a large number of shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products and services. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their Shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain their current market prices, or as to what effect that the sale of Shares or the availability of common stock for sale at any time will have on the prevailing market price.
Rule 144 Related Risk.
A person who has beneficially owned restricted shares for at least six months would be entitled to sell their securities provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale; (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale; and (iii) since we were a shell company from 2002 to 2007, we are current in our Exchange Act filings.
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Persons who have beneficially owned restricted shares for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

1% of the total number of securities of the same class then outstanding; or

the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144. Any sale of restricted shares under Rule 144 may adversely affect the market price of our common stock.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable to a smaller reporting company.
ITEM 2.
ITEM 2. PROPERTIES
Our principal executive offices were located at 1000 5th Street, Suite 200, Miami Beach, FL 33139. The term of the lease is month to month and our monthly rent is $95. In addition, we maintained an office at 429 Lenox Avenue, Miami Beach, Florida 33139 on a month to month basis and our monthly rent was $563. We have vacated those premises.
In October 2014, our wholly owned subsidiary Omega Capital Street LLC entered into a 6 year lease for space at 501 Brickell Key, Suite 104, Miami, FL. The term of the lease is 6 years and monthly rent is $14,651 for the first 12 months.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Other than as set forth below, there are no material pending legal proceedings to which we are a party or to which any of our property is subject and to the best of our knowledge, no such actions against us are contemplated or threatened.
The following is summary information on the cases against us or our subsidiaries:
Judgments
Jorge Ramos v. Omega Capital Funding, LLC, et. al. In the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 07-38288 CA 09. This matter resulted in a summary judgment against the Defendants on September 25, 2009 for $85,000. The judgment accrues interest at 8% annually and has yet to be satisfied.
Sebaco Siete, S.A. v. Omega Realty Partners, L.L.C., et. al. In the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 06-11204 CA 13. This matter resulted in a default final judgment against the Defendants in March 2008 for $1,564,832 plus fees and costs. The judgment accrues interest at 11% annually and has yet to be satisfied.
Luxury Home, LLC v. Omega Commercial Finance Corporation, et. al. In the Superior Court of Arizona, Maricopa County, Arizona. Case No.: CV2011-004554. This breach of contract matter resulted in a default judgment against the Defendants in 2012 for $651,113 plus fees and costs. The judgment accrues interest at 4.25% annually and has yet to be satisfied.
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Settlements
On April 26, 2013 Madison Boardwalk, LLC (“Madison Boardwalk”) filed a complaint in the U.S. District Court for the Western District of Wisconsin (Case No. 13-cv-288) against Omega Commercial Finance Corp. (the “Company”), Jon S. Cummings, IV and Von C. Cummings. The complaint alleges that the Company breached its agreements with Madison Boardwalk to provide it with funding for a hotel it was seeking to finance and develop (the “Project”). The complaint also alleges that the defendants engaged in deceptive practices in violation of Wisconsin Statutes Section 100.18(1) and that Jon S. Cummings IV and made intentional misrepresentations related to the Company’s ability to arrange financing for the Project. The plaintiff is seeking damages against the Company in the amount of $9,240,874, which the plaintiff claims is the difference between the financing cost proposed by the Company and what the plaintiff alleged they could receive from an alleged alternative funding source; plus, Jon S. Cummings IV and Von C. Cummings jointly and severally in the amount of $1,071,000, and certain other amounts as determined at trial. The plaintiff did provide to the Company a payment of a non-refundable due diligence and processing fee in the amount of $20,000, which is not in dispute.
In response to this complaint, the Company and Jon S. Cummings IV filed a motion to dismiss the complaint due to Jurisdiction and Venue. On November 7, 2013, the Court issued an order denying the motion to dismiss, granting Madison Boardwalk’s motion for leave to file a surreply and allowing Madison Boardwalk leave until November 21, 2013 to show that the individual defendants in this case are citizens of Florida. The complaint was settled through mediation on September 26, 2014. Terms of the settlement include repayment of $100,000 over the course of 12 month per a stipulated schedule with no admission of guilt by either party. The Company has made the first installments per the stipulated schedule, and as of December 31, 2014, there is an outstanding balance of $65,000.
On October 17, 2014 the Circuit Court in the Twelfth Judicial Circuit in and for Sarasota County, Florida (the “Court”), entered an Order Granting Approval of Settlement Agreement (the “Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a Settlement Agreement (the “Settlement Agreement”) between the Company and IBC Funds, LLC, a Nevada limited liability company (“IBC”), in the matter entitled IBC Funds, LLC, vs Omega Commercial Finance Corporation., Case No. 2014 CA 6009 (the “Action”). IBC commenced the Action against us to recover an aggregate of $65,085 of past-due accounts payable, which IBC had purchased from certain of our vendors pursuant to the terms of separate claim purchase agreements between IBC and each of the respective vendors (the “Assigned Accounts), plus fees and costs (the “Claim”). The Assigned Accounts relate to certain legal, accounting, underwriting, and Edgar filing services cost. The Order provides for the full and final settlement of the Claim and the Action, and on October 23, 2014, we issued an initial 270,000 shares of common stock to IBC. The Settlement Agreement became effective and binding on October 31, 2014. Since this settlement agreement involves stock issuance at variable stock prices, the Company has opted to group it with other convertible debentures (See Convertible debt below). At December 31, 2014, there is an outstanding balance of $40,313.
Pending Litigation
Macallan Partners LLC v. Omega Commercial Finance Corp., the Superior Court of the State of Delaware in and for New Castle County, C.A. No. N14C-11-186-DCS. A complaint was filed on November 21, 2014, by Macallan Partners LLC, alleging breach of obligations under the Loan Documents, and seeking damages of not less than $177,000 as of the date of Complaint with additional damages increasing principal to accrue at $2,000 per day and a default interest rate of 18%. The Company has responded acknowledging and denying it had breached any proportionality preservation clauses or insolvency clauses. As of December 31, 2014, the litigation is pending. Our legal counsel has indicated it is more likely than not this litigation will not go forward. Accordingly, we have made no conditional provisions for liabilities.
We currently have payment obligations of $2,365,948 and stock issuance obligations of $40,313 on the settlement and judgments against us, which are included in our financial statements for the year ended December 31, 2014.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to our operations.
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PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES
Our common stock is quoted on the OTCQB and trades under the symbol “OCFN”. As of May 13, 2015, there were approximately 2,565 record holders and 1,573,087,276 shares of common stock issued and outstanding.
The following table reflects the range of high and low bid information for our common stock for the period indicated. The bid information was obtained from the OTC Markets Group, Inc. and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions The market for our Shares is limited and sporadic. The prices have been retroactively adjusted to reflect the Reverse Stock Split implemented in July 2014.
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends on common stock in the foreseeable future.
Recent Sales of Unregistered Securities
On July 9, 2014, the Company issued 40,000,000 shares of common stock to its president Jon Cummings IV in recapitalizing the Company and positioning the Company to secure future capitalization for growth completed through a resolution by the Board of Directors. The Company recorded an expense of $2.4 billion ($2,400,000,000) or $60 per share, the value of the stock which approximated the value of services.
On July 9, 2014, the Company issued 10,000,000 shares of common stock to its wholly owned subsidiary Omega Capital Street LLC to position the Company to secure future capitalization for growth, completed through a resolution by the Board of Directors. The Company recorded the issuance to its subsidiary at par value, $.01 in the equity section of their financial statements.
On July 18, 2014, The Company issued 285,714 shares of common stock to AmericaVest to satisfy a $2,000,000 Promissory note, in exchange for 51% equity ownership in AmericaVest, which was subsequently reduced to 10% in accordance with the contractual agreement.
On July 30, 2014, the Company issued 200,000 shares of common stock to Eran Danino in exchange for services as VP of Omega Capital Street LLC. The Company recorded an expense of $12,000,000 or $60 per share, the value of the stock on the day of authorization.
On July 30, 2014, the Company issued 50,000 shares of common stock to Nelson Garcia, 50,000 shares of common stock to Robert Damigella and 50,000 shares of common stock to Ilan Doron, a total of 150,000 shares, in exchange for management consulting services. The Company recorded an expense of $ 60 per share.
On July 30, 2014, the Company issued 75,000 shares of common stock to Flavio Zuanier for business consulting services and 25,000 shares of common stock to Gail Rosenthal for accounting services. The Company recorded an expense of $4,500,000 or $60 per share.
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On July 30, 2014, the Company issued a total of 97,002 shares of Series A Preferred Stock, 10,778 shares each, to Britannia Securities International, Agri Technologies International, RND Company Ltd., On Time Investments Ltd., Rooftop Holdings Ltd, Tosca Limited, Anybright Investments Ltd., Sequence Investments Ltd., and Copperbottom Investments Ltd., for consideration in modification of terms and deadlines to their original agreement. The Company recorded $485,010 or $.001 per share, the par value of the preferred stock, to Deferred equity costs under shareholders’ equity and recorded a total expense of $3,635 for the transaction.
On September 11, 2014, the company issued 285, 714 shares of common stock to AmericaVest to retire a $2,000,000 promissory in conjunction with our acquisition of 51% equity interest or 1,564,079 shares of AmericaVest stock. On October 30, 2014, the Company and AmericaVest mutually agreed to reduce our equity interest in AmericaVest to ten percent (10%) through a transfer of 641,272 shares of AmericaVest (the “Contributed shares”) back by us to AmericaVest, pending completion of required audited financials by AmericaVest, at which time we will have an irrevocable option exercisable at our sole discretion to reacquire the Contributed shares at no additional consideration. The Company reduced its ownership interest pursuant to and based upon a material event, which occurred causing the resignation of one of the AmericaVest’s Co-Founders. The Company intends to regain the 75% majority ownership as originally executed in the Definitive Share Exchange Agreement upon the Company reassessing its position upon future due diligence and deeming the transaction optimal for the both the company and its shareholders. The pricing of the acquisition was negotiated based on the Company’s shares being valued at $ $7.00 per share. Hence with AmericaVest requesting a purchase price of $2.7 million and with the agreed upon cost basis of $7.00 per share, the Company agreed to issue 285,714 shares per the share exchange agreement for 51% ownership stake.
On October 23, 2014, the Company issued 270,000 shares of common stock in accordance with the settlement agreement with IBC Funds LLC.
On November 7, 2014, the Company issued 1,000,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement.
On November 14, 2014, the Company issued 1,000,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement.
On November 29, 2014, the Company sold 237 shares of Series 2020 Convertible Redeemable Cumulative Preferred stock, par value $200, to Stephen Wall and 125 shares of Series 2020 Convertible Redeemable Cumulative Preferred stock, par value $200, to Richard Carlton Wall for $25,000. The shares were issued in January 2015.
On December 2 2014, the Company issued 2,700,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement.
On December 9, 2014, the Company issued 2,700,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement.
On December 15, 2014, the Company issued 1,000,000 shares of common stock to Rodrigo Rappaccioli for $10,000 purchased under the DPO.
On December 15, 2014, the Company sold 1,500 shares of Series 2020 Preferred stock, par value $200, to Alison Helm for $375,000 cash.
On December 18, 2014, the Company issued 2,700,000 shares of stock to IBC Funds LLC in compliance with the settlement agreement.
On December 19, 2014, the Company issued 3,000,000 shares of stock to Train Systems LLC for sales consulting services on closing deals. The Company recorded an expense of $6,000 or $.002, the closing stock price on the date of issuance.
On December 30, 2014, the Company issued 2,700,000 shares of stock to IBC Funds LLC in compliance with the settlement agreement,
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As of December 31, 2014, the Company had outstanding 119,249,895 shares of common stock, 369,000 shares of Series A preferred stock, 500,000 shares of Series C preferred stock, 97,500 shares of Series D preferred stock, 80,000 shares of Series F preferred stock, 1,000,000 shares of Series G preferred stock, and 1,500 shares of Series 2020 preferred stock outstanding with 362 shares to be issued.
We offered and sold the securities in reliance on an exemption from federal registration under Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder. We relied on this exemption and rule based on the fact that there were a limited number of investors, all of whom were accredited investors and (i) either alone or through a purchaser representative, had knowledge and experience in financial and business matters such that each was capable of evaluating the risks of the investment, and (ii) we had obtained subscription agreements from such investors indicating that they were purchasing for investment purposes only. The securities were not registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The disclosure contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company, and is made only as permitted by Rule 135c under the Securities Act.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to a smaller reporting company.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following management’s discussion and analysis should be read in conjunction with our historical combined financial statements and the related notes. The management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “project,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Current Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We disclaim any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Current Report. Please see “Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
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Overview
We were incorporated in the state of Wyoming on November 6, 1973 under the name DOL Resources, Inc. From inception until October 2002, our primary business activity was the acquisition, disposition, commercialization and/or exploration of interests in oil, gas and/or coal properties. In October 2002, we sold all of our oil and gas properties to Glauber Management Company whereupon we ceased any business operations and became a development stage company, whose activities were limited to that of a shell company seeking to merge with or acquire an operating business.
On September 14, 2007, we entered into a Stock Purchase Agreement and Share Exchange with Omega Capital Funding LLC, a Florida limited liability company (“Omega Capital”) pursuant to which we acquired 100% ownership of Omega Capital (the “Reorganization”). After the Reorganization, our business operations consisted of those of Omega Capital. Prior thereto since 2002, we were a non-operating shell company with no revenue and minimal assets. As a result of the Reorganization, we were no longer considered a shell company.
Since the Reorganization in September 2007, our business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. We provide short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. We focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. Our operations are based primarily in Miami Beach, Florida.
For the fiscal year ended December 31, 2014 and 2013, the financial statements include the results of the Company and its subsidiaries Omega Capital Street LLC and MatchPoint.
Going Concern
As of December 31, 2014, we have not yet achieved profitable operations. We have accumulated losses since inception, a working capital deficiency and we expect to incur further losses in the development of our business, all of which, according to our accountants, casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. We intend to seek additional funds by equity financing through an offering of our securities and/or related party advances, however there is no assurance of additional funding being available.
Results of Operations
Twelve months ended December 31, 2014 compared to twelve months ended December 31, 2013
Revenues
For the twelve months ended December 31, 2014, we generated $469,578 in revenues compared to $405,265 in revenues for the twelve months ended December 31, 2013 for an increase of $64,313 The increase in revenue is a result of the competitive commercial real estate financing sector, and Omega Capital Street LLC’s sales force and their efforts in marketing our lending programs.
Cost of Sales
Cost of sales for the twelve months ended December 31, 2014 was $196,112 compared to $168,692 for the twelve months ended December 31, 2013. Revenue increased by approximately 15.8%%, and costs of sales increased proportionally (16.3%) as a result of more efficient closings and less involvement from consultants. Cost of sales for the twelve months ended December 31, 2014 was 41.76% compared to 41.63% for the twelve months ended December 31, 2013.
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Operating Expenses
Total expenses increased to $2,516,171,273,134 for the twelve months ended December 31 2014 from $2,312,439 for the twelve months ended December 31, 2013, an increase of $2,421,440,920. The increase was primarily due to $2,510,021,162 in services to consultants, contractors and officers paid in common stock, $8,000,000 in services paid in preferred stock, $3,635 paid in preferred stock for continued relationships, $511,244 in commissions and compensation, an increase of $186,456 in legal and professional fees, increased rent of $132,277, and an increase to $47,331 in other expenses.
Loss From Operations
We generated a net loss of $2,536,808,593 for the twelve months ended December 31, 2014 compared to a net loss of $2,471,384 for the same period in 2013 due to the circumstances set forth above.
Capital Resources and Liquidity
Liquidity is a measure of a company’s ability to meet potential cash requirements. On December 31, 2014 we had total assets of $293,350 compared to $138,823on December 31, 2013, an increase of $154,527. We had a deficit in total stockholders’ equity of $4,480,339 on December 31, 2014 compared to the deficit of stockholders’ equity of $2,740,658 on December 31, 2013, an increase in the deficit of $1,739,681.
All assets are booked at historical cost. Management reviews on an annual basis the book value, along with the prospective dismantlement, restoration, and abandonment costs and estimate residual value for the assets, in comparison to the carrying values on the financial statements.
As discussed elsewhere in this report, on February 8, 2013 we entered into a Standby Equity Purchase Agreement (the “Agreement”) with Lambert Private Equity LLC (“Lambert”). The Agreement provides us with an equity line whereby we can sell to Lambert, from time-to-time, our shares of common stock up to an aggregate value of $100 million over a thirty-six month period. Under the terms of the Agreement, once a registration statement becomes effective we will have the right to deliver to Lambert from time-to-time a “Draw Down Notice” stating the dollar amount of common shares we intend to sell to Lambert, up to a maximum of $100 million. Our board of directors will also have the discretion to use the funds for purposes it deems to be in our best interest. There can be no assurance that once we file a registration statement, it will become effective or that we will realize any proceeds from the Agreement. The Agreement will not be effective until the date a registration statement is declared effective by the SEC.
As discussed elsewhere in this report, on October 4, 2012, Omega Commercial Finance Corporation (Company) consummated a corporate action that entailed the closing of the Unit Subscription Agreement Titled USA 68207V208 OCFN, (the "USA") and has been formally closed by Elco Securities. It is being held in a Cash Account in the name of Omega Commercial Finance Corporation and is fully funded.
The Unit Subscription Agreement (the “USA”) contains 900 units priced at $45,156.85 totaling the $40,642,069. Pursuant to which the Company issued nine (9) certificates each for 30,222 shares of newly designated Series A Preferred Stock (the “Series A Shares”) and 101,258,100 Warrants (the “Common Stock Warrants”) to purchase additional Company Stock with an average price of $1.42 per share.
The Investment amount of $40,642,069 is subscription receivable to Omega Commercial Finance Corporation subject to the Account Management Agreement AMA 68207V208 OCFN dated September 30, 2013 (The "AMA") and Memorandum of Terms MOT 68207V208 OCFN dated September 30, 2013 (The “MOT”) pursuant to the terms and conditions outlined in the full agreements (the “Agreements”) attached as Exhibits 10.20, 10.21 and 10.22 to Form 8-K, filed with the SEC on October 9, 2013 and incorporated herein.
Also included is the Investment amount of $3,000,000 which is subscription receivable to Omega Commercial Finance Corporation subject to the Account Management Agreement AMA dated September 30, 2013 (The “MOT”) pursuant to the terms and conditions outlined in the full agreements (the “Agreements”) in exchange for the issuance of 30,000,000 shares of common stock, also held in trust by Elco Securities.
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Net cash used in operating activities during the twelve months ended December 31, 2014 was $536,303 as compared to net cash used in operating activities of $431,061 for the twelve months ended December 31, 2013. The increase of $105,242 in cash used by operations was primarily due to an increase in our net loss partially offset by non-cash expenses in connection with the issuance of common and preferred stock for services rendered and a beneficial conversion feature of our Convertible Debentures issued during the year, collecting other receivables and paying deposits on rent and equipment.
Net cash used in investing activities during the twelve months ended December 31, 2014 was $52,108 as compared to net cash received from investing activities of $116,084 for the twelve months ended December 31, 2013. We invested in furniture, fixtures and equipment of $50,610 in addition to purchasing a debt security. Positive cash flow from investment in 2013 was due to the sales of trading securities.
Cash Requirements
We have not yet achieved profitable operations and expect to incur further losses in the development of our business, cash needs to complete various transactions we have entered into and repay certain indebtedness, the result of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from business operations when they come due. We intend to meet our financial needs for operations by equity and/or debt financing and/or related party advances. In the event we are unable to borrow or raise funds needed for our business, or we are unable to repay our current obligations when due, we will have to seek additional financing, and no assurances can be given that such financing would be available on a timely basis, on terms that are acceptable or at all. Failure to obtain such additional financing could result in delay or indefinite postponement of our planned operations which would materially adversely affect our business, results of operations and financial condition and threaten our financial viability.
Any additional funds raised through the issuance of equity or convertible debt securities will reduce the percentage ownership of our stockholders who may experience additional dilution and such securities may have rights, preferences or privileges senior to those of our common stock.
In the next twelve months, the company's goal is to achieve profitable operations through implementation of our proposed financing products and services.
We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Emerging Growth Company
We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.
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Critical Accounting Policies
Our financial statements are based on the application of accounting principals generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principals that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.
Revenue Recognition
We will be primarily engaged in the sourcing of and providing advice in connection with second- and third-tier financing for commercial development and construction. Revenues are generated from fixed non-refundable processing fees associated with the contractual agreement. Revenues are recorded at the time each contract is signed and fees remitted.
The fees are non-refundable and fixed, which is unconditionally earned and is not contingent on success factors. We recognize revenues as amounts become billable in accordance with contract terms. These revenues based on contractual agreement with us are recognized as the contracts are signed and the fees are received, and amounts are earned in accordance with the Securities and Exchange Commission (the “SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB No. 104, “Revenue Recognition” (“SAB 104”). We consider amounts to be earned once evidence of an arrangement has been obtained, the contract signed, and the processing fees remitted.
In the past our fees have not been refundable, which resulted in unclear contracts and several lawsuits. Our contracts have been rewritten to clearly state the processing fees as non-refundable, and customers are clearly informed of the fees and policies. If the Company elects to refund any processing fees, determined on a case by case basis, a loss provision will be recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined by the contractual agreement and the amount of processing fees associated with the customer. There were anticipated refunds of $69,180 as of December 31, 2014 and refunds of $9,540 as of December 31, 2013.
Fair value of financial instruments
The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
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Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
Our financial instruments include cash, other receivable, accounts payable and accrued liabilities, customer deposits, judgment payable, convertible debentures payable, debt issuance cost and derivative liabilities.
The carrying values of the Company’s cash, other receivable, accounts payable and accrued liabilities, customer deposits, judgment payable, and debt issuance cost approximate their fair value due to their short-term nature.
The Company’s convertible debentures payable are measured at amortized cost.
The derivative liabilities are stated at their fair value as a level 3 measurement. The Company used a Black-Scholes model to determine the fair values of these derivative liabilities. See Note 3 for the Company’s assumptions used in determining the fair value of these financial instruments.
Convertible debentures payable
The Company accounts for convertible debentures payable in accordance with the FASB Accounting Standards Codification No. 815, Derivatives and Hedging, since the conversion feature is not indexed to the Company’s stock and can’t be classified in equity. The Company allocates the proceeds received from convertible debentures payable between the liability component and conversion feature component. The conversion feature that is considered embedded derivative liabilities has been recorded at their fair value as its fair value can be separated from the convertible debentures and its conversion is independent of the underlying debentures value. The Company has also recorded the resulting discount on debentures related to the conversion feature and is amortizing the discount using the effective interest rate method over the life of the debt instruments.
Derivative liabilities
The Company accounts for derivative liabilities in accordance with the FASB Accounting Standards Codification No. 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires companies to recognize all derivative liabilities in the balance sheet at fair value, and marks it to market at each reporting date with the resulting gains or losses shown in the Statement of Operations.
Investments in and Advances to Unconsolidated Entities
The trends, uncertainties or other factors that may negatively affected the Company’s business and the finance, construction and new development industries in general may also affect the unconsolidated entities in which the Company may have investments. The Company will review each of its investments in unconsolidated entities on a quarterly basis to determine the recoverability of its investment. The Company evaluates the recoverability of its investment in unconsolidated entities, which entails a detailed cash flow analysis using many estimates including but not limited to expected sales pace, expected sales prices, expected incentives, costs incurred and anticipated, sufficiency of financing and capital, competition, and market conditions. When markets deteriorate and it is no longer probable that the Company can recover its investment in a joint venture, the Company impairs its investment. If a joint venture has its own loans or is principally a joint venture to hold an option, such impairment may result in the majority or all of our investment being impaired.
Income Taxes - Valuation Allowance
Significant judgment is required in estimating valuation allowances for deferred tax assets. In accordance with ASC 740, a valuation allowance is established against a deferred tax asset if, based on the available evidence, it is more likely than not that such asset will not be realized. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carry forward periods under tax law. We periodically assesses the need for valuation allowances for deferred tax assets based on ASC 740’s “more-likely-than-not” realization threshold criterion. In our assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative income and losses, forecasts of future profitability, the duration of statutory carryback or carry forward periods, its experience with operating loss and tax credit carry forwards being used before expiration, and tax planning alternatives.
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In accordance with ASC 740, we assesses whether a valuation allowance should be established based on its determination of whether it is more likely than not that some or all of the deferred tax assets will not be realized. Our assessment of the need for a valuation allowance on its deferred tax assets includes assessing the likely future tax consequences of events that have been recognized in its consolidated financial statements or tax returns. We base our estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, on business plans and other expectations about future outcomes. Changes in existing tax laws or rates could affect actual tax results and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. Our accounting for deferred tax assets represents its best estimate of future events using the guidance provided by ASC 740.
Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in future reporting periods (carry forward period assumptions), it is reasonably possible that actual results could differ from the estimates used in our historical analyses. Our assumptions require significant judgment because the residential homebuilding industry is cyclical and is highly sensitive to changes in economic conditions. If our results of operations are less than projected and there is insufficient objectively verifiable evidence to support the likely realization of its deferred tax assets, a valuation allowance would be required to reduce or eliminate its deferred tax assets.
Stock Based Compensation
From time to time, we have compensated our officers and vendors with the issuance of stock. The value of the transaction is determined by the trading price on the day of the transactions. We anticipate that we will continue to compensate our officers with stock and traditional payments in the future. Since the stock price is variable and there is no assurance the stock price will remain at any level, the amount of stock issued for services in kind or bonus awards will vary, and dilution may occur.
COMMON STOCK
On July 2, 2014, the Company executed a 1:20,000 reverse stock split. All common stock and per share data for the period presented in this register statement have been restated to give effect to the reverse split in accordance with SAB Topic 4C.
PREFERRED STOCK
Onn September 4, 2013, the Company entered a Unit Subscription Agreement and an Account Management Agreement with nine oversea investors. Under the terms of the Unit Subscription Agreement (the “Agreement”), the Company issued a total of 271,998 newly designated shares of preferred stock, which are convertible to common stock totaling 27,199,800 shares and 101,258,100 common stock warrants to nine investors for a total investment of $40,642,069 with an average Price of $1.42. The common stock warrants have an average exercisable price of $1.42 per common share. Under the Account Management Agreement, investors under the Unit Subscription Agreement and Company have appointed Elco Securities, Ltd. as intermediary to monitor and enforce the Use of Proceeds to ensure that it meets the projected Use of Proceeds.
In conjunction with the above discussed Unit Subscription Agreement and Account Management Agreement, the Company issued 500,000 shares of Series C preferred stock, $5 par value, as guarantee against default. These shares are being held in trust by Elco Securities. The Company also issued 100,000 shares of Series D preferred convertible stock, $5 par value, in lieu of an 8% commission fee. This issuance was recorded as Commissions in our Consolidated Statement of Operations as of December 31, 2013. In 2014 the Company issued an additional 92,007 shares of Series A Preferred stock to the same 9 overseas shareholders for continuing the relationship after the 1:20,000 stock split, and during 2014, 2,500 shares of Series D preferred convertible stock was converted to 7,450 shares of common stock.
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OPTIONS
As part of the convertible debenture agreement with Tonaquint, Inc., the Company issued warrants to purchase $139,000 worth of our common stock. Since the amount of stock is variable, we have included it with our debenture presentation.
As part of the Standby Purchase Agreement with Lambert (See Note 14), the Company granted to Lambert a 5-year Option to Purchase Shares for 25,641,000 shares of our common stock at an exercise price of the lesser of (i) $0.40 per share or (ii) 110% of the lowest daily VWAP for our common stock as reported by Bloomberg during the thirty trading days prior to the date the option is exercised. The options expire March 7, 2018. The Company did not grant any registration rights with respect to any share of common stock issuable upon exercise of the options. The fair values of the options expense was calculated using the Black-Scholes options pricing model at issue date using assumptions as delineated in the Footnotes to the Consolidated Financial Statements as of December 31, 2013. No options were issued during the year ended December 31, 2014. Lambert chose to exercise their options in December 2014, and 2,126,588 shares were issued for the outstanding options.
WARRANTS
As part of the consulting agreement with A.S. Austin Company, Inc., the Company will grant warrants to purchase up to 1,000,000 shares of common stock, to be granted ratably over the term of the agreement on the first day of each calendar month. The Warrants shall be exercisable at any time or from time to time commencing on the grant date at an exercise price of $.40 per share. The Warrants will expire two years from the date of issuance and will be subject to customary stock splits and payable in legal tender. The Company received no services from A.S. Austin after the initial contract was signed and the 2014 warrants were voided.
As of December 31, 2014 and 2013, the Company issued to A.S. Austin Company warrants to purchase -0- and 13 shares of common stock.
On September 4, 2013, as part of the Unit Exchange Agreement discussed above, 5,063 warrants (101,258,100 warrants pre-split) were issued to 9 investors. These warrants expire on September 3, 2016(originally 36 months) and are exercisable at variable amounts, as per the agreements and accompanying warrant certificates. No additional warrants were issued in 2014.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 7A.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for a smaller reporting company.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules appearing on page 41 of this Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on that evaluation, it was concluded that our disclosure controls and procedures are effective in timely alerting to material information relating to us required to be included in our periodic SEC filings and in ensuring that information required to be disclosed by us in the reports filed or submitted under the Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control, as defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.
Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principals and that the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2014.
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
Changes in Internal Control
There were no changes in our internal control over financial reporting identified in connection with the evaluation of our controls performed during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
Not applicable to smaller reporting companies.
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PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the names and ages of each of the persons designated to become members of the Board of Directors and Executive Officers.
Our directors are appointed for a one-year term to hold office until their successor is duly elected and qualified. Our officers are appointed by our board of directors and hold office until removed by the board. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
All of our directors bring to our Board executive leadership experience derived from their prior business experience. Each of our board members has demonstrated strong business acumen and an ability to exercise sound judgment and has a reputation for integrity, honesty and adherence to ethical standards.
Jon S. Cummings, IV has been our Chief Executive Officer, President, Chief Financial Officer and member of the Board since 2007. Since 2005, he has been the President of our subsidiary, Omega Commercial Finance LLC, which is engaged in and domestic real estate development projects valued at over $100 million. Mr. Cummings is responsible for our day to day operations including communications to employ additional personnel in the future which are expected to include real estate analysts, surveyors, licensed appraisers, and real estate brokers. Additionally, he is responsible for overseeing the internal underwriting department to achieve the maximum value in our origination and lending activities. From 1996 to 1999, Mr. Cummings was employed as Vice President by J.S. Cummings & Associates, a company engaged in commercial and residential real estate development. From 1999 to 2005 Mr. Cummings was responsible for construction management and budgeting at African International. Mr. Cummings graduated from Ohio University in 1994 with BS dual major in Pre-Law & History.
Clarence Williams has been a member of our Board since 2008. Mr. Williams has 45 years of demonstrated experience in business administration and management. He retired from the City of Dayton as Chief Executive to the Dayton City Council from 1973 to 2005. During that tenure of 32 years, his responsibilities included the review and the assessment of the city’s $800 million general and enterprise fund budgets. Mr. Williams has facilitated workshops and training seminars across the country and in Russia, Israel, Zimbabwe, Zambia, Liberia, and South Africa. He has served on numerous boards for government entities and non-profit organizations. Mr. Williams has a Bachelor of Science degree in Business Management and a MBA graduate degree. He was selected as a George Washington University Fellow; Elliott School of International Affairs and focused on international global economic development opportunities. He was certified at the Senior Executive Institute, University of Virginia.
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Eran Danino, 36, joined Omega Capital Street LLC as the Vice President of Sales and Marketing in February 2014 and assumed the President and CEO role March 4, 2014. Mr. Danino is responsible for managing the day-to-day lending operations and brings more than 14 years of experience in the sales, marketing, management, and business development of real estate, investments, and the capital markets space. After completing his service in the Israeli Defense Force in 2000, Mr. Danino emigrated to the U.S. where he began a career in retail sales where he quickly rose to store manager. In 2004 he was recruited by Inditex/Zara as a regional manager servicing the eastern US where he was responsible for all facets of retail outlet management and training new management for Florida, California, Massachusetts and New York. In 2006, Mr. Danino worked with Omega Capital Funding where he helped the company generate over $1 million in fees per year arranging financing for commercial real estate transactions. He served as the Northeast/Southeast regional manager for 2020 Communications from 2007-2009, where he developed strong connections in the telecommunications industry. In 2011, he and partners launched Global Impact Inc., a holding company, which provides link and management services to small companies in the U.S., Canada, and Central and South America from 2011-2014, where he was responsible for domestic and international business development. Collectively, Mr. Danino has been involved in negotiating, closed and managed transactions valued over $1 billion dollars since 2000. He is also the co-founder of Omega Venture Capital LLC, which specializes in commercial real estate strategic alliances. He resides in Miami with his wife and 2 young children.
Todd Buxton, 46, joined Omega Commercial Finance Corporation as the Chief Executive Officer on April 6th, 2015. Mr. Buxton has worked with the Company in an advisory capacity and as a vendor for underwriting services. Over the past 5 years Mr. Buxton has worked within the capacity of an advisory role to the Company through Bentley-Addison Capital Finance and therefore has a vast familiarity with the Company, its business model, and associated goals and initiatives. His previous and ongoing involvement served as a precursor to this natural transition as Chief Executive Officer for the Company. Mr. Buxton’s directive is to significantly improve the strategic operational execution and integration of new and existing subsidiaries with a goal to accelerate profitability and growth. Mr. Buxton shall report to Mr. Jon Cummings IV as President/Chairman of the Board for the Company. Mr. Cummings IV will continue to prudently serve the Company with stringent oversight administering all financial, legal, and compliance tasks.
Board of Directors
Our Board of Directors currently consists of two members. Our Bylaws provide that our board shall consist of not less than one with a maximum as determined by the board or the stockholders. The terms of directors expire at the next annual stockholders’ meeting unless their terms are staggered as permitted in our bylaws. Each shareholder is entitled to vote the number of shares owned by him for as many persons as there are directors to be elected. Shareholders do not have a right to cumulate their votes for directors.
Director Compensation
Currently, we do not pay our directors any cash compensation other than the compensation paid to our CEO who is also a Director, which is reflected in the Summary Compensation Table below. In the future, we may consider appropriate forms of compensation, including the issuance of common stock and stock options as compensation.
Committees
To date, we have not established a compensation committee, nominating committee or an audit committee. The functions of those committees are being undertaken by Board of Directors as a whole. Because none of our directors are independent, we believe that the establishment of these committees would be more form over substance.
We do not have a policy regarding the consideration of any director candidates, which may be recommended by our shareholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees, nor do we have a policy regarding director diversity. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our shareholders, including the procedures to be followed. Our Board has not considered or adopted any of these policies as we have never received a recommendation from any shareholder for any candidate to serve on our Board of Directors. Given our relative size and lack of directors and officers insurance coverage, we do not anticipate that any of our shareholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees. In considering a director nominee, it is likely that our Board will consider the professional and/or educational background of any nominee with a view towards how this person might bring a different viewpoint or experience to our Board.
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None of our directors is an “audit committee financial expert” within the meaning of Item 401(e) of Regulation S-K. In general, an “audit committee financial expert” is an individual member of the audit committee or Board of Directors who:

understands generally accepted accounting principals and financial statements,

is able to assess the general application of such principals in connection with accounting for estimates, accruals and reserves,

has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to our financial statements,

understands internal controls over financial reporting, and

understands audit committee functions.
Our common stock is not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.
Employment Agreements
Mr. Danino has a one year employment agreement with us. His compensation is determined by production and paid through the Company’s Employee and Consultant Incentive Equity Plan. As the VP of Sales and Marketing, Mr. Danino received a signing bonus of 7,500,000 shares of S-8 Company stock. He receives 20% of revenues generated through non-refundable fees charged to prospective borrowers, paid to him for the business he generates, split between himself and the sales teams for business generated by the team. He also participates in bonuses for capital raising, equity participation compensation and production stock compensation for gross monthly revenue generation. As additional compensation for the President and CEO role, Mr. Danino receives a stock incentive bonus and cash compensation determined monthly pursuant to final approval by Mr. Jon Cummings IV, Chairman of the Board.
Mr. Buxton has a one year employment agreement with us. Mr. Buxton’s annual compensation of $85,000 shall be paid with restricted common stock, cash, or combination of both. The Board of Directors will also grant Mr. Buxton 25,000 shares of restricted common stock on a quarterly basis in addition to an annual bonus of 50,000 shares of free trading S8 stock, which will be granted under the Company’s incentive plan. His previous and ongoing involvement served as a precursor to this natural transition as Chief Executive Officer for the Company. Mr. Buxton’s directive is to significantly improve the strategic operational execution and integration of new and existing subsidiaries with a goal to accelerate profitability and growth. Mr. Buxton shall report to Mr. Jon Cummings IV as President/Chairman of the Board for the Company. Mr. Cummings IV will continue to prudently serve the Company with stringent oversight administering all financial, legal, and compliance tasks.
Board oversight in risk management
Mr. Cummings serves as both our President and as one of the two members of our Board of Directors. The other director, Mr. Williams is not considered independent. The business and operations of our company are managed by our Board as a whole, including oversight of various risks, such as operational and liquidity risks that our company faces. Management is responsible for the day-to-day management of the risks we face, while the Board, as a whole, has responsibility for the oversight of risk management. Our directors meet regularly to discuss strategy and risks we face and to address any questions or concerns they may have on risk management and any other matters.
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ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all compensation recorded by us in the fiscal years ending December 31, 2014, 2013, and 2012, for our principal executive officer, each other executive officer serving as such whose annual compensation exceeded $100,000, and up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our Company at December 31, 2014. The value attributable to any option awards is computed in accordance with FASB ASC Topic 718.
(1)
Mr. Cummings has served as our CEO since 2007. On June 5, 2014, we issued 2.500 shares to Mr. Cummings, valued at $250,000 or $100 per share and on July 9, 2014 we issued 40 million (40,000,000) shares to Mr. Cummings, valued at $2,400,000,000 or $60 per share at the dates of issuance. We issued no stock to Mr. Cummings in 2013. In 2012 we issued to Mr. Cummings, 150 shares, valued at $60,000 and 250 shares, valued at $450,000, valued at the closing stock price at the date of issuance, In October 2011 we issued 750 shares to Mr. Cummings, valued at $750,000 or $1,000 per share at the date of issuance, of which 650 shares were returned to the company and retired in 2012.
(2)
Mr. Danino has served as the VP of our wholly owned subsidiary Omega Capital Street since February 2014. On February 28, 2014, we issued 375 shares to Mr. Danino, valued at $111,750 or $298 per share at the date of issuance. On April 22, 2012 we issued 175 shares to Mr. Danino, valued at $22,750 or $130 per share at the date of issuance. On May 14, 2014, we issued 750 shares to Mr. Danino, valued at $73,500 or $98 per share at the date of issuance. On July 30, 2014, we issued 200,000 shares to Mr. Danino, valued at $12 million ($12,000,000) or $60 per share at the date of award. Mr. Danino also received $131,421 in cash disbursements during the year ended December 31, 2014.
(3)
Mr. Buxton was appointed CEO of Omega Commercial Finance Corp. on April 6. 2015. Although he received compensation for his efforts as a consultant, Mr. Buxton was not compensated as an officer or director during the years ended December 31, 2014 and 2013.
As our President and former CEO, Mr. Cummings received compensation for his services since he began serving as our CEO in 2007. In 2013, Mr. Cummings received no stock compensation for services. Mr. Cummings received cash payment as compensation for his services from time to time on an irregular basis throughout the year totaling $101,320. None of the payments exceeded $5,000 per distribution. During 2012, Mr. Cummings received total stock compensation for services of 400 shares, awarded in 2 instances: 150 shares, valued at $60,000 or $400 per share, the closing stock price on the date of issuance, and 250 shares, valued at $450,000 or $1,800 per share, the closing stock price on the date of issuance. Mr. Cummings also received cash payments as compensation for his services from time to time on an irregular basis throughout the year totaling $74,314. None of the payments exceeded $5,000 per distribution. During 2011, Mr. Cummings received stock compensation for services of 750 shares, valued at the closing price of $1,000 per share at the date of issuance or $750,000. Of these shares, 650 were returned to the Company and retired at the beginning of 2012. Mr. Cummings also received cash payments as compensation for his services from time to time on an irregular basis throughout the year totaling $49,383. None of the payments exceeded $5,000 per distribution.
Mr. Danino has served as Vice President of Sales and Marketing of our wholly owned subsidiary Omega Capital Street LLC since February 22, 2014, and President and CEO of Omega Capital Street since March 2014. On February 28, 2014, we issued 375 shares to Mr. Danino, valued at $111,750 or $298 per share at the date of issuance. On April 22, 2012 we issued 175 shares to Mr. Danino, valued at $22,750 or $130 per share at the date of issuance. On May 14, 2014, we issued 750 shares to Mr. Danino, valued at $73,500 or $98 per share at the date of issuance. On July 30, 2014, we issued 200,000 shares to Mr. Danino, valued at $12 million ($12,000,000) or $60 per share at the date of award. Mr. Danino also received cash payments of $131,421 during the year ended December 31, 2014.
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Mr. Buxton was appointed as the Chief Executive Officer of Omega Commercial Finance Corp. on April 6, 2015. Although he received compensation for his consulting work as an independent vendor, he received no compensation of stock or cash for officer services during the years ended December 31, 2014 and 2013.
How our Chief Executive Officer’s compensation is determined
Mr. Cummings is not a party to an employment agreement with us. His compensation is determined by our Board, of which he is a member, and is based upon a number of factors including the scope of his duties and responsibilities and the time devoted to our business. Such deliberations are not arms-length. We did not consult with any experts or other third parties in fixing the amount of Mr. Cummings compensation. The amount of compensation payable to Mr. Cummings can be changed at any time upon the determination of our Board. Mr. Cummings is compensated from time to time from the available resources of the company, specifically with regard to his fiduciary responsibilities to the Company. Mr. Cummings accommodates the cash flow of the business in receiving compensation. In moving forward, we are putting in place a Compensation agreement for Mr. Cummings encompassing all instruments of payment including a bonus structure, to better facilitate budgeting and overall corporate performance.
Employment Agreements
Mr. Danino has a one year employment agreement with us. His compensation is determined by production and paid through the Company’s Employee and Consultant Incentive Equity Plan. As the VP of Sales and Marketing, Mr. Danino received a signing bonus of 7,500,000 shares of S-8 Company stock. He receives 20% of revenues generated through non-refundable fees charged to prospective borrowers, paid to him for the business he generates, split between himself and the sales teams for business generated by the team. He also participates in bonuses for capital raising, equity participation compensation and production stock compensation for gross monthly revenue generation. As additional compensation for the President and CEO role, Mr. Danino receives a stock incentive bonus and cash compensation determined monthly pursuant to final approval by Mr. Jon Cummings IV, Chairman of the Board a copy of his employment agreement and amendment are attached to our S-1/A Registration filing 333-200569 with the SEC on February 11, 2015 and are incorporated herein by reference.
Mr. Buxton’s annual compensation of $85,000 shall be paid with restricted common stock, cash, or combination of both. The Board of Directors will also grant Mr. Buxton 25,000 shares of restricted common stock on a quarterly basis in addition to an annual bonus of 50,000 shares of free trading S8 stock, which will be granted under the Company’s incentive plan. A copy of his employment agreement is attached as Exhibit 22.2 to this 10K filing.
There are no other employment agreements between the Company and its other executive officers and directors.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2014:
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ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of the date of this filing, we had 1,405,837,381 shares of common stock issued, 369,000 shares of Series A Preferred Stock, 500,000 shares of Series C Preferred Stock, 97,500 shares of Series D Preferred Stock, 80,000 shares of Series F Preferred Stock, 1,000,000 shares of Series G Preferred Stock and outstanding and 2,000,000,000 shares of Series CC Preferred stock, which are our only classes of voting securities outstanding. The following table sets forth certain information, as of the date of this prospectus with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five percent, (ii) each of our executive officers and directors, and (iii) our directors and executive officers as a group.
Unless otherwise indicated, the business address of each person listed is in care of c/o Omega Commercial Finance Corp., 1000 5th Street, Suite 200, Miami Beach, Florida 33139. The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all Shares outstanding on that date and all Shares issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all Shares owned by them, except to the extent that power may be shared with a spouse.
(1) Mr. Cummings is our CEO. Includes 150,002,750 shares owned directly, 602 shares owned by Omega Capital Funding, LLC, 60,010,250 shares owned by Omega Capital Street, LLC and 250 shares owned by Omega CRE Group, LLC, our wholly owned subsidiaries.
(2) Mr. Cummings has voting and dispositive control over securities held by Omega Capital Funding LLC.
(2) Mr. Cummings has voting and dispositive control over securities held by Omega Capital Street LLC.
(3) Mr. Cummings has voting and dispositive control over securities held by Omega CRE Group LLC.
(4) Iconic Holdings Inc. had voting and dispositive control over 9.9% of outstanding securities, as filed on Schedule 13G with the SEC on February 26, 2015.
(5) Beaufort Capital Partners LLC had voting and dispositive control over 9.9% of outstanding securities, as filed on Schedule 13G with the SEC on February 26, 2015.
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(1) Series A Preferred shares carry 100 votes per share. Total votes carried 36,900,000. Shares are being held in trust.
(1) Series C Preferred shares carry 100 votes per share. Mr. Cummings carries 50,000,000 votes. Shares are being held in trust.
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(1) Series D Preferred shares carry 1 vote per share. Total votes carried 97,500.
(1) Series F Preferred shares carry 1 vote per share. Mr. Zuanier carries 80,000 votes.
(1) Mr. Cummings is our CEO. Series CC Preferred stock carries 100 votes per share. Mr. Cummings carries 200,000,000,000 votes.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
General
Except as described herein, none of the following parties (each a “Related Party”) has, in our fiscal years ended December 31, 2014 and December 31, 2013, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us, any of our directors or officers, any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock or any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the above persons.
We are currently party to employment agreements with Mr. Eran Danino, CEO of Omega Capital Street LLC and Mr. Todd Buxton, our newly appointed CEO, as of April 6, 2015, and we will have an employment agreement with our President and Chairman of the Board, Mr. Jon Cummings IV.
Review, approval or ratification of transactions with related persons
Our management believes that the terms of the above transactions are as favorable to our company as could have been obtained from nonaffiliated persons at the time and under the circumstances as when the transactions were entered into.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table shows the fees that were billed for the audit and other services provided by Bongiovanni & Associates, PA for the fiscal year ended December 31, 2014 and by M&K CPAS, PLLC and Bongiovanni & Associates, PA for the fiscal year ended December 31, 2013
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Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. The audit and tax fees paid to the auditors with respect to 2014 and 2013 were pre-approved by the Board of Directors.
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PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) 1.
Financial Statements
The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements and Schedules” on page 41 and included on pages F - 1 through F - 29.
2.
Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.
3.
Exhibits (including those incorporated by reference).
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* Filed herewith.
** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Annual Report on Form 10-K shall be deemed “furnished” and not “filed”.
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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, thereunto duly authorized.
Omega Commercial Finance Corporation
(Registrant)
By:
/s/ Jon S. Cummings, IV
Jon S. Cummings, IV
Date: May 15, 2015
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
/s/ Jon S. Cummings, IV
President, Chief Financial Officer (Principal Financial and Accounting Officer)
May 15, 2015
Jon S. Cummings, IV
and Director
/s/ Todd C. Buxton
Chief Executive Officer
May 15, 2015
Todd C. Buxton
/s/ Clarence Williams
Director
May 15, 2015
Clarence Williams
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OMEGA COMMERCIAL FINANCE CORPORATION AND SUBSIDIARIES
For the Fiscal Years Ended December 31, 2014 and December 31, 2013
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Bongiovanni & Associates, PA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Omega Commercial Finance Corp. And Subsidiaries
We have audited the accompanying consolidated balance sheets of Omega Commercial Finance Corp. and Subsidiaries (the “Company”) as of December 31, 2014 and 2013 and related consolidated statements of operations, stockholders’ deficit, and cash flows for the two years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial position of Omega Commercial Finance Corp. and Subsidiaries as of December 31, 2014 and 2013 and the consolidated results of its operations and its cash flows for two years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring operating losses, has an accumulated stockholders’ deficit, has negative working capital, has a retained deficit and has yet to generate an internal cash flow that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 13. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/ Bongiovanni & Associates, P.A./
Bongiovanni & Associates, P.A.
Certified Public Accountants
Cornelius, North Carolina
The United States of America
May 15, 2015
OMEGA COMMERCIAL FINANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2014 AND 2013
OMEGA COMMERCIAL FINANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2014 AND 2013
(Continued)
The report of Independent Registered Public Accounting firm and accompanying notes are an integral part of
these consolidated financial statements.
OMEGA COMMERCIAL FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
The report of Independent Registered Public Accounting firm and accompanying notes are an integral part of
these consolidated financial statements.
OMEGA COMMERCIAL FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
OMEGA COMMERCIAL FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(Continued)
OMEGA COMMERCIAL FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(Continued)
The report of Independent Registered Public Accounting firm and accompanying notes are an integral part of
these consolidated financial statements.
OMEGA COMMERCIAL FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
The report of Independent Registered Public Accounting firm and accompanying notes are an integral part of
these consolidated financial statements.
OMEGA COMMERCIAL FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2014 and 2013
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business organization
Omega Commercial Finance Corporation (formerly known as DOL Resources, Inc.) (the “Company”) is a commercial real estate financing company that also provides asset backed lending services located in the Miami, Florida area. The Company was incorporated in the State of Wyoming on November 6, 1973. Since the Reorganization in September 2007, the Company’s business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. The Company provides financial consulting services for short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. The Company focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. The Company’s operations are based primarily in Miami Beach, Florida.
The Company’s wholly owned subsidiaries include the following:
CCRE (“CCRE”), a Florida limited liability company providing second- and third-tier real estate funding as well as partnering in development ventures.
Ωmega Capital Street LLC- a Nevada limited liability company which focuses on commercial mortgage-backed securities and by originating CMBS-style loans with proven and standard securitization underwriting criteria.
Ωmega CRE Group LLC - a Nevada limited liability company which focuses primarily on originating, investing in, acquiring and managing senior or mezzanine performing commercial real estate mortgage loans.
Ωmega Factoring LLC- an Ohio limited liability company focused on products to assist small to medium sized business owners with resolving their short-term working capital needs.
Ωmega Venture Capital LLC- an Ohio limited liability company focused on raising, providing and investing venture capital into cutting edge technologies and businesses.
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principals in the United States of America (“USGAAP”). The consolidated financial statements of the Company include the Company and its subsidiaries. Certain reclassifications to amounts reported in the December 31, 2012 consolidated financial statements have been made to conform to the December 31, 2013 presentation. All material inter-company balances and transactions have been eliminated.
Management’s Use of Estimates
The preparation of financial statements in conformity with accounting principals generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. During the years ended December 31, 2014 and 2013, the Company recorded compensation expense of $2,412,715,000 and $-0-, respectively, based on the fair value of services rendered in exchange for common shares issued to the Company’s officer.
The Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in which services are provided.
On July 2, 2014, FINRA approved a one for twenty thousand (1:20,000) stock split. All shares have been restated to their post-split values for comparative purposes.
As of December 31, 2014 and 2013, the Company recorded $2,507,021,162 and $1,406,600 for outside services based on the fair value of services rendered in exchange for common shares, respectively. These approximated the fair value of the shares at the dates of issuances in the opinion of management.
As of December 31, 2014 and 2013, the Company recorded $-0- and $500,000 for commissions paid in exchange for Series D convertible preferred shares, respectively. The parties agreed upon compensation with shares of preferred convertible stock in lieu of an 8% finder’s fee.
As of December 31, 2014 and 2013, the Company issued to A.S. Austin Company, under their consulting agreements, warrants to purchase -0- and 13 shares of common stock at $.40 per share, respectively. This consulting agreement is no longer in effect and no further warrants will be issued.
As of December 31, 2014, in conjunction with the convertible debentures issued to Tonaquint, Inc., we issued warrants to purchase $139,000 of our common stock. Since the amount of warrants is variable, we have included them with our derivative presentation.
As of December 31 2014 and 2013, 13- and 5,063 warrants to purchase shares of common stock were issued in conjunction with the sale of preferred convertible stock
As of December 31, 2014, there are -0- options and 5,063 warrants outstanding.
Deferred Taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
Revenue Recognition
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:
 persuasive evidence of an arrangement exists,
 the services have been rendered and all required milestones achieved,
 the sales price is fixed or determinable, and
 collectability is reasonably assured.
Income (Loss) Per Share
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Convertible debentures and preferred stock conversions are not considered in the calculations, as the impact of the potential common shares would be to decrease the loss per share. In addition, the warrants are excluded as well, as the impact of the potential common shares would be to decrease loss per share. Therefore no diluted loss per share figures are presented.
Trading Securities
Trading securities was comprised of shares of common stock we received in converting a promissory note we purchased at a discount. The carrying value of the investment is the market price of the shares at December 31, 2014. Any unrealized gain or loss are recorded under other income/(expense) in the accompanying consolidated statements of operations. We held no trading securities at December 31, 2013.
Risk and Uncertainties
The Company is subject to risks common to companies in the service industry, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.
Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of restricted cash. The Company currently maintains a balance in excess of the federally insured limit set by the FDIC for cash in its Bahamian Restricted cash account, maintained and monitored by its intermediary Elco Securities, Ltd., as part of the Unit Subscription Agreement (the “Agreement”) and Account Management Agreement (“AMA”) into which it entered on September 4, 2013. Because the cash is under control of an intermediary, the funds are recorded as subscription receivable in the Equity section of the financial statements.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.
Related Party Transactions
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the Related parties include:
a.
affiliates of the Company;
b.
entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity;
c.
trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management;
d.
principal owners of the Company;
e.
management of the Company;
f.
other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and
g.
other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements. The disclosures shall include:
a.
the nature of the relationship(s) involved;
b.
a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements;
c.
the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and
d.
amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Fair value of financial instruments
The Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with FASB Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), which provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable.
Our financial instruments include cash, other receivable, accounts payable and accrued liabilities, customer deposits, judgment payable, convertible debentures payable, debt issuance cost and derivative liabilities.
The carrying values of the Company’s cash, other receivable, accounts payable and accrued liabilities, customer deposits, judgment payable, and debt issuance cost approximate their fair value due to their short-term nature.
The Company’s convertible debentures payable are measured at amortized cost.
The derivative liabilities are stated at their fair value as a level 3 measurement. The Company used a Black-Scholes model to determine the fair values of these derivative liabilities. See Note 3 for the Company’s assumptions used in determining the fair value of these financial instruments.
Convertible debentures payable
The Company accounts for convertible debentures payable in accordance with the FASB Accounting Standards Codification No. 815, Derivatives and Hedging, since the conversion feature is not indexed to the Company’s stock and can’t be classified in equity. The Company allocates the proceeds received from convertible debentures payable between the liability component and conversion feature component. The conversion feature that is considered embedded derivative liabilities has been recorded at their fair value as its fair value can be separated from the convertible debentures and its conversion is independent of the underlying debentures value. The Company has also recorded the resulting discount on debentures related to the conversion feature and is amortizing the discount using the effective interest rate method over the life of the debt instruments.
Derivative liabilities
The Company accounts for derivative liabilities in accordance with the FASB Accounting Standards Codification No. 815, Derivatives and Hedging (“ASC 815”). ASC 815 requires companies to recognize all derivative liabilities in the balance sheet at fair value, and marks it to market at each reporting date with the resulting gains or losses shown in the Statement of Operations.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.
For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Beneficial Conversion Feature
For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount.
When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt.
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original Issue Discount
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Extinguishments of Liabilities
The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the years ended December 31, 2013 and 2012.
Subsequent Events
The Company evaluated for subsequent events through the issuance date of the Company’s consolidated financial statements.
Recently issued accounting pronouncements:
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements up to ASU 2015-07, and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE 2: OTHER RECEIVABLE
On January 23, 2013, the Company entered into a Purchase & Option to Purchase Agreement with VFG Securities Incorporated, a California corporation (“VFG Securities”) to acquire 100% of VFG Securities for $750,000 in cash and common stock. Under the terms of this agreement, the Company agreed to pay the shareholders of VFG Securities (1) $125,000 upon the first closing to acquire 17% of the issued and outstanding common stock of VFG (the “First Closing”) and (2) $525,000 in cash (the “Deferred Cash Payment”) plus 1,000,000 shares of the Company’s common stock to acquire the remaining 83% of VFG common stock (the “Second Closing:”). The First Closing and initial $130,000 was paid upon VFG’s filing of a Form BD with the Financial Industries Regulatory Authority (“FINRA”) and at such time the Company received a 17% non-controlling minority ownership stake in VFG Securities and VFG Advisors LLC, a subsidiary of VFG Securities. The Company filed an Application for Approval of Change in Ownership with FINRA pursuant to NASD Rule 1017 and a Form BD, however VFG withdrew itself from the Purchase & Option to Purchase Agreement, and has halted the application process for FINRA approval. The companies dissolved their agreement. VFG cancelled their share issuances representing a 17% non-controlling minority ownership to the Company and agreed to refund $110,000 cash to the Company. This was received in February, 2014.
NOTE 3: FURNITURE, FIXTURES AND EQUIPMENT
Property and equipment consisted of the following at December 31, 2014 and 2013:
NOTE 4: TRADING SECURITIES
As of December 31, 2014, the Company held $107 in securities in its margin account and $16,735 in two money market accounts, which is included in the cash balance of $179,045. As of December 31, 2013, the Company held no securities in its margin account and $818 in a money market account, which is included in the cash balance of $28,401.
NOTE 5: OTHER ASSETS
Other assets consisted of the following at December 31, 2014 and 2013:
The Company has the irrevocable option to again exchange the aforementioned shares with shareholders back after the audit.
All asset purchases and company acquisitions were revalued at December 31, 2014.
NOTE 6: ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
As of December 31, 2014 and 2013, the Company has outstanding $125,770 and $39,293 in Accounts payable and accrued liabilities relating to operational expenses and legal fees, respectively.
NOTE 7. CONVERTIBLE DEBENTURES
During year ended December 31, 2013, there were no conversions. At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding Debentures
During the year ended December 31, 2014, the Company issued $337,056 in new debentures, $28,847 in accrued interest assigned to principal of the convertible notes after notes assignment, and $65,085 in accounts payable reclassified as convertible liabilities due to court order (see Note 14). During the year ended December 31, 2014, the debenture holders converted $216,643 in face value and $18,234 in interest on the debentures to 51,051,646 shares of our common stock. As a result of these transactions, the Company recorded an increase to the derivative liability of as of December 31, 2014, the total face value of the Debentures outstanding was $380,642, net of $76,698 discount.
SUMMARY OF DEBT TRANSACTIONS
At December 31, 2014 and 2013, debt consisted of the following:
As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is summarized as follows:
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2014:
Debt Discount
The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note. For the years ended December 31, 2014 and 2013, the Company recorded a derivative expense of $1,102,767 and $627,112, respectively. The Company recorded amortization of derivative discount of $471,795 and $73,739 for the years ended December 31, 2014 and 2013, respectively. These amounts are included in interest expense. Debt discounts are summarized as follows:
Debt Issuance Costs
Debt issuance costs are summarized as follows:
For the years ended December 31, 2014 and 2013, the Company incurred debt issuance expenses of $70,190 and $4,033, respectively and recorded it to interest expense.
LG Convertible Notes
During the year ended December 31, 2013, the Company entered into note agreements with an unaffiliated investor (LG) for the issuance of convertible promissory notes of $160,500 in the aggregate as follows:
The beneficial conversion feature (an embedded derivative) included in the LG Convertible Notes resulted in total initial debt discounts of $160,500 and a total initial loss on the valuation of derivative liabilities of $516,383 for a derivative liability balance of $676,883 total for their issuances.
The Company revalued the LG note at December 31, 2013 and recorded a decrease in liability of 308,799 to $368,084.
We received net proceeds from LG Convertible Notes of $153,000 after debt issuance costs of $7,500 paid for lender legal fees. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014 and 2013, $7500 and $4,025 of these costs had been expensed as debt issuance costs.
During the year ended December 31, 2014, the LG noteholders converted $21,500 in principal and $924 in interest to 214 shares, or $105 per share.
During the year ended December 31, 2014, the LG noteholders converted $16,000 in principal and $2,053 in interest to 244 shares, or $74 per share.
During the year ended December 31, 2014, the LG noteholders converted $21,415 in principal and $1,347 in interest to 589 shares or $39 per share.
During the year ended December 31, 2014, the LG noteholders converted $1,350 in principal and $139 in interest to 3,722,675 shares, or $.0004 per share.
During the year ended December 31, 2014, the LG noteholders converted $1,415 in principal and $148 in interest to 3,906,575 shares or $.0004 per share.
During the year ended December 31, 2014, the LG noteholders converted $1,340 in principal and $144 in interest to 4,121,116 shares, or $.00036 per share.
During the year ended December 31 2014, LG converted a total of $61,605 in principal and $4,607 in interest to 11,751,462 shares (post split) at various prices throughout the year.
Iconic Convertible Note
On June 6, 2014, the Company entered into note agreements with an unaffiliated investor (Iconic) for the issuance of convertible promissory notes of $33,000:
Among other terms, the Convertible Notes mature on its nine month anniversary (the “Maturity Date”), unless prepayment of any of the Convertible Notes is required in certain events, as called for in the agreement. The debentures are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 55% of the lowest trading price per share of the Company’s common stock for the fifteen (15) trading days prior to conversion.
The Convertible Notes bears interest at ten percent (10%) per annum, payable in cash or shares of our common stock at the Conversion Price. Upon the occurrence of an Event of Default (as defined in the Convertible Notes), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the Convertible Notes, together with all accrued and unpaid interest, to be immediately due and payable. Further terms call for the Company to maintain shares reserved for issuance as stated in the Convertible Note.
The beneficial conversion feature (an embedded derivative) included in the Iconic Convertible Notes resulted in total initial debt discounts of $33,000 and a total initial loss on the valuation of derivative liabilities of $62,510 for a derivative liability balance of $95,510 total for their issuances.
We received net proceeds from the Iconic Convertible Notes of $28,500 after debt issuance costs of $4,500 paid for lender legal fees. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014 and 2013, $7500 and $-0- of these costs had been expensed as debt issuance costs, respectively.
During the year ended December 31, 2014, the Iconic noteholders converted $7,095 in principal to 10,000 shares, or $0.07095 per share.
During the year ended December 31, 2014, the Iconic noteholders converted $7,500 in principal to 267,380 shares, or $.02805 per share.
During the year ended December 31, 2014, the Iconic noteholders converted $6,000 in principal to 1,239,669 shares or $.00484 per share.
During the year ended December 31 2014, Iconic converted a total of $20,095 in principal to 1,507,184 shares (post split) at various prices throughout the year.
During the year ended December 31, 2014, as a result of all conversions, the Company recorded an increase to the derivative liability of $4,377 and $69,193 of derivative liabilities reclassified to additional paid in capital, taking it to $30,695.
During the year ended December 31 2014, Iconic converted $20,595 in principal to 1,517,184 shares (post split) at various prices throughout the year.
Tonaquint Convertible Notes and Warrants
On March 11, 2014, the Company entered into note agreements with an unaffiliated investor (Tonaquint) for the issuance of convertible promissory notes of $58,000 and warrants to purchase $139,000 of stock.
Among other terms, the Convertible Notes mature on its twelve month anniversary (the “Maturity Date”), unless prepayment of any of the Convertible Notes is required in certain events, as called for in the agreement. The Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 55% of the lowest trading price per share of the Company’s common stock for the twenty five (25) trading days immediately preceding the request for conversion. The Convertible Notes bears interest at ten percent (10%) per annum, payable in cash or shares of our common stock at the Conversion Price
The beneficial conversion feature (an embedded derivative) included in the Tonaquint Convertible Notes resulted in total initial debt discounts of $58,000 and a total initial loss on the valuation of derivative liabilities of $521,149 for a derivative liability balance of $521,149 total for their issuances.
We received net proceeds from the Tonaquint Convertible Notes of $46,000 after debt issuance costs of $12,000 paid for lender legal fees. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $9,690 of these costs had been expensed as debt issuance costs.
During the year ended December 31, 2014, the Tonaquint noteholders converted $3,040 in principal and $6,960 to 13,423 shares, or $.7450 per share.
During the year ended December 31, 2014, the Tonaquint noteholders converted $10,000 in principal to 392,157 shares, or $.0255 per share.
During the year ended December 31, 2014, the Tonaquint noteholders converted $10,000 in principal to 1,980,198 shares or $00505 per share.
During the year ended December 31, 2014, the Tonaquint noteholders converted $3,015 in principal to 3,350,000 shares or $0009 per share.
During the year ended December 31 2014, Tonaquint converted a total of $26,055 in principal and $6,960 in interest to 5,735,778 shares (post split) at various prices throughout the year.
During the year ended December 31, 2014, in spite of all conversions, the Company recorded an increase to the derivative liability of $226,178 less conversion of $194,012 taking it to $553,315.
Macallan Convertible Note
On March 26, 2014, the Company entered into note agreements with an unaffiliated investor (Macallan Partners LLC) for the issuance of convertible promissory notes of $88,000 in the aggregate:
Among other terms, the Convertible Notes mature on its nine month anniversary (the “Maturity Date”), unless prepayment of any of the Convertible Notes is required in certain events, as called for in the agreement. The Convertible Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 45% of the lowest trading price per share of the Company’s common stock for the fifteen (15) trading days immediately prior to conversion. In addition, the Convertible Notes provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.
The Convertible Notes bears interest at ten percent (10%) per annum, payable in cash or shares of our common stock at the Conversion Price. Upon the occurrence of an Event of Default (as defined in the Convertible Notes), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the CY Convertible Notes, together with all accrued and unpaid interest, to be immediately due and payable. Further terms call for the Company to maintain shares reserved for issuance as stated in the Convertible Note.
The beneficial conversion feature (an embedded derivative) included in the Macallan Convertible Notes resulted in total initial debt discounts of $88,000 and a total initial loss on the valuation of derivative liabilities of $147,247 for a derivative liability balance of $235,247 total for their issuances.
We received net proceeds from the Macallan Convertible Notes of $80,000 after debt issuance costs of $8,000 paid for lender legal fees. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $7,294 of these costs had been expensed as debt issuance costs.
During the year ended December 31, 2014, the Macallan noteholders converted $10,000 in principal to 392,157 shares, or $.0255 per share.
On November 21, 2014, Macallan Partners LLC filed a complaint against the Company:
Macallan Partners LLC v. Omega Commercial Finance Corp., the Superior Court of the State of Delaware in and for New Castle County, C.A. No. N14C-11-186-DCS. A complaint was filed on November 21, 2014, by Macallan Partners LLC, alleging breach of obligations under the Loan Documents, and seeking damages of not less than $177,000 as of the date of Complaint with additional damages increasing principal to accrue at $2,000 per day and a default interest rate of 18%. The Company has responded acknowledging and denying it had breached any proportionality preservation clauses or insolvency clauses. As of December 31, 2014, the litigation is pending. Our legal counsel has indicated it is more likely than not this litigation will be dismissed. Accordingly, we have made no conditional provisions for liabilities.
Auctus Convertible Note (also see Beaufort/Auctus Convertible Note below)
On April 29, 2014, the Company entered into note agreements with an unaffiliated investor (Auctus) for the issuance of convertible promissory notes of $30,000:
Among other terms, the Convertible Notes mature on its twelve month anniversary (the “Maturity Date”), unless prepayment of any of the Convertible Notes is required in certain events, as called for in the agreement. The Convertible Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 55% of the average of the lowest two trading prices per share of the Company’s common stock for the twenty five (25) trading days immediately preceding the date the request for conversion is received. In addition, the Convertible Notes provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.
The Convertible Notes bears interest at eight percent (8%) per annum, payable in cash or shares of our common stock at the Conversion Price. Upon the occurrence of an Event of Default (as defined in the Convertible Notes), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the CY Convertible Notes, together with all accrued and unpaid interest, to be immediately due and payable. Further terms call for the Company to maintain shares reserved for issuance as stated in the Convertible Note.
During the year ended December 31 2014, the Note went into default and Auctus assigned its debt and accrued interest of $22,180 to Beaufort (see Beaufort Convertible Notes below)
Adar Bays Convertible Note
On April 30, 2014, the Company entered into note agreements with an unaffiliated investor (Adar Bays) for the issuance of convertible promissory notes of $35,000:
Among other terms, the Convertible Notes mature on its twelve month anniversary (the “Maturity Date”), unless prepayment of any of the Convertible Notes is required in certain events, as called for in the agreement. The Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 60% of the lowest trading price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.. In addition, the Convertible Notes provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.
The Convertible Notes bears interest at eight percent (8%) per annum, payable in cash or shares of our common stock at the Conversion Price. Upon the occurrence of an Event of Default (as defined in the Convertible Notes), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the CY Convertible Notes, together with all accrued and unpaid interest, to be immediately due and payable. Further terms call for the Company to maintain shares reserved for issuance as stated in the Convertible Note.
The beneficial conversion feature (an embedded derivative) included in the Adar Bays Convertible Notes resulted in total initial debt discounts of $35,000 and a total initial loss on the valuation of derivative liabilities of $65,243 for a derivative liability balance of $100,243 total for their issuances.
We received net proceeds from the Adar Bays Convertible Notes of $30,000 after debt issuance costs of $9,925 paid for lender legal fees. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $6,617 of these costs had been expensed as debt issuance costs.
During the year ended December 31 2014, Adar Bays did not convert any of its debt or accumulated interest, and the Company recorded an increase of $22,488 taking it to $122,731.
IBC Convertible Debt Settlement
On October 17, 2014 the Circuit Court in the Twelfth Judicial Circuit in and for Sarasota County, Florida (the “Court”), entered an Order Granting Approval of Settlement Agreement (the “Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a Settlement Agreement (the “Settlement Agreement”) between the Company and IBC Funds, LLC, a Nevada limited liability company (“IBC”), in the matter entitled IBC Funds, LLC, vs Omega Commercial Finance Corporation., Case No. 2014 CA 6009 (the “Action”). IBC commenced the Action against us to recover an aggregate of $65,085 of past-due accounts payable, which IBC had purchased from certain of our vendors pursuant to the terms of separate claim purchase agreements between IBC and each of the respective vendors (the “Assigned Accounts), plus fees and costs (the “Claim”). The Assigned Accounts relate to certain legal, accounting, underwriting, and Edgar filing services cost. The Order provides for the full and final settlement of the Claim and the Action, and on October 23, 2014, we issued an initial 270,000 shares of common stock to IBC. The Settlement Agreement became effective and binding on October 31, 2014.
The debt is convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the average of the lowest two trading prices per share of the Company’s common stock for the ten (10) trading days immediately preceding the date the request for conversion is faxed to the Company
The beneficial conversion feature (an embedded derivative) included in the IBC Funds Settlement Agreement resulted in total initial debt discounts of $65,085 and a total initial loss on the valuation of derivative liabilities of $212,663 for a derivative liability balance of $277,748 total for their issuances.
We received net proceeds from the IBC Funds Settlement Agreement of $65,085, paid out to legal, accounting and compliance vendors. These debt issuance costs were amortized immediately. As of December 31, 2014, $65,085 of these costs had been expensed as debt issuance costs.
During the year ended December 31, 2014, the IBC noteholders converted $5,049 in principal to 1,182,181 shares, or $.055 per share.
During the year ended December 31, 2014, the IBC noteholders converted $5,555 in principal to 270,000 shares, or $.0187per share.
During the year ended December 31, 2014, the IBC noteholders converted $5,555 in principal to 1,000,000 shares, or $.05555 per share.
During the year ended December 31, 2014, the IBC noteholders converted $3,118.50 in principal to 2,700,000 shares, or $.001155 per share.
During the year ended December 31, 2014, the IBC noteholders converted $2,673 in principal to 2,700,000 shares, or $.00099 per share.
During the year ended December 31, 2014, the IBC noteholders converted $1,485 in principal to 2,700,000 shares, or $.00055 per share.
During the year ended December 31, 2014, the IBC noteholders converted $1,336.50 in principal to 2,700,000 shares, or $.000495 per share.
During the year ended December 31, 2014, in spite of all conversions, the Company recorded an increase to the derivative liability of $134,452 less conversion of $63,627 taking it to $79,669.
Beaufort (Auctus) Convertible Note
In November, Beaufort assumed the Auctus Convertible Note including principal and interest, of $57,180. Also in November, 2014, the Company entered into note agreements with an unaffiliated investor (Beaufort) for the issuance of convertible promissory notes of $32,500 (see Beaufort below):
Among other terms, the Convertible Notes mature on its nine month anniversary (the “Maturity Date”), unless prepayment of any of the Convertible Notes is required in certain events, as called for in the agreement. The Convertible Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the average of the lowest two trading prices per share of the Company’s common stock for the ten (10) trading days immediately preceding the date the request for conversion is faxed to the Company. In addition, the Convertible Notes provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.
The Convertible Notes bears interest at eight percent (8%) per annum, payable in cash or shares of our common stock at the Conversion Price. Upon the occurrence of an Event of Default (as defined in the Convertible Notes), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the Convertible Notes, together with all accrued and unpaid interest, to be immediately due and payable. Further terms call for the Company to maintain shares reserved for issuance as stated in the Convertible Note.
The beneficial conversion feature (an embedded derivative) included in the Beaufort Note assumed from Auctus (Beaufort/Auctus) resulted in total initial debt discounts of $35,000 and a total initial loss on the valuation of derivative liabilities of $26,649 for a derivative liability balance of $61,649 total for their issuances.
We received net proceeds from the Beaufort/Auctus Convertible Notes of $28,000 after debt issuance costs of $7,000 paid for lender legal fees. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $6,222 of these costs had been expensed as debt issuance costs.
During the year ended December 31, 2014, the Beaufort/Auctus noteholders converted $7,500 in principal to 1,500,000 shares, or $.005 per share.
During the year ended December 31, 2014, the Beaufort/Auctus noteholders converted $2,725 in principal to 2,752,525 shares, or $.00099 per share.
During the year ended December 31, 2014, the Beaufort/Auctus noteholders converted $5,190 in principal to 3,931,818 shares, or $.00013 per share.
During the year ended December 31, 2014, the Beaufort/Auctus noteholders converted $2,645 in principal to 5,343,434 shares, or $.0005 per share.
During the year ended December 31, 2014, the Company recorded an increase to the derivative liability of $124,989 less conversion of $78,006 taking it to $108,633.
Beaufort Convertible Note
The beneficial conversion feature (an embedded derivative) included in the Beaufort Note assumed from the Beaufort Convertible Note resulted in total initial debt discounts of $32,500 and a total initial loss on the valuation of derivative liabilities of $84,413 for a derivative liability balance of $116.913 total for their issuances.
We received net proceeds from the Beaufort of $25,000 after debt issuance costs of $7,500 paid for lender legal fees. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $2,500 of these costs had been expensed as debt issuance costs.
During the year ended December 31, 2014, the Beaufort noteholders did not convert principal or interest.
During the year ended December 31, 2014, the Company recorded an increase to the derivative liability of $1,850 taking it to $118,763.
JMJ / River North Convertible Notes
On June 24, 2014, the Company received net proceeds of $47,500 from the JMJ Convertible Note. The note duration is 2 years and its due date is June 23, 2016. Among other terms, the note bears no interest for 90 days and a one-time charge of twelve percent (12%) upon non-payment within the first 90 days. It carries with it a 10% OID. The Company received $50,000 with OID of $5,556 for a total of $55,556.
Among other terms, the Convertible Notes mature on its 2 year anniversary (the “Maturity Date”), unless prepayment of any of the Convertible Notes is required in certain events, as called for in the agreement. The Convertible Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the average of the lowest two trading prices per share of the Company’s common stock for the ten (10) trading days immediately preceding the date the request for conversion is faxed to the Company. In addition, the Convertible Notes provide for adjustments for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where there is a change in control of the Company.
The Convertible Notes bears interest at eight percent (8%) per annum, payable in cash or shares of our common stock at the Conversion Price. The notes may be prepaid with 150% interest or on day 91, there is a one time 12% interest fee. Upon the occurrence of an Event of Default (as defined in the Convertible Notes), the Company is required to pay interest to the Holder of each outstanding note at twenty-two percent (22%) per annum and the Holders may at their option declare the Convertible Notes, together with all accrued and unpaid interest, to be immediately due and payable. Further terms call for the Company to maintain shares reserved for issuance as stated in the Convertible Note.
The beneficial conversion feature (an embedded derivative) included in the JMJ convertible debenture resulted in total initial debt discounts of $55,556 in 2013 and $55,556 in 2014. and a total initial loss on the valuation of derivative liabilities of $41,353 for a derivative liability balance of $96,909 in 2013 and a total initial loss on the valuation of the derivative liabilities of $40,893 for a derivative liability balance of $96,449 in 2014, $193,358 total for their issuances.
We received net proceeds from the JMJ notes of $97,500 after debt issuance costs of $2,500 and OID of 11,112. These debt issuance costs were amortized over the terms of the Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $5,556 of these costs had been expensed as debt issuance costs.
During the year ended December 31, 2014, the JMJ noteholders converted $7,000 in principal to 200 shares (post split), or $35 per share.
During the year ended December 31, 2014, the JMJ noteholders converted $7,650 in principal to 300,000 shares (post split), or $.0255 per share.
During the year ended December 31, 2014, the JMJ noteholders converted $20,000 in principal to 2,000,000 shares (post split), or $.01 per share.
During the year ended December 31, 2014, the JMJ noteholders converted $27,572 in principal and interest to 2,757,222 shares (post split), or $00013 per share.
During the year ended December 31, 2014, the JMJ noteholders converted a total of $62,222 in principal and interest to 5,057,422 shares (post split), throughout the year.
During the year ended December 31, 2014, the Company recorded an increase to the derivative liability of $8,106 less conversions of $105,015 to take the balance of the 2013 debenture to $-0-.
During the year ended December 31, 2014, JMJ assigned the second payment debenture to River North Equity. The Company transferred the liability to River North and upon revaluing the debenture, recorded an increase to the derivative liability of $73,248 to take the balance of the 2014 debenture to $169,697.
We have determined that the conversion feature of the Convertible Notes represents an embedded derivative since the Convertible Note is convertible into a variable number of shares upon conversion. Accordingly, the Convertible Notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Company believes that the aforementioned embedded derivatives meet the criteria of ASC 815 (formerly SFAS 133 and EITF 00-19), and should be accounted separately as derivatives with a corresponding value recorded as a liability. Accordingly, the fair value of these derivative instruments have been recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the Convertible Notes. Such discount will be accreted from the date of issuance to the maturity dates of the Convertible Notes. The change in the fair value of the liability for derivative contracts will be credited to other income (expense) in the consolidated statements of operations at the end of each quarter. The $430,988face amount of the Convertible Notes were stripped of its conversion feature due to the accounting for the conversion feature as a derivative, which was recorded using the residual proceeds to the conversion option attributed to the debt. The beneficial conversion feature (an embedded derivative) included in the Convertible Notes resulted in an initial debt discount of $402,141 and an initial loss on the valuation of derivative liabilities of $1,102,767 for a derivative liability balance of $1,504,908 at issuance.
The fair values of the Convertible Notes were calculated at issue date utilizing the following assumptions:
The fair value of the Convertible Note was calculated at December 31, 2014 utilizing the following assumptions:
NOTE 8. CUSTOMER DEPOSITS
As of December 31, 2014 and 2013, the Company had outstanding Customer deposit balances of $69,180 and $9,540, respectively.
NOTE 9. STOCKHOLDERS’ EQUITY (DEFICIT)
Capital Stock
COMMON STOCK
Effective on January 8, 2013, the Company amended its Articles of Incorporation to increase to unlimited the number of authorized shares of its common stock.
On March 27, 2013, the Company’s Board of Directors amended the designations, terms, powers, preferences and rights of the Series A Redeemable Cumulative Preferred Stock as originally reported in its Form 8-K filed on October 15, 2012. The amendment decreased the dividend rate to 4.50% and shortened the redemption obligation to 3 years.
Effective July 2, 2014, the Company effected a 1:20,000 split for its common stock. All numbers are restated for comparative purposes.
In February, 2013, the Company issued 15 shares of its common stock as a deposit to secure the purchase of the building and property at 983 Washington, Miami, Florida. The Company recorded as other asset $30,000 or $2,000 per share, the value of the stock which approximated the value of the required deposit. This agreement has expired and the deposit forfeit. The Company recorded an expense of $30,000 as loss on deposit during the year ended December 31, 2013.
In March 2013, the Company issued 43 shares of common stock to A.S. Austin and 8shares of restricted common stock to NewsUSA for marketing services and recorded expense of $16,500, or $2,200 per share, the value of the stock which approximated the value of services.
The Company issued 670 shares of common stock to Lambert as part of the Standby Purchase Agreement (See Note 14) and recorded the cost of $2,357,060 or $3,518 per share to deferred equity offering costs, a contra equity account and 100 shares of common stock to Stephen Hand as collateral for the TD bank loan repurchase and recorded an expense of $351,800 or $3,518 per share, the value of the stock which approximated the value of services. Shares issued to Mr. Hand were voided and cancelled on June 27, 2013. The Company issued 100,000,000 shares of restricted common stock as a reserve. As of the date of this filing, the shares have been cancelled and retired.
On April 5, 2013, the Company entered into a Research Services Agreement (the “Agreement”) with Grass Roots Research and Distribution, Inc. (“GRRD”) for a 30-day research project. For these services, the Company issued 25 shares of restricted stock to GRRD with anti-dilution rights which expire at the conclusion of the contract. The Company recorded an expense of $40,000 or $1,600 per share, the value of the stock which approximated the value of services.
On April 22, 2013, the Company issued 25 shares of restricted stock to La Postal for services rendered in furtherance of the agreements in process. The Company recorded an expense of $40,000 or $1,600 per share, the value of the stock which approximated the value of services.
On May 1, 2013, the Company issued 5 shares of restricted stock to Grass Roots, as part of the contract executed in April, 2013. The Company recorded an expense of $10,000 or $2,000 per share, the value of the stock which approximated the value of services.
On May 1, 2013, the Company issued 150 shares to A. Austin, in compliance with their consulting contract terms. The Company recorded an expense of $300,000 or $2,000 per share, the value of the stock which approximated the value of services.
On May 9, 2013, the Company issued T. Buxton 75 shares of restricted stock for services rendered. The Company recorded an expense of $150,000 or $2,000 per share, the value of the stock which approximated the value of services.
On May 9, 2013, the Company issued Global Discovery 63 shares of restricted stock for services rendered. The Company recorded an expense of $125,000 or $2,000 per share, the value of the stock which approximated the value of services.
On May 31, 2013, the Company issued 7,500 shares to its subsidiary, Omega Capital Street, in anticipation of share exchange agreements to be executed. The Company recorded the transaction at par value with no expense associated.
On June 3, 2013, the Company issued Lambert 500 shares under the Standby Share Agreement. The Company recorded $650,000 as deferred equity offering costs, a contra equity account.
On June 27, 2013, the Company issued its attorneys 25 shares of restricted stock in exchange for services. The Company recorded the stock issuance at the value of the stock which approximated the value of services in the amount of $6,800.
On July 3, 2013, the Company issued 150 shares of common stock to two contractors in exchange for services. The Company recorded an expense of $102,000 or $680 per share, the value of the stock which approximated the value of services.
On July 10, 2013, the Company issued 350 shares of common stock to two consultants in exchange for services. The Company recorded an expense of $238,000 or $.034 per share, the value of the stock which approximated the value of services.
On July 12, 2013, the Company issued 125 shares of stock to a consultant in exchange for services. The Company recorded an expense of $92,500 or $740 per share, the value of the stock which approximated the value of services.
On September 4, 2013, the Company sold 1,500 shares of common stock to three foreign investors under the DPO filing at $.10 per share or $3,000,000, as per the DPO. The Company has appointed Elco Securities, Ltd. as intermediary to monitor and distribute shares to the investors in accordance with the cash disbursements. The offering was completed and the funds wired into the Company’s offshore restricted Bahamian Cash account. The funds will become available for use by the Company when it meets the terms and conditions set forth in the DPO, and the dollar equivalent in free trading common stock will be delivered to the investors at the market price of the common stock on the day the funds are requested. This Restricted cash account is not covered by the FDIC in the United States of America which represents a credit risk. (See Note 6)
On October 29, 2013, the Company issued total 76 shares of stock to 2 consultants, or 38 shares each, in exchange for services. The Company recorded an expense of $44,400 or $592 per share, the value of the stock which approximated the value of services.
In December, 2013, the Company accrued an additional 188 shares of common stock to be issued for PBDC and recorded an expense of $127,500 or $680 per share, the value of the stock which approximated the value of services.
The Company had 14,252 shares of common stock issued and outstanding as of December 31, 2013, respectively, including 7,750 shares issued to Omega Capital Street and 250 shares issued to Omega CRE Group, LLC, the subsidiaries of the Company, in anticipation of share exchange business combinations and mergers.
In January 2014, the Company issued approximately 214 shares of restricted common stock to LG Capital Funding LLC in converting their June 2013 debenture of $21,500 and $924 in interest.
On January 22, 2014, the Company issued approximately 734 shares of common stock to Chad Curtis, Joseph Babiak and Robin Trehan in exchange for business consulting services. The Company recorded an expense of $255,084 or $348 per share, the value of the stock which approximated the value of services.
On January 28, 2014, the Company issued 375 shares of common stock to Todd Buxton and Bentley Addison in exchange for commercial real estate advisory services. The Company recorded an expense of $138,000 or $368 per share, the value of the stock which approximated the value of services.
On January 28, 2014, the Company issued 250 shares of common stock to Ken Honeyman in exchange for services as CEO of Capital Match Point. The Company recorded an expense of $92,000 or $368 per share, the value of the stock which approximated the value of services.
On February 7, 2014, the Company issued 1,000,000 shares of Series G Preferred stock to Nuquest Inc.to purchase their web portal, Capital Match Point. Post-split, 800 shares of Series G Preferred stock are convertible to one (1) share of common stock. The Company valued the purchase at $412,500 or $330 per share, the value of the converted shares of common stock as of the date of the transaction.
On February 12, 2014, the Company issued approximately 33 shares of common stock to Vikram Grover in exchange for Mergers & Acquisitions advisory services. The Company recorded an expense of $11,375 or $350 per share, the value of the stock which approximated the value of services.
On February 12, 2014, the Company issued approximately 350 shares of common stock to Iconic Holdings LLC in exchange for sourcing additional financing services. The Company recorded an expense of $122,480 or $350 per share, the value of the stock which approximated the value of services.
On February 12, 2014, the Company issued 175 shares of common stock to Ken Honeyman in exchange for services as CEO of Capital Match Point, 100 shares of common stock to Kevin Olson in exchange for services as CFO of Capital Match Point, and 38 shares of common stock to Suzanne Sires in exchange for services as Operations Manager of Capital Match Point. The Company recorded an expense of $109,375 or $350 per share, the value of the stock which approximated the value of services.
On February 28, 2014, the Company issued 375 shares of common stock to Eran Danino in exchange for services as Vice President of Omega Capital Street LLC. The Company recorded an expense of $111,750 or $298 per share, the value of the stock which approximated the value of services.
On March 3, 2014, the Company issued approximately 12 shares of common stock to John Bucassa in exchange for consulting services. Mr. Bucassa specializes in the acquisition of Broker/Dealers.The Company recorded an expense of $2,610 or $232 per share, the value of the stock which approximated the value of services.
On March 17, 2014, the Company sold 50 shares of common stock to Rebecca Mcavoy, 25 shares of common stock to Rick Bolkema, 25 shares of common stock to Scott Bolkema, LLC, 50 shares of stock to Angio Investment Partners and 25 shares of stock to Kenneth Mulder, 4 unrelated investors, for $35,000 under our DPO. On April 15, 2014, the Company sold 25 shares of common stock to Kenneth Mulder for $5,000 under our DPO.
On March 17, 2014, the Company issued 224 shares of common stock to Wakabayashi Fund LLC in exchange for investor relations services. The Company recorded an expense of $36,161 or $162 per share, the value of the stock which approximated the value of services.
On April 15, 2014, the Company issued 80,000 shares of Series F Preferred stock, par value $100 per share, to Flavio Zuanier in exchange for business consulting services. The Company recorded an expense of $8,000,000, the value of the stock which approximated the value of services.
On April 20, 2014, the Company issued 1,000 shares of common stock to Ilan Doron in exchange for Mergers & Acquisitions services focused on the telecommunications sector and on April 22, 2014, the Company issued 375 shares of common stock to Kenneth Leide and 250 shares of S-8 common stock to Todd Buxton for commercial real estate advisory services.. The Company recorded an expense of $211,250 or $130 per share, the value of the stock which approximated the value of services.
On April 22, 2014, the Company issued 175 shares of common stock to Eran Danino in exchange for services as CEO and President of Omega Capital Street LLC. The Company recorded an expense of $22,750 or $130 per share, the value of the stock which approximated the value of services.
On April 25, 2014, the Company issued approximately 244 shares of common stock to LG Capital LLC in exchange for converting their debentures of $16,000 and $961 in interest, or $68 per share.
On May 14, 2014, the Company issued 750 shares of common stock to Eran Danino in exchange for services as CEO and President of Omega Capital Street LLC. The Company recorded an expense of $73,500 or $98 per share, the value of the stock which approximated the value of services.
On May 14, 2014, the Company issued 500 shares of common stock to Todd Buxton in exchange for commercial real estate advisory services. The Company recorded an expense of $49,000 or $98 per share, the value of the stock which approximated the value of services.
On May 28, 2014, the Company issued approximately 589 shares of common stock to LG Capital LLC in exchange for converting their debentures of $16,000 and $2,053 in interest, or $31 per share, the value of the stock which approximated the value of the transaction.
On June 5, 2014, the Company issued 2,500 shares of common stock to Omega Capital Street LLC, our wholly owned subsidiary, in anticipation of mergers and exchanges. The Company recorded the issuance at par value to its equity accounts.
On June 5, 2014, the Company issued 2,500 shares of common stock to its president Jon Cummings IV in exchange for services as President of Omega Commercial Finance Corp. The Company recorded an expense of $250,000 or $100 per share, the value of the stock which approximated the value of services.
On June 17, 2014, the Company issued 200 shares of common stock to JMJ in exchange for converting $7,000 in principal.
On July 2, 2014, the Company executed a 1:20,000 stock rollback of their common stock. As of July 2, 2014 the Company had outstanding 29,843 shares of common stock. All shares have been stated at their rollback value for comparative purposes.
On July 9, 2014, the Company issued 40,000,000 shares of common stock to its president Jon Cummings IV in recapitalizing the Company and positioning the Company to secure future capitalization for growth completed through a resolution by the Board of Directors. The Company recorded an expense of $2.4 billion ($2,400,000,000) or $60 per share, the value of the stock which approximated the value of services.
On July 9, 2014, the Company issued 10,000,000 shares of common stock to its wholly owned subsidiary Omega Capital Street LLC to position the Company to secure future capitalization for growth, completed through a resolution by the Board of Directors. The Company recorded the issuance to its subsidiary at par value, $.01 in the equity section of their financial statements.
On July 18, 2014, The Company issued 285,714 shares of common stock to AmericaVest to satisfy a $2,000,000 Promissory note, in exchange for 51% equity ownership in AmericaVest, which was subsequently reduced to 10% in accordance with the contractual agreement
On July 30, 2014, the Company issued 200,000 shares of common stock to Eran Danino in exchange for services as VP of Omega Capital Street LLC. The Company recorded an expense of $12,000,000 or $60 per share, the value of the stock on the day of authorization.
On July 30, 2014, the Company issued 200,000 shares of S-8 common stock to Todd Buxton, 1,000,000 shares of common stock to Von Cummings, and 100,000 shares of stock to Kenneth Bruce Leide in exchange for commercial real estate advisory services. The share amount was determined by contractual agreement. The Company recorded an expense of $78,000,000 or $60 per share, the value of the stock on the day of authorization.
On July 30, 2014, the Company issued 50,000 shares of common stock to Nelson Garcia, 50,000 shares of common stock to Robert Damigella and 50,000 shares of common stock to Ilan Doron, a total of 150,000 shares, in exchange for management consulting services. The Company recorded an expense of 60 per share.
On July 30, 2014, the Company issued 75,000 shares of common stock to Flavio Zuanier for business consulting services and 25,000 shares of common stock to Gail Rosenthal for accounting services. The Company recorded an expense of $4,500,000 or $60 per share.
On July 30, 2014, the Company issued a total of 97,002 shares of Series A Preferred Stock, 10,778 shares each, to Britannia Securities International, Agri Technologies International, RND Company Ltd., On Time Investments Ltd., Rooftop Holdings Ltd, Tosca Limited, Anybright Investments Ltd., Sequence Investments Ltd., and Copperbottom Investments Ltd., for consideration in modification of terms and deadlines to their original agreement. The Company recorded $485,010 or $.00 per share, the par value of the preferred stock, to Deferred equity costs under shareholders’ equity and recorded a total expense of $3.635 for the transaction.
On August 15, 2014, the Company issued 7,450 shares of common stock to Sojourn Investments LP upon conversion of 2,500 shares of Series D Preferred Stock and recorded the difference of $12,425 to paid in capital.
On September 11, 2014, the company issued 285, 714 shares of common stock to AmericaVest CRE Mortgage Funding Trust Inc. (“AmericaVest”) to retire a $2,000,000 promissory in conjunction with our acquisition of 51% equity interest or 1,564,079 shares of AmericaVest stock. On October 30, 2014, the Company and AmericaVest mutually agreed to reduce our equity interest in AmericaVest to ten percent (10%) through a transfer of 641,272 shares of AmericaVest (the “Contributed shares”) back by us to AmericaVest, pending completion of required audited financials by AmericaVest, at which time we will have an irrevocable option exercisable at our sole discretion to reacquire the Contributed shares at no additional consideration. The Company reduced its ownership interest pursuant to and based upon a material event, which occurred causing the resignation of one of the AmericaVest’s Co-Founders. The Company intends to regain the 75% majority ownership as originally executed in the Definitive Share Exchange Agreement upon the Company reassessing its position upon future due diligence and deeming the transaction optimal for the both the company and its shareholders. The pricing of the acquisition was negotiated based on the Company’s shares being valued at @ $7.00 per share. Hence with AmericaVest requesting a purchase price of $2.7 million and with the agreed upon cost basis of $7.00 per share, the Company agreed to issue 285,714 shares per the share exchange agreement for 51% ownership stake.
On September 24, 2014, the Company issued 2,126,588 shares of common stock to Lambert Private Equity LLC to exercise options. The Company recorded the difference of $4,479,684 to paid in capital.
On September 29, 2014, the Company issued 10,000 shares of common stock to Iconic Holdings LLC to convert debentures and interest.
On October 14, 2014, the Company issued 392,157 shares of common stock to Macallan Partners LLC and 392,157 shares of common stock to Tonaquint Inc. to convert debentures and interest.
On October 23, 2014 the Company issued 270,000 shares of common stock in accordance with the Settlement Agreement with IBC Funds LLC and 300,000 shares of common stock to JMJ Financial to convert debentures and interest.
In October, 2014, the company agreed to issue 15,000,000 shares of common stock to the majority shareholders of VeriTrek, Inc. (“VeriTrek”) in conjunction with our acquisition of a 75% equity interest in VeriTrek. On October 30, 2014, the Company and the VeriTrek majority shareholders mutually agreed to reduce our equity interest in VeriTrek to fifteen (15%) in exchange for their return to us of 6,750,000 of the 15,000,000 shares of common stock, due to the immediate unavailability of VeriTrek’s financial statements.
On November 7, 2014, the Company issued 1,000,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement.
On November 11, 2014, the Company issued 1,500,000 shares of common stock to Beaufort Capital Partners LLC to convert debentures and interest.
On November 14, 2014, the Company issued 1,000,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement and 2,000,000 shares of common stock to JMJ Financial to convert debentures and interest.
On November 24, 2014, the Company issued 1,239,669 shares of common stock to Iconic Holdings LLC to convert debentures and interest.
On November 25, 2014, the Company issued 1,980,198 shares of common stock to Tonaquint Inc. to convert debentures and interest.
On November 29, 2014, the Company sold 237 shares of Series 2020 Convertible Redeemable Cumulative Preferred stock, par value $200, to Stephen Wall and 125 shares of Series 2020 Convertible Redeemable Cumulative Preferred stock, par value $200, to Richard Carlton Wall for $25,000. The shares were issued in January 2015.
On December 2 2014, the Company issued 2,700,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement.
On December 3, 2014, the Company issued 2,752,525 shares of common stock to Beaufort Capital Partners LLC to convert debentures and interest.
On December 6, 2014, the Company issued 2,757,222 shares of common stock to JMJ Financial to convert debentures and interest.
On December 9, 2014, the Company issued 2,700,000 shares of common stock to IBC Funds LLC in compliance with the settlement agreement.
On December 12, 2014, the Company issued 3,350,000 shares of common stock to Tonaquint Inc. to convert debentures and interest.
On December 15, 2014, the Company issued 1,000,000 shares of common stock to Rodrigo Rappaccioli for $10,000 purchased under the DPO.
On December 15, 2014, the Company issued 3,722,675 shares of common stock to LG Capital Funding LLC to convert debentures and interest.
On December 15, 2014, the Company sold 1,500 shares of Series 2020 Preferred stock, par value $200, to Alison Helm for $375,000 cash.
On December 17, 2014, the Company issued 3,931,818 shares of common stock to Beaufort Capital Partners LLC to convert debentures and interest.
On December 18, 2014, the Company issued 2,700,000 shares of stock to IBC Funds LLC in compliance with the settlement agreement.
On December 19, 2014, the Company issued 10,000,000 shares of stock to VeriTrek Inc. and HR Hale LLC as part of the share exchange agreement signed in October 2014.
On December 19, 2014, the Company issued 3,000,000 shares of stock to Train Systems LLC for sales consulting services on closing deals. The Company recorded an expense of $6,000 or $.002, the closing stock price on the date of issuance.
On December 22, 2014, the Company issued 3,906,575 shares of stock to LG Capital Funding LLC to convert debentures and interest.
On December 30, 2014, the Company issued 2,700,000 shares of stock to IBC Funds LLC in compliance with the settlement agreement, and 5,343,434 shares of stock to Beaufort Capital Partners LLC to convert debentures and interest.
On December 31, 2014, the Company issued 4,121,166 shares of stock to LG Capital Funding LLC to convert debentures and interest.
The Company had 119,249,895 and 14,282 shares of common stock issued and outstanding as of December 31, 2014 and 2013, respectively.
PREFERRED STOCK
On September 4, 2013, the Company entered a Unit Subscription Agreement and an Account Management Agreement with nine oversea investors. Under the terms of the Unit Subscription Agreement (the “Agreement”), the Company issued a total of 271,998 newly designated shares of preferred stock, which are convertible to common stock totaling 27,199,800 shares and 101,258,100 common stock warrants to nine investors for a total investment of $40,642,069 with an average Price of $1.42. The common stock warrants have an average exercisable price of $1.42 per common share. Under the Account Management Agreement, investors under the Unit Subscription Agreement and Company have appointed Elco Securities, Ltd. as intermediary to monitor and enforce the Use of Proceeds to ensure that it meets the projected Use of Proceeds as included in the Unit Subscription Offering Breakout Detail, filed as Exhibit 10.20 to Form 8-K with the SEC dated October 9, 2013 and included by reference herein.
Subject to and upon the terms and conditions set forth in the Agreement, at the Closing the Company issued and sold individually and not jointly, to the Investor(s), and the Investor(s), severally and not jointly, purchased from the Company that number of Units consisting of (i) shares of Convertible Preferred Stock (the "Shares"), and, (ii) Warrants to purchase additional Common Shares (the "Warrant") at such prices and in such amounts as are set forth opposite their respective Warrant Series name in Figure 1 hereto, and an expiration date of thirty six (36) months following registration or following final disbursement of capital or sixty (60) from this offering whichever is longer.
Payment:
The Investor(s), severally and not jointly, individually purchase that number of Units as is set forth next to their names on the Signature Page and such cost per Unit as specified in Figure 1. In consideration of the sale of these Units, and in reliance on the representations and warranties herein provided by the Company for the benefit of the Investor(s), the Investor(s) deliver their portion of the agreed to Total Unit Purchase (the "Purchase Price") as is set forth in Figure 1 above. Payment of the Purchase Price, of both the Unit Subscription Agreement and the Warrant exercise, has been made to the Company's Restricted Cash Account with the Intermediary as specified in the AMA which will monitor the capital disbursement.
Closing; Deliveries.
(a)
The closing of the sale and purchase of the Units under the Agreement (the “Closing”) took place at the offices of the Intermediary, Elco Securities, Ltd. in Abaco, Bahamas. The date of the Closing is hereinafter referred to as the “Closing Date”. Such Closing shall be evidenced by a letter from the Intermediary attesting to the Closing and stating the available capital to the Company in their account (the "Closing Notification").
(b)
At the Closing, the Company delivered, or cause to be delivered, to each of the Investor(s), (i.) certificates evidencing the Convertible Preferred Shares being purchased by such Investor(s) as called for in the Agreement, registered in the name of such Investor(s), against payment to the Company of the Purchase price by such Investor(s), (ii.) the Warrants being purchased by such Investor(s) against payment to the Company of the Purchase Price by such Investor(s), (iii.) a corporate resolution authorizing the offering, closing and submission to the Account Management Agreement and (iv.) an opinion letter stating that the offering is an obligation of the company and that the offering has been completed according to applicable securities regulations.
The terms and conditions of the Account Management Agreement (“AMA”) are filed as Exhibit 10.21 and 10.22 of Form 8-K, filed with the SEC on October 9, 2013 and are incorporated herein.
In accordance with the terms of the agreement, we have reserved 28,000,000 shares of common stock for issuance upon conversion of the preferred stock.
In accordance with the agreement, in 2013, 100,000 shares of Series D Convertible preferred stock were issued to the agent as commissions in lieu of 8% commission on the total amount of funds raised and $500,000, the value of the preferred stock at par value ($5 per share) was expensed as Commissions, and during 2014, 2,500 shares of Series D preferred stock were converted to 7,450 shares of common stock. There were 97,500 shares of Series D Preferred stock issued and outstanding as of December 31, 2014.
In accordance with the agreement, 500,000 shares of Series C Convertible Supervoting stock were issued to our President Jon Cummings IV and is being held by the intermediary as a guarantee. The stock will be returned to the Company at the conclusion of the Agreement, and the Company has recorded it as Preferred stock reserves, a contra equity account.
In August 2014, we issued 97,002 shares of Series A Preferred Cumulative Convertible stock (10,778 shares per stockholder) to the original 9 Series A Preferred stockholders.
There were 500,000 shares of Series C Preferred Cumulative stock issued and outstanding as of December 31, 2014.
The related funds are being held in trust in an offshore Bahamian Restricted cash account, under the trusteeship of Elko Securities, Ltd. Since the funds are maintained by the intermediary, we have recorded these as subscription receivable in the Equity section of our balance sheet. As of December 31, 2014 and 2013, the account held balances of $43,636,559 and $43,642,694 respectively.
In February 2014, we issued 1,000,000 shares of Series G Convertible Preferred stock to Nuquist Capital MatchPoint to purchase their web portal. As of December 31, 2014, there are 1,000,000 shares of Series G Preferred stock issued and outstanding.
In April 2014 we issued 80,000 shares of Series F Preferred stock to Flavio Zuanier for consulting services regarding business management and overseas investing and recorded an expense of $8,000,000 or $100 per share.
In December 2014, we sold 1,862 shares of Series 2020 Preferred stock. We issued 1,500 shares in 2014. The remaining 362 shares were issued in 2015. Also in 2015 we sold 1,175 shares for $235.000.
In March 2015, we issued 2,000,000,000 shares of Series CC Preferred stock to our president for his services and recorded an expense of $200,000 or $.0001 per share to officer compensation expense.
OPTIONS
As part of the Standby Purchase Agreement with Lambert (See Note 14), the Company granted to Lambert a 5-year Option to Purchase Shares for 1,283 shares of our common stock at an exercise price of the lesser of (i) $0.40 per share or (ii) 110% of the lowest daily VWAP for our common stock as reported by Bloomberg during the thirty trading days prior to the date the option is exercised. The options expire March 7, 2018. The Company did not grant any registration rights with respect to any share of common stock issuable upon exercise of the options. The fair values of the options expense was calculated using the Black-Scholes options pricing model at issue date using the following assumptions:
No additional stock options were issued in the years ended December 31, 2014 and 2013, and in December 2014, Lambert exercised their options and received 2,126,588 shares of common stock. As of December 31, 2014, there are no options outstanding.
WARRANTS
As part of the consulting agreement with A.S. Austin Company, Inc., the Company granted warrants to purchase up to 1,000,000 shares of common stock, to be granted ratably over the term of the agreement on the first day of each calendar month. The Warrants shall be exercisable at any time or from time to time commencing on the grant date at an exercise price of $.40 per share. The Warrants will expire two years from the date of issuance and will be subject to customary stock splits and payable in legal tender.
The consulting agreement with A.S. Austin has been dissolved, and as of December 31, 2014 and 2013, A.S. Austin Company had issued and outstanding 13 warrants.
On September 4, 2013, as part of the Unit Exchange Agreement discussed above, 5,063 warrants were issued to 9 investors. These warrants expire in 3 years (36 months) and are exercisable at variable amounts, as per the agreements and accompanying warrant certificates.
Stock Warrants and Options
Stock warrants/options outstanding and exercisable on December 31, 2014 are as follows:
As of December 31, 2014 and 2013, -0- options and 5,076 warrants to purchase our common stock have been issued. No warrants have been exercised.
DEFERRED EQUITY OFFERING COSTS
In connection with the Standby Purchase Agreement with Lambert (See Note 14), the Company incurred the following costs through December 31, 2013: (1) stock issued to Lambert (See Note 14) as a commitment fee, fair value of $2,357,060; (2) options issued to Lambert as performance incentive, fair value of $4,500,950. These costs will be charged to additional paid-in-capital (“APIC”) as shares are sold to Lambert.
On June 3, 2013, the Company issued 500 shares of its common stock (10,000,000 pre-split) to Lambert under the Standby Purchase Agreement and a cost of $650,000 was charged to APIC, valued at the closing price of the stock on the day of stock issuance.
In December, 2014, Lambert exercised their options and the fair value of the options was charged to paid in capital on issuance of 2,126,588 shares.
NOTE 10: INCOME (LOSS) PER SHARE
Income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. Stock options and warrants associated with performance contracts totaling 127,149,095 shares are not considered in the calculation as the impact of the potential common shares would be to decrease loss per share. Therefore no diluted loss per share figures is presented. The Company posted losses of ($104.95) and ($37.68) per basic share for the periods ended December 31, 2014 and 2013, respectively.
NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information for the periods ending December 31, 2014 and 2013 are summarized as follows:
Cash paid during the periods ending December 31, 2014 and 2013 for interest and income taxes:
NOTE 12. SEGMENT REPORTING
The Company follows paragraph 280 of the FASB Accounting Standards Codification for disclosures about segment reporting. This Statement requires companies to report information about operating segments in interim and annual financial statements. It also requires segment disclosures about products and services, geographic areas, and major customers. The Company determined that it did not have any separately reportable operating segments as of December 31, 2014 and 2013.
NOTE 13. GOING CONCERN
The accompanying consolidated financial statements for the periods ended December 31, 2014 and 2013 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As of December 31, 2014, the Company has negative working capital of $4,543,734 and a retained deficit of $2,618,899,319. There can be no assurance that the Company will be able to obtain the substantial additional capital resources necessary to implement its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company is pursuing sources of additional financing and there can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all. Any inability to obtain additional financing will have a material adverse effect on the Company, including possibly requiring the Company to cease operations.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 14. JUDGMENTS and SETTLEMENTS PAYABLE
Judgments
The Company currently has three judgments against it. Included in the accompanying balance sheets at December 31, 2013 and December 31, 2012 is $2,300,948 stemming from the following lawsuits.
Sebaco Siete, S.A. v. Omega Realty Partners, LLC, et. al. 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 06-11204 CA 13 FJ. A default judgment against impleader defendants in the amount of $1,564,832 was filed in 2009.
Jorge Ramos v. Omega Capital Funding, LLC, et. al. in the circuit court of the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 07-38288 CA 09. A final summary judgment was filed in 2009 in the amount of $85,000.
Luxury Home LLC v. Omega et. al. Case No.: CV2011-004554. A default judgment in the amount of $651,116 was filed in 2012 for a previous year’s claim.
Settlements
On April 26, 2013 Madison Boardwalk, LLC (“Madison Boardwalk”) filed a complaint in the U.S. District Court for the Western District of Wisconsin (Case No. 13-cv-288) against Omega Commercial Finance Corp. (the “Company”), Jon S. Cummings, IV and Von C. Cummings. The complaint alleged that the Company breached its agreements with Madison Boardwalk to provide it with funding for a hotel it was seeking to finance and develop (the “Project”). In response to this complaint, the Company and Jon S. Cummings IV filed a motion to dismiss the complaint due to Jurisdiction and Venue. On November 7, 2013, the Court issued an order denying the motion to dismiss, granting Madison Boardwalk’s motion for leave to file a reply and allowing Madison Boardwalk leave until November 21, 2013 to show that the individual defendants in this case are citizens of Florida. The case subsequently went to mediation and was settled during mediation in September 2014. In accordance with the settlement agreement, while admitting no culpability, we have recorded the $100,000 settlement payable as legal expenses and have made payments in accord with the stipulated schedule therein. As of December 31, 2014, the Company has an outstanding balance of $65,000 which it intends to fulfill according to terms in the settlement agreement.
On October 17, 2014 the Circuit Court in the Twelfth Judicial Circuit in and for Sarasota County, Florida (the “Court”), entered an Order Granting Approval of Settlement Agreement (the “Order”) approving, among other things, the fairness of the terms and conditions of an exchange pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”), in accordance with a Settlement Agreement (the “Settlement Agreement”) between the Company and IBC Funds, LLC, a Nevada limited liability company (“IBC”), in the matter entitled IBC Funds, LLC, vs Omega Commercial Finance Corporation., Case No. 2014 CA 6009 (the “Action”). IBC commenced the Action against us to recover an aggregate of $65,085 of past-due accounts payable, which IBC had purchased from certain of our vendors pursuant to the terms of separate claim purchase agreements between IBC and each of the respective vendors (the “Assigned Accounts), plus fees and costs (the “Claim”). The Assigned Accounts relate to certain legal, accounting, underwriting, and Edgar filing services cost. The Order provides for the full and final settlement of the Claim and the Action, and on October 23, 2014, we issued an initial 270,000 shares of common stock to IBC in accordance with the settlement agreement. The Settlement Agreement became effective and binding on October 31, 2014.
Because this Settlement Agreement involves issuing shares in satisfaction of debt at variable stock prices, we have deemed the transactions to contain derivative liabilities and as such have bifurcated the liabilities and treated them as convertible debt. (See Note 3 above).
Pending Litigation
Macallan Partners LLC v. Omega Commercial Finance Corp., the Superior Court of the State of Delaware in and for New Castle County, C.A. No. N14C-11-186-DCS. A complaint was filed on November 21, 2014, by Macallan Partners LLC, alleging breach of obligations under the Loan Documents, and seeking damages of not less than $177,000 as of the date of Complaint with additional damages increasing principal to accrue at $2,000 per day and a default interest rate of 18%. The Company has responded acknowledging and denying it had breached any proportionality preservation clauses or insolvency clauses. As of December 31, 2014, the litigation is pending. Our legal counsel has indicated it is more likely than not this litigation will be dismissed. Accordingly, we have made no conditional provisions for liabilities.
We currently have payment obligations of total $2,365,948 and $2,300,948 on the judgments against us, which is included in our financial statements for the year ended December 31, 2014 and 2013, respectively.
NOTE 15 RELATED PARTY TRANSACTIONS
During the periods ended December 31, 2014 and 2013, the Company compensated its officers in total amount of $2,402,186,028 and $101,320 respectively, of which $218,028 and $101,320 was in cash and equivalents, respectively.
NOTE 16. MATERIAL TRANSACTIONS
EQUITY RESTRUCTURING
Effective on January 8, 2013, the Company amended its Articles of Incorporation to increase to unlimited the number of authorized shares of our common stock.
On March 27, 2013, the Company’s Board of Directors amended the designations, terms, powers, preferences and rights of the Series A Redeemable Cumulative Preferred Stock as originally reported in its Form 8-K filed on October 15, 2012. The amendment decreased the dividend rate to 4.50% and shortened the redemption obligation to 3 years.
Several times during the years ended December 31, 2014 and 2013, the Company authorized additional classes of preferred stock. As of the date of this filing, we have the following series of preferred stock authorized by our Board of Directors:
Series A Preferred Stock - $5 par value, 4.5% annual dividend accrual, redeemable after the 1st anniversary of the date of issuance for par value plus all accrued dividends, mandatory redemption on the 3rd anniversary of the date of issuance, convertible at one thousand (1,000) shares of Series A Preferred stock for five (5) shares of common stock, or 200 shares of Series A Preferred Stock for 1 share of common stock of the Company. Each share is entitled to the number of votes equal to the number of shares of common stock into which such shares of Preferred stock is then convertible. Upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, each holder of these Preferred stock series shall be entitled to be paid ratably in cash or marketable securities, after payment of any amount due in respect of any senior securities and before any amount shall be paid or distributed to the junior securities shareholders, an amount per share equal to the original issues price, as adjusted for non-capital events, plus all accrued but unpaid dividends, whether or not declared, subject to automatic conversion into common stock if common stock were to receive greater distribution. 1 million (1,000,000) shares authorized, 369,000 shares issued and outstanding.
Series B Redeemable Cumulative Preferred Stock - $1,000 par value, 4.75% annual dividends, redeemable after the 1st anniversary of the issuance date for par value plus any accrued and unpaid dividends, mandatory redemption on the third anniversary after issuance. Each Series B Redeemable Cumulative Preferred share shall have one (1) vote and the right to vote on all matters submitted to the common shareholders for a vote at any time at special or annual meetings of the company. The Preferred shares shall have the same rights and privileges as the common stock of the Company for liquidation. 500,000 shares authorized. no shares issued or outstanding.
Series C Preferred Stock -, $5 par value, callable from and after sixty (60) months from date of issuance at $1.00 per share, no conversion. The Series C Preferred stockholders are not entitled to participate in dividends and distributions declared by the Company to its outstanding common stock shareholders. Each holder of Series C Preferred Stock shall have votes equal to one hundred (100) times the number of votes per Series C Preferred share (rounded to the nearest whole share) held on the record date for the determination of the holders of the shares entitled to vote or at the date such vote is taken or any written consent of shareholders is first solicited. The Series C Preferred stockholders shall vote together with the holders of the outstanding capital stock and not as a separate class, series or voting group. The holders of the shares of Series C Preferred stock shall rank senior and prior to the common stock of the Company. 500,000 authorized, issued and outstanding.
Series D. Convertible Preferred Stock -$5 par value, convertible at the higher of $1.50 or the average of the closing sales prices of the Company’s common stock on the five Trading days prior to the date of the conversion request. No conversion shall result in the Conversion of more than the number of shares of Series D Preferred stock, such that, upon conversion, the aggregate beneficial ownership of the Company’s common stock (calculated pursuant to Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of such Holder and all persons affiliated with such Holder is more than 9.99% of the Company’s common stock then outstanding. No redemption. In the event of any liquidation, dissolution or winding up of the Company, Series D Preferred stockholders shall be entitled to receive prior and in preference to any distribution of any of the assets of the company to junior stockholders but not prior to any holders of the Series A Preferred, Series B Preferred, Series C Preferred stock and any senior debt instruments created by the Company, which holders shall have priority to the distribution of any assets of the Company, an amount per share for each share of Preferred stock held equal to the original issue price per share for each share of Series D Preferred stock (as appropriately adjusted for any recapitalization). Each share of Series D Preferred stock shall carry one (1) vote and voted equally with the shares of common stock as a single class, with respect to all matters submitted to the holders of common stock, the number of votes determined by the shares of Series D Convertible Preferred stock held immediately after the close of business on the record date fixed for any annual or special meeting of the stockholders of the Company or on the effective date of such written consent. No fractional votes will be permitted. Fractional votes will be rounded to the nearest whole number (with one half rounded upward to one (1) vote). 100,000 shares authorized, 97,500 shares issued and outstanding.
Series F Redeemable Cumulative Preferred Stock - $100 par value, 9.5% annual dividends, redeemable after the 1st anniversary of the date of issuance for par value plus any accrued and unpaid dividends, mandatory redemption on the 3rd anniversary of the date of issuance for par value plus accrued and unpaid dividends. The Preferred shares have the same rights and privileges and the common stock of the Company. Each preferred share shall have one (1) vote and the right to vote on all matters submitted to the common stockholders for a vote at any time at special or annual meetings of the Company, 500,000 shares authorized, 80,000 shares issued and outstanding.
Series G Preferred Stock - $1 par value, convertible at 1 share of common stock for 800 shares of Series G Preferred Stock. The holders of the Series G Preferred stock shall have the same rights and privileges and the holders of the common stock. The holders of Series G Preferred stock shall have no voting rights with respect to the other outstanding shares of capital stock of the Company, but shall have the right to vote as a separate class with respect to the Series G Preferred only. (1,000,000 shares authorized, issued and outstanding.
Series 2020 Convertible Redeemable Preferred stock -$200 par value, 18.25% annual dividend accrued, convertible at one (1) share of Series 2020 Preferred stock for one hundred (100) shares of common stock, redeemable after the 1st anniversary of the date of issuance for par value plus accrued dividends, mandatory redemption on the 6th anniversary of the date of issuance. No votes for any election or other vote placed before the shareholders of the Company. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series 2020 Convertible Redeemable Preferred stock are not entitled to be paid out of the assets off the Corporation. 100,000 shares authorized, 1,862 shares issued and outstanding.
Series H Convertible Redeemable Preferred stock -$2.50 initial par value, annual dividend accrued, convertible at par value any time into the number of shares of the Corporation’s common stock equal to the price of the Series H Preferred Stock divided by the par value of the Series H Preferred, subject to adjustment as may be determined by the Board of Directors (the “Conversion Rate)”. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series H Preferred stock shall be entitled to be paid out of the assets off the Corporation before any distribution or payment to the holders of any stock ranking higher to the Series H Preferred Stock, distributed ratably to the holders of the Corporation’s stock. These shares carry no voting rights. These shares are anti-dilutive to reverse splits, and therefore in the case of a reverse split, are convertible to the number of Common Shares after the reverse split as would have been equal to the ratio prior to the reverse split. The conversion rate of shares of Series H Preferred Stock, however would increase proportionately in the case of forward splits, and may not be diluted by a reverse split following a forward split. 10,000,000 shares authorized, no shares issued or outstanding as of the date of this filing.
Series Y Secured Convertible Redeemable Cumulative Preferred stock -$10 par value, 5.5% annual dividend accrued (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), convertible any time before the 101th anniversary of purchase at one (1) share of Series Y Preferred stock for three (3) shares of common stock, redeemable after the 1st anniversary of the date of issuance for par value plus accrued dividends, mandatory redemption on the 10th anniversary of the date of issuance. No voting rights for any election or other vote placed before the shareholders of the Company. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Series Y Convertible Redeemable Preferred stock are entitled to be paid out of the assets off the Corporation after higher ranking stock and before common stock . 1,000,000 shares authorized, no shares issued or outstanding as of the date of this filing.
Series CC Convertible Preferred stock - $0.0001 par value, no annual dividend, convertible at one (1) share of Series CC Preferred stock for two hundred (200) shares of common stock, redeemable after the 1st anniversary of the date of issuance for par value, no mandatory redemption. The Preferred shares have the same rights and privileges and the common stock of the Company. Each preferred share shall have one hundred (100) votes and the rights to vote on all matters submitted to the common stockholders for a vote at any time at special or annual meetings of the Company, unlimited shares authorized, 2,000,00,000 shares issued and outstanding as of the date of this filing.
TERMINATION OF DUTCHESS INVESTMENT AGREEMENT
On March 12, 2012, the Company entered into the Investment Agreement with Dutchess Opportunity Fund, II, LP (“Duchess”). Pursuant to the Investment Agreement, Dutchess committed to purchase up to $25 million of common stock over the course of 36 months. No sales of our common stock were made under this agreement, and the Company terminated this agreement on February 7, 2013.
TERMINATION OF ACQUISITION OF USA TAX & INSURANCE SERVICES, INC. and AMERICAN INVESTMENT SERVICES LLC
On October 16, 2012, the Company entered into a Definitive Agreement for The Share Exchange & Acquisition of USA Tax & Insurance Services, Inc. (“USTIS”) and American Investment Services LLC (“AIS), (together the “Agreement”), whereby by agreed to purchase all of the outstanding equity and assets of both USTIS and AIS from Stephen Hand for $20 million. In accordance with the Agreement, the Company is required to create and authorize Series B Preferred Stock and conduct a registered offering of these shares to raise funds to pay the purchase price. The initial agreement expired December 15, 2012. The Company entered into amendments to the Agreement, on January 10, 2013 which extended the closing to January 30, 2013, and on January 23, 2013 extending the closing through April 30, 2013. These amendments removed the obligation for creating and selling Series B Preferred Stock in an offering, as well as reduced the purchase price from $20,000,000 to $10,400,000 plus payment of stock compensation as part of a roll-up acquisition strategy. The closing did not occur by April 30, 2013. USTIS and AIS terminated the Agreement and it is of no further force or effect. This Agreement has been terminated.
TERMINATION OF COMMERCIAL CONTRACT TO PURCHASE PROPERTY
On December 13, 2012, the Company entered into a Commercial Contract to purchase 0.15 acres of real estate including a 12,500 sq. ft. professional service building located at 983 Washington Avenue, Miami Beach, Florida 33139 from Club Investment Group, LLC for $11.5 million. In February, 2013, the Company deposited 15 shares of common stock valued at $2,000 per share or $30,000, the value of the stock which approximated the value of services, into an escrow account. The closing was required to take place no later than February 11, 2013. As of December 31, 2013, the contract expired. The Company has expensed the $30,000 deposit, paid with 15 shares of common stock, as loss on deposit.
JOINT VENTURE - GARDENS VE
On February 20, 2012, CCRE, a wholly owned subsidiary of Omega Commercial Finance Corp., entered into the Strategic Alliance Agreement (the “Strategic Alliance”) with Gardens VE Limited (Company No. 07071936), a British Company (“Gardens”), and its management, whereby the parties agreed to form a strategic alliance for the acquisition and refurbishment of the La Posta Golf Club & Luxury Hotel. Under the Agreement, Gardens has free and clear, unencumbered title to the fixed assets and issues equal to forty-nine (49%) percent of their ownership interests in Gardens to CCRE in exchange for future fundraising for operating capital and related expenses. CCRE is responsible for the arrangement and contribution of up to but no more than fifty-eight million dollars ($58,000,000 US) over the course of the operation as needed per the budgeted projected cost for the Strategic Alliance but not to exceed 10 years. The principal is responsible for the day-to-day operation for the entire duration of the project as it pertains to the future refurbishment phase and he has currently placed the property under contract with a hard deposit. In addition he is responsible for transferring free and clear with an unencumbered title of fixed assets in order to support future financing for all phases covering the acquisition on through the refurbishment of the property. The termination of the strategic alliance is at the discretion of both parties or upon the completion of the refurbishment and or disposition of the stabilized income-producing asset. Gardens has not completed the acquisition of La Posta and we will continue to work with the principal and general manager to continue our efforts under the Strategic Alliance to raise additional capital to meet our funding obligations to complete this transaction.
As of March 27, 2013, an operating agreement addendum (the “Addendum”) was issued by the Company and Gardens whereby CCRE will now own 95% of Gardens in exchange 1,000,000 shares of our unregistered common stock. The principal will retain a 75% profit participating interest pro rata for all mortgages, liens, operating expenses and or encumbrances on Garden’s development/projects. As of December 31, 2014, the agreements are being restructured.
JOINT VENTURE - TOWERS
On June 27, 2012, CCRE, a wholly owned subsidiary of Omega Commercial Finance Corp., entered into the Strategic Alliance Agreement (the “Strategic Alliance II”) with Towers Real Estate Limited, a British Company (“Towers”), and its management, whereby the parties agreed to form a strategic alliance for the acquisition and construction of the Le Principesse real estate located in Mestre-Venice, Italy. Under the Agreement, Towers has free and clear, unencumbered title to the fixed assets and issues equal to forty-nine (49%) percent of their ownership interests in Towers to CCRE in exchange for future fundraising for operating capital and related expenses. CCRE is responsible for the arrangement and contribution of up to but no more than three hundred seventy five million dollars ($375,000,000 US) over the course of the operation as needed per the budgeted projected cost for the Strategic Alliance.
On March 27, 2013, an operating agreement addendum (the “Addendum”) was issued by the Company and Towers whereby the principal in the development agreed to transfer an additional 46% interest in Towers to CCRE, giving CCRE a 95% ownership interest in the capital of Towers in exchange for 1,000,000 shares of the Company’s unregistered common stock. The principal of Towers will retain a 75% profit participating interest pro rata for all mortgages, liens, operating expenses and or encumbrances on Tower’s development/projects. As of December 31, 2014, the agreement is being restructured.
ACQUISITION OF VFG SECURITIES INC. AND DISSOLUTION OF AGREEMENT
On January 23, 2013, the Company entered into a Purchase & Option to Purchase Agreement with VFG Securities Incorporated, a California corporation (“VFG Securities”) to acquire 100% of VFG Securities for $750,000 in cash and common stock. Under the terms of this agreement, the Company agreed to pay the shareholders of VFG Securities (1) $125,000 upon the first closing to acquire 17% of the issued and outstanding common stock of VFG (the “First Closing”) and (2) $525,000 in cash (the “Deferred Cash Payment”) plus 1,000,000 shares of the Company’s common stock to acquire the remaining 83% of VFG common stock (the “Second Closing:”). The First Closing and initial $130,000 was paid upon VFG’s filing of a Form BD with the Financial Industries Regulatory Authority (“FINRA”) and at such time the Company received a 17% non-controlling minority ownership stake in VFG Securities and VFG Advisors LLC, a subsidiary of VFG Securities. The Second Closing is contingent on obtaining FINRA approval within 90 days of First Closing. In addition, the Purchase Price is subject to VFG Securities achieving gross revenue of at least $3,300,000 during the 12 month period ending on December 31, 2013 (the “Revenue Target”). In the event VFG does not meet its Revenue Target, then the Purchase Price will be reduced pro rata based on a gross revenue target on $3,500,000. In addition, the Second Closing is subject to the Company obtaining errors and omissions insurance for VFG Securities’ operations and other customary conditions of closing. As of the date of this filing, the Company filed an Application for Approval of Change in Ownership with FINRA pursuant to NASD Rule 1017 and a Form BD. As of September 30, 2013, VFG has withdrawn itself from the Purchase & Option to Purchase Agreement, and has halted the application process for FINRA approval. The Company is evaluating its rights under the agreement, if any, to determine if it is entitled to adjust the purchase price for the 17% interest it acquired in VFG Securities or rescind the entire transaction. The Company has recorded the 17% ownership in VFG Securities it acquired at the First Closing in Other Assets as $130,000, the cash price paid. As of December 31, 2013, VFG has withdrawn from the agreement and agreed to refund the Company $110,000. This amount is shown as VFG-receivable on the balance sheet. The Company received the payment in full in February, 2014.
EQUITY PURCHASE AGREEMENT - LAMBERT PRIVATE EQUITY LLC
On February 8, 2013, the Company entered into a Standby Equity Purchase Agreement (the “Agreement”) with Lambert Private Equity LLC (“Lambert”). The Agreement provides us with an equity line whereby the Company can sell to Lambert, from time to time, our shares of common stock up to an aggregate value of $100 million over a thirty-six month period. Under the terms of the Agreement, once a registration statement becomes effective, the Company will have the right to deliver to Lambert from time to time a “Draw Down Notice” stating the dollar amount of common shares we intend to sell to Lambert, up to a maximum of $100 million. The purchase price of the shares identified in the Draw Down Notice shall be equal to 90% of the lowest daily volume weighted average price of our common stock during the fifteen (15) trading dates following the date of the Draw Down Notice. The Company has the option to specify a floor price for any Draw Down Notice. In the event the shares fall below the floor price, the put will be temporarily suspended. The put will resume if, during the pricing period for that put, the common stock trades above the floor price. The Company has agreed to pay to Lambert a commitment fee of 13,094,014 shares of common stock following execution of the Agreement. In connection with the Agreement, the Company granted to Lambert a 5-year Option to Purchase Shares for 1,283 (25,641,000 pre-split) shares of our common stock at an exercise price of the lesser of (i) $0.40 per share or (ii) 110% of the lowest daily VWAP for our common stock as reported by Bloomberg during the thirty trading days prior to the date the option is exercised. The Company intends to use the proceeds from the sale of common stock pursuant to the Agreement to develop and support operations for our commercial real estate financing subsidiaries, Omega Capital Street LLC and Omega CRE Group LLC as well as for general corporate and working capital purposes. The Agreement will not be effective until the date a registration statement is declared effective by the SEC. On March 8, 2013, the Company issued to Lambert 13,400,000 shares of restricted common stock, valued at $2,357,060 or $.1759 per share, the value of the stock which approximated the value of services. On June 3, 2013, the Company issued to Lambert 10,000,000 shares of restricted stock, under this agreement. The Company recorded the value of the stock at the valuation specified in the Standby Purchase Agreement or $650,000 to APIC. In December 2014, Lambert exercised their options and the Company issued 2,126,588 shares and recorded $4,479,684 to paid in capital. There are no options outstanding as of December 31, 2014.
RESCISSION OF LOAN RECEIVABLE PURCHASE AND PROMISSORY NOTE
On March 7, 2013, we borrowed $231,500 from Stephen Hand. The promissory note has a maturity date of April 1, 2014 and a stated interest rate of 3.5%. As collateral for the repayment of the loan and in the event of a default hereon, the Company issued to Mr. Hand 2,000,000 shares of common stock and recorded an expense of $351,800 or $.1759 per share, the value of the stock which approximated the value of services. In addition, on March 7, 2013, the Company entered into a repurchase agreement with Mr. Hand whereby he shall purchase from the Company for $4,330,000 a loan receivable which we plan to purchase from TD Bank in the original principal amount of $4,460,000 (the “TD Bank Loan:”). Under the terms of the loan purchase agreement we entered into with TD Bank, we agreed to purchase from TD Bank for $4,330,000 the TD Bank Loan, which purchase required us to deposit $216,500 in an escrow account as a refundable earnest money deposit to be applied to the purchase price after the Company completes a 30-day due diligence review. In the event the Company elects not to close on the purchase after the expiration of the 30-day due diligence period, the above transactions shall be rescinded, ab initio.
On May 13, 2013, the Company terminated the contract with TD Bank and has been released from any performance obligation under said contract. The Company is also released from any and all obligations to repay the promissory note dated March 7, 2013, in the principal amount of $231,500. The repurchase agreement dated March 7, 2013 has been terminated and the Company has been released from any and all obligations to perform under said agreement. The Company cancelled the 10 (2,000,000 pre-stock split) shares issued to Mr. Hand effective June 27, 2013.
NOTE 17. INCOME TAXES
At December 31, 2014, the Company had federal and state net operating loss carry forwards of approximately $2,546,196,458 that expire in various years through the year 2024.
Due to cumulative operating losses, there is no provision for current federal or state income taxes for the periods ended December 31, 2014 and 2013.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.
The Company’s deferred tax asset at December 31, 2014 and 2013 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $865,706,796 less a valuation allowance in the amount of ($865,706,796). Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance.
The Company’s total deferred tax asset as of December 31, 2014 and 2013 is as follows:
The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes as of December 31, 2013 and 2012 is as follows:
NOTE 18. LEASE COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company had a month to month lease at $563 per month with an unrelated landlord. The Company also had a month to month lease for an executive office at $95 per month with an unrelated landlord. The Company vacated those premises in December 2013.
On November 1, 2013, our subsidiary Omega Capital Street LLC entered into a short-term sublease for space in downtown Miami FL at $11,069 per month with an unrelated landlord. The lease expired October 31, 2014.
On October 23, 2014, Omega Capital Street LLC entered into a 65 month lease for offices at 501 Brickell Key Drive, Suite 104, Miami FL. The lease commitments are as follows:
NOTE 19. SUBSEQUENT EVENTS
On February 11, 2015 we filed an amended S-1 filing to sell and register 250,000,000 shares of our common stock. The registration has not yet been approved.
On March 9, 2015, the Company issued 2,000,000,000 shares of Series CC Redeemable Preferred stock, par value $0.0001 to Jon S. Cummings IV, our President and then CEO for his services, and recorded compensation expense of $200,000.
On March 12, 2015, the Company and the VeriTrek Shareholders entered into a second amendment to the VeriTrek Agreement (the “Amendment 2”), providing for the consummation of the acquisition as originally proposed, by reissuing an additional 6,750,000 shares of Omega’s restricted common stock to the VeriTrek Shareholders in exchange for 600,000 shares of VeriTrek’s common stock held by them, thereby increasing our equity interest in VeriTrek to seventy-five percent (75%). This transaction closed on March 23, 2015. The foregoing summary of the Amendment is qualified in its entirety by the copy of that agreement attached as Exhibit 10.1 on Form 8-K, filed with the SEC on March 12, 2015, and incorporated herein by reference.
During the 3 months January 1-March 31, 2015, the Company issued 1,016,037,381 shares of common stock to convert debentures and interest at various conversion rates. The Company also issued 329,000,000 shares of common stock for services, and 50,000,000 shares to its wholly owned subsidiary Omega Capital Street in anticipation of mergers and acquisitions.
On April 6, 2015, Omega Commercial Finance Corporation (the “Company”), (OTCPINK: OCFN) announced the appointment of Todd C. Buxton as Chief Executive Officer. The appointment is effective April 6, 2015. A copy of the press release relating to this Item 5.02 is furnished as Exhibit 99.1 on Form 8-K, filed with the SEC on April 6, 2015 and incorporated herein by reference. A copy of the employment agreement for Mr. Buxton is attached as Exhibit 22.2 to this filing
On April 26, 2015 Omega Commercial Finance Corp. (“Omega”), entered into a definitive strategic alliance agreement (the “Agreement”) with Rene Gomes De Sousa., (“SOUSA”), pursuant to which the parties agreed to form a strategic alliance to be known as Omega CRE Investments LLC (the “Strategic Alliance”).
The Strategic Alliance intends to specialize in owning institutional quality commercial real estate core/core plus, as well as other value-added and opportunistic real estate assets. Under the Agreement SOUSA is required to contribute free and clear rural land that encompasses 33,318 acres valued at $88,062,555, based on a March 15, 2014 valuation that is located in the Boca do Acre a municipality in the State of Amazonas, Brazil (the “Property”).
The Strategic Alliance, which will be a limited liability company, will be governed by the terms of an operating agreement (the “Operating Agreement”) to be entered into between the parties. The Operating Agreement will provide, among other matters, for (i) each party to have a fifty percent (50%) equity interest in the Strategic Alliance, (ii) profits and losses to be allocated forty percent (40%) to Omega and sixty percent (60%) to SOUSA and (iii) the Strategic Alliance to be managed by Eran Danino, Chief Executive Officer of our principal operating subsidiary.
Consummation of the Strategic Alliance and acquisition by it of the Property, which is anticipated to occur on or before June 28, 2015, is subject to the fulfillment of various closing conditions.
The foregoing summary of the Agreement is qualified in its entirety by the agreement attached as Exhibit 10.1 on Form 8-K, filed with the SEC on April 26, 2015, and Form 8-K/A, filed with the SEC on April 28, 2015, and incorporated herein by reference.
Management has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.