UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2012
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ________
Commission File Number: 333-173702
Excel Corporation
(Exact name of registrant as specified in its charter)
Delaware | 27-3955524 |
(State or other jurisdiction of | (I.R.S. Employer) |
incorporation or organization) | Identification No.) |
1384 Broadway, 17th Floor, New York, NY | 10018 |
(Address of principal executive offices) | (Zip Code) |
212-391-4600
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
___________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, accelerated filer, non-accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares common stock, $.0001 par value, outstanding as of August 17, 2012 was 30,486,000.
Excel Corporation
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page | |||
PART I - FINANCIAL INFORMATION | |||
Item 1. | Financial Statements | ||
Consolidated Balance Sheet as of June 30, 2012 (unaudited) and December 31, 2011 | 5 | ||
Consolidated Statements of Operations for the three and six months ending June 30, 2012 and 2011 (unaudited) and from inception on November 13, 2010 through March 31, 2012 (unaudited) | 6 | ||
Consolidated Statement of Stockholders Equity for the six months ended June 30, 2012 (unaudited) | 7 | ||
Consolidated Statements of Cash Flows for the six-month period ended June 30, 2012 and 2011 (unaudited) and from inception on November 13, 2010 through June 30, 2012 (unaudited) | 8-9 | ||
Notes to Unaudited Consolidated Financial Statements | 10-17 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risks | 19 | |
Item 4. | Controls and Procedures | 19 | |
PART II - OTHER INFORMATION | |||
Item 5. | Other Information | 19 | |
Item 6. | Exhibits | 19 | |
Signatures | 20 | ||
Exhibit Index | 21 |
2 |
Excel Corporation and Subsidiary
(A Development Stage Company)
June 30, 2012
3 |
Excel Corporation and Subsidiary
A Development Stage Company
June 30, 2012
Contents
Page | |
Financial Statements | |
Consolidated Balance Sheet at June 30, 2012 (unaudited) and December 31, 2011 | 5 |
Consolidated Statements of Operations | |
For the three and six months ending June 30, 2012 and 2011 (unaudited) and from inception on November 13, 2010 through March 31, 2012 (unaudited) | 6 |
Consolidated Statement of Stockholders' Equity | |
For the six months ending June 30, 2012 (unaudited) | 7 |
Consolidated Statement of Cash Flows | |
For the six months ending June 30, 2012 and 2011 (unaudited) and from inception on November 13, 2010 through June 30, 2012 (unaudited) | 8-9 |
Notes to Unaudited Consolidated Financial Statements | 10-17 |
4 |
Excel Corporation and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheet
June 30, | December 31, | |||||||
2012 | 2011 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 1,730,364 | $ | 473,058 | ||||
OTHER ASSETS | ||||||||
License agreements | 200,000 | 200,000 | ||||||
Total assets | 1,930,364 | 673,058 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
LIABILITIES | ||||||||
Accounts payable | 14,478 | 38,883 | ||||||
Accrued expenses | 94,805 | |||||||
Note payable | 120,000 | 120,000 | ||||||
Corporate taxes payable | 149 | 2,900 | ||||||
229,432 | 161,783 | |||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, $.0001 par value, 10,000,000 shares authorized, none issued and outstanding | ||||||||
Common stock, $.0001 par value, 200,000,000 shares authorized 30,486,000 issued and outstanding | 3,049 | 3,049 | ||||||
Additional paid-in capital | 575,267 | 575,267 | ||||||
Deficit accumulated during the developmental stage | (202,384 | ) | (67,041 | ) | ||||
Total stockholders’ equity | 375,932 | 511,275 | ||||||
Accumulated minority interest | 1,325,000 | |||||||
Total Equity | 1,700,932 | 511,275 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,930,364 | $ | 673,058 |
See notes to the unaudited consolidated financial statements.
5 |
Excel Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
From Inception | ||||||||||||||||||||
Three Months Ended | Six Months Ended | November 13, 2010 | ||||||||||||||||||
June 30, | June 30, | through | ||||||||||||||||||
2012 | 2011 | 2012 | 2011 | June 30, 2011 | ||||||||||||||||
REVENUES | ||||||||||||||||||||
Less: Cost of sales | $ | $ | $ | $ | $ | |||||||||||||||
Gross profit | -0- | -0- | -0- | -0- | -0- | |||||||||||||||
EXPENSES | ||||||||||||||||||||
Filing fees | 1,317 | 3,260 | 2,317 | 4,660 | 15,252 | |||||||||||||||
Edgar filing fees | 2,175 | 9,426 | ||||||||||||||||||
Advertising | 26,910 | 38,382 | 38,382 | |||||||||||||||||
Telephone | 150 | 986 | 986 | |||||||||||||||||
Outside services | 57,378 | 99,549 | 99,674 | |||||||||||||||||
Transfer agent fees | 362 | 2,437 | 5,537 | |||||||||||||||||
Legal and accounting | 44,280 | 141,088 | 181,733 | |||||||||||||||||
Automobile | 854 | 1,731 | 1,731 | |||||||||||||||||
Bank charges | 50 | 163 | 188 | |||||||||||||||||
Miscellaneous | 1,500 | 1,500 | 1,500 | |||||||||||||||||
Total expenses | 132,801 | 3,260 | 290,328 | 4,660 | 354,409 | |||||||||||||||
Net loss before other income and income taxes | (132,801 | ) | (3,260 | ) | (290,328 | ) | (4,660 | ) | (354,409 | ) | ||||||||||
OTHER INCOME | ||||||||||||||||||||
Gain on sale of note receivable | 154,985 | 154,985 | 154,985 | |||||||||||||||||
Net income (loss) before income taxes | 22,184 | (3,260 | ) | (135,343 | ) | (199,424 | ) | |||||||||||||
INCOME TAXES | ||||||||||||||||||||
Current | 2,960 | |||||||||||||||||||
Deferred | ||||||||||||||||||||
Total income taxes | -0- | -0- | -0- | -0- | 2,960 | |||||||||||||||
Net Income (Loss) | $ | 22,184 | $ | (3,260 | ) | $ | (135,343 | ) | $ | (4,660 | ) | $ | (202,384 | ) | ||||||
(Loss) per common share | .00073 | (.00011 | ) | (.00444 | ) | (.00016 | ) | (.00664 | ) |
See notes to the unaudited consolidated financial statements.
6 |
Excel Corporation
(A Development Stage Company)
Consolidated Statement of Stockholders’ Equity
For the Six Months Ended June 30, 2012
(Unaudited)
Deficit | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | During the | |||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-In | Development | |||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Stage | |||||||||||||||||||
Balance - | ||||||||||||||||||||||||
December 31, 2011 | $ | 30,486,000 | $ | 3,049 | $ | 575,267 | $ | (67,041 | ) | |||||||||||||||
Net loss - | ||||||||||||||||||||||||
January 1, 2012 to | ||||||||||||||||||||||||
June 30, 2012 | (135,343 | ) | ||||||||||||||||||||||
Balance - | ||||||||||||||||||||||||
June 30, 2012 | $ | 30,486,000 | $ | 3,049 | $ | 575,267 | $ | (202,384 | ) |
See notes to the unaudited consolidated financial statements.
7 |
Excel Corporation
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
From Inception on | ||||||||||||
November 13, 2010 | ||||||||||||
Six Months Ended | through | |||||||||||
June 30, 2012 | June 30, 2011 | June 30, 2012 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net loss | $ | (135,343 | ) | $ | (4,660 | ) | $ | (202,384 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Decrease in taxes payable | (2,751 | ) | 149 | |||||||||
Decrease in accounts payable | (24,405 | ) | 14,478 | |||||||||
Increase in accrued expenses | 94,805 | 94,805 | ||||||||||
Net cash (used in) operating activities | (67,694 | ) | (4,660 | ) | (92,952 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Increase in minority interest | 1,325,000 | 1,325,000 | ||||||||||
Issuance of common stock | 3,049 | |||||||||||
Increase in additional paid in capital | 575,267 | |||||||||||
Increase in note payable | 120,000 | |||||||||||
Net cash provided by financing activities | 1,325,000 | -0- | 2,023,316 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Increase in licensing agreement | (200,000 | ) | ||||||||||
Net cash (used in) provided by investing activities | -0- | -0- | (200,000 | ) | ||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 1,257,306 | (4,660 | ) | 1,730,364 | ||||||||
Cash and Cash Equivalents – Beginning of Period | 473,058 | 40,722 | -0- | |||||||||
Cash and Cash Equivalents – End of Period | $ | 1,730,364 | $ | 36,062 | $ | 1,730,364 |
8 |
Excel Corporation
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Unaudited)
(Continued)
From Inception on | ||||||||||||
November 13, 2010 | ||||||||||||
Six Months Ended | through | |||||||||||
June 30, 2012 | June 30, 2011 | June 30, 2012 | ||||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||||||
Cash paid for: | ||||||||||||
Taxes | $ | 2,751 | $ | -0- | $ | 2,751 | ||||||
Interest | $ | -0- | $ | -0- | $ | -0- | ||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||||||
For the period ended June 30, 2012 | NONE | NONE | NONE |
See notes to the unaudited consolidated financial statements.
9 |
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
1. | ORGANIZATION AND OPERATIONS |
Excel Corporation (the “Company”) was organized November 13, 2010 as a Delaware corporation. The Company owns 100% of the common stock of XL Fashions, Inc. (subsidiary). The Company is considered a development stage company as defined by FASB ASC 915- 205-45-6. The Company is currently devoting substantially all of its efforts in acquiring, developing and licensing brands in a broad range of product categories. The Company also intends to acquire, develop and license select brands where the brand name can be leveraged into new categories. The Company’s objective is to develop a diversified portfolio of iconic consumer brands by issuing licenses and then organically growing the existing portfolio, licensing new brands and entering into joint ventures or other partnerships with the goal of leveraging the experience of management in the license of branded merchandise.
Based upon the experience of our management, we expect that our licenses will typically require our licensees to pay us royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach specified targets. We further expect that any licenses we issue will require licensees to pay us certain minimum amounts for the advertising and marketing of the respective license brands. |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with instructions for Form 10Q and, therefore, do not include all disclosures necessary for a complete presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). However, all adjustments that are, in the opinion of management necessary for the fair presentation of the interim financial statements have been included. Such adjustments were of a normal recurring nature. The results of operations for the six month period ended June 30, 2012 are not necessarily indicative of the results that may be expected for the entire year or any other interim period. For additional information, refer to the consolidated financial statements and footnotes thereto of Excel Corporation and Subsidiary (the “Company”) included in the Company’s annual report on Form 10-K for the year ended December 31, 2011.
Basis of Consolidation
The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements of the Company include the accounts of Excel Corporation and its subsidiary, XL Fashions, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
Accounting Method |
The Company’s financial statements are prepared on the accrual method of accounting. |
Revenue Recognition |
The Company’s revenue will consist of fees from licenses issued. Revenues will include royalties and brand fund contributions which will be based on a percent of sales and an initial license fee. Royalties, license fees and brand fund contributions will be recognized in the period earned. |
10 |
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Cash and Cash Equivalents
For purposes of reporting the statement of cash flows, the Company includes all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents. The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held. |
Income Taxes
Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards.
The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards. 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 income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available. Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond the Company’s control, it is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred taxes could change in the near term.
Loss Per Share |
Basic net loss per share is computed by dividing net loss available for common stock by the weighted average number of common shares outstanding during the period. |
Use of Estimates in the Preparation of Financial Statements |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
11 |
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
3. | RECENT ACCOUNTING PRONOUNCEMENTS |
In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment (ASU 2011-08), to simplify how entities test goodwill for impairment. ASU 2011-08 allows entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If a greater than 50 percent likelihood exists that the fair value is less than the carrying amount then a two-step impairment test as described in Topic 350 must be performed. The guidance provided by this update becomes effective for annual and interim impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.
4. | FAIR VALUE MEASUREMENTS |
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below: |
Level 1: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. |
Level 2: | Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest rates. |
Level 3: Level 3 inputs are unobservable inputs. |
The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows:
Cash and Cash Equivalents, Accounts Payable, and Corporate Tax Payable
The items are generally short-term in nature, and accordingly, the carrying amounts reported in the consolidated statements of financial condition are reasonable approximations of their fair values.
12 |
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
4. | FAIR VALUE MEASUREMENTS (Continued) |
License Agreements and Note Payable
The carrying amounts approximate the fair value.
5. | INCOME TAXES |
The Company accounts for income taxes in accordance with FASB Accounting Standards Codification Topic 740-10 which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. At June 30, 2012, the Company has available unused operating loss carryforwards of approximately $67,000 which may be applied against future taxable income which expires in various years between 2025 and 2026.
The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined because of the uncertainty surrounding the realization of the loss carryforwards. The Company has established a valuation allowance equal to the effect of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards.
6. | STOCKHOLDERS' EQUITY |
At June 30, 2012, the Company had 200,000,000 shares of common stock authorized par value $.0001 and 10,000,000 shares of preferred stock authorized par value $.0001.
7. | STOCK OPTIONS |
Under the Company's stock option plan, the Company may grant incentive and non statutory options to employees, non employee members of the Board and consultants and other independent advisors who provide services to the Corporation. The maximum shares of common stock which may be issued over the term of the plan shall not exceed 4,000,000 shares. Awards under this plan are made by the Board of Directors or a committee of the Board. Options under the plan are to be issued at the market price of the stock on the day of the grant except to those issued to 10% or more stockholders which shall be issued at 110% of the fair market value on the day of the grant. Each option exercisable at such time or times, during such period and for such numbers of shares shall be determined by the Plan Administrator. However, no option shall have a term in excess of 10 years from the date of the grant. As of March 31, 2012, no options have been issued. |
13 |
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
8. | LOSS PER SHARE |
Loss per share is based on the weighted average number of common shares. Dilutive loss per share was not presented as of June 30, 2012 because it would have had an antidilutive effect on earnings. |
The following is a reconciliation of the numerators and denominators of the basic per share calculation for the six months ended June 30, 2012 and for the period November 13, 2010 (date of inception) through June 30, 2012.
November 13, 2010 | ||||||||
(date of inception) | ||||||||
Six Months Ended | through | |||||||
June 30, 2012 | June 30, 2012 | |||||||
Loss from continuing operations available to common stockholders | (135,343 | ) | (202,384 | ) | ||||
Weighted average number of common shares outstanding used in earnings per share during the period | (30,486,000 | ) | (30,486,000 | ) | ||||
Loss per common share | (.00444 | ) | .00664 |
9. | LICENSING AGREEMENTS |
Stand up to Cancer Agreement
On September 2, 2011, Excel Corporation, the “Licensee”, entered into a License Agreement with the Entertainment Industry Foundation, the “Licensor”, in which the Licensor granted the Licensee the exclusive right to manufacture, advertise, and distribute licensed products in a Territory as defined in the License Agreement. The term of the License Agreement commences on the effective date September 2, 2011 and expires on December 31, 2014.
The Agreement calls for the Licensee to pay the Licensor royalties based on six percent (6%) of net sales as defined in the Agreement. The Licensee was required and paid a “Guaranteed Minimum Royalty and Advance” of $50,000 upon execution of the agreement (September 2, 2011). Another $50,000 advance is due August 1, 2012. These Royalty deposits will be applied against royalties to be paid to the Licensor.
14 |
Excel Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
9. | LICENSING AGREEMENTS (Continued) |
Provided that the Licensee is not in default of the Agreement, an additional two year renewal option is available with the same term and conditions which calls for an additional Guaranteed Minimum Royalty amount of $250,000 to be paid during the first year of the renewal term ending December 31, 2015.
Master License Agreement (Michael Vick)
On June 9, 2011, Excel Corporation “the Licensee” entered into a Master License Agreement with Michael Vick, “the Licensor”, which grants the Licensee an exclusive twenty-five year license to use the name and mark, referred to as the “Marks” pursuant to the “Master License” throughout the world. The license granted under the agreement is royalty free, provided that the Licensor is reimbursed for funds expended in registering, securing, acquiring, maintaining, or protecting the Mark.
In addition, the Licensor retains the absolute right to approve the design, content, packaging, and all other product characteristics utilized in the licensed Mark.
Sales Agreement (Billy Martin)
On October 21, 2011, Excel Corporation entered into an Agreement of Sale with Real American Capital Corp to purchase the assets of the business known as “Billy Martin’s”, collectively the “Assets”. The assets include the following:
1. | All rights, title and interest in and under the trademarks including all claims associated with the license, the “Trademarks”. |
2. | The right, title and interest of the Seller in the name of Billy Martin’s, the “Name”. |
3. | Any goodwill associated with the trademark, the “Goodwill”. |
4. | Any furniture, furnishings, fixtures, “fixtures and equipment”, as defined in the agreement. |
The purchase price for the assets above is $150,000 due as follows:
1. | $30,000 due at closing, October 24, 2011. – (Paid) |
2. | An additional $120,000 at closing (October 24, 2011) by the execution of a Promissory Note by the Purchaser to the seller. This note calls for $30,000 payments at zero percent interest (0%) commencing October 17, 2012, and continuing on the 17th of October of each succeeding year, until Note is paid. |
15 |
Excel Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
9. | LICENSING AGREEMENTS (Continued) |
Representation Agreement (Soupman Inc.)
On February 4, 2012, Excel Corporation entered into an Agreement with Soupman, Inc. (Principal). Pursuant to the agreement, the Principal has designated Excel as the exclusive licensing agent in the Territory, as defined in the Agreement. As licensing agent, Excel Corp will negotiate and service licensing agreements on behalf of the Principal.
As compensation, Excel will receive 25% of all licensing revenue from agreements executed pursuant to the terms of the Representation Agreement and five percent (5%) of other licensing revenue as defined in the Agreement. All payments from License Agreements are made payable to the Principal and after such payment, the Agent (Excel Corp) will be paid the commission as indicated above.
The initial term of the Agreement is for one year and automatically renews provided that the Agent has submitted to the Principal a minimum of five potential license applications. Subsequent to the second year, the Agreement will terminate unless extended by written agreement.
Licensing Agreement (Camuto Consulting)
On February 21, 2012, Excel Corporation entered into an Agreement with Camuto Consulting, Inc. (the “Company”), in which the Company engaged Excel Corp as the Licensing Agent to identify and secure licenses as applicable. The Agreement is for a one year term and expires February 28, 2013.
Compensation to the Licensing Agent pursuant to the agreement is as follows:
1) | Commissions payable at six and a half (6.5%) on Royalties earned and received by the Company during the first term of solicited agreements with eligible Licensees that are executed. |
2) | Commissions payable at five (5%) on Royalties earned and received by the Company during any renewal term of solicited agreements with eligible Licensees that are executed. |
Licensing Agreement (Benedetto Arts, LLC)
On May 3, 2012 Excel Corporation entered into an Agreement with Bendetto Arts, LLC (“BA”), in which BA will utilize Excel Corp as an independent contractor for the solicitation of licensing opportunities. As compensation for its services, Excel will receive a commission based on 20% of Gross Revenue as defined in the Agreement.
The term of the Agreement is for one year commencing on May 3, 2012 with an option to extend if both parties agree. In addition, if Excel Corp does not deliver three business opportunities from the May 3, 2012 date, BA has the right to terminate the Agreement.
16 |
Excel Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
June 30, 2012
10. | NOTE RECEIVABLE |
Assignment Agreement – January 23, 2012
On January 23, 2012, Excel Corporation’s wholly owned subsidiary, XL Fashions, Inc. entered into an Agreement with Orix Venture Finance. Pursuant to the Agreement, XL Fashions acquired a $3.4 Million dollar senior secured loan and warrant from Orix to purchase Class A Preferred Units of e-Fashions Solutions, LLC (“e-Fashions”). Orix was e-Fashions senior secured lender and the loan is secured by all assets of e-Fashions.
As part of the Agreement, Orix assigned registration rights to XL Fashions requiring e-Fashions to register the securities underlying the warrant. The purchase price paid by XL for the loan, warrant and related rights was $1,029,880.
The funds that XL Fashions utilized for the acquisition were raised from the sale of 9,608,412 shares of its Preferred stock, at a price of $.1379 per share. The shares will convert on a one for one basis for shares of common stock of the parent (Excel Corporation) upon the closing of the acquisition of e-Fashions. The loan is secured by all the assets of e-Fashions.
On April 24, 2012, XL Fashions initiated a lawsuit against e-Fashions which notified e-Fashions of an event of default under the loan and collected $250,000 which was due and owed on warrant and related rights that the Company had purchased from Orix (see above).
Loan Assignment Agreement
On June 25, 2012, the Company (XL Fashions, Inc.) entered into a Loan Assignment Agreement with Seacoast Holdings (e-Fashion Inc.). Pursuant to the Agreement, Seacoast Holdings acquired the Loan, Warrant and related rights from XL Fashions, Inc. for $925,000 which the Company originally acquired from Orix pursuant to an Assignment Agreement dated January 23, 2012 (see above).
The purchase price paid by e-Fashions for the Loan, Warrant and related rights on June 27, 2012 was $925,000.
11. | MINORITY INTEREST |
Minority interest consists of the stockholders who hold the preferred stock of XL Fashions, Inc.
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Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. These statements involve unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those risks identified in “Item 2.01-Risk Factors” and other risks identified in our Prospectus dated July 25, 2011. There have been no material changes from the risk factors previously disclosed in our Prospectus dated July 25, 2011. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Readers are cautioned that actual results may differ from management’s expectations.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current Overview
We have been in a developmental phase since inception and had no revenues from operations for the period from inception, November 13, 2010 through June 30, 2012.
On May 3, 2012, we entered into an Agreement with Bendetto Arts, LLC (“BA”), in which BA will utilize us as an independent contractor for the solicitation of licensing opportunities. As compensation for its services, we will receive a commission based on 20% of gross revenue. The term of the agreement is for one year with an option to extend if both parties agree.
On June 25, 2012, our subsidiary XL Fashions, Inc. entered into a Loan Assignment Agreement with Seacoast Holdings (e-Fashion Inc.). Pursuant to the agreement, Seacoast Holdings acquired the Loan, Warrant and related rights from XL Fashions, Inc. for $925,000 which was originally acquired pursuant to an Assignment Agreement dated January 23, 2012. The purchase price paid by e-Fashions for the Loan, Warrant and related rights on June 27, 2012 was $925,000.
Results of Operations for the three and six month periods ending June 30, 2012 and 2011
During the three months ended June 30, 2012, we had net income of $22,184 based on the loan assignment described above compared to a net loss of $3,260 for the three months ended June 30, 2011.
During the three months ended June 30, 2012, we had general and administrative expenses of $132,801 compared to $3,260 for the three months ended June 30, 2011. Expenses for the three month period ended June 30, 2012 consisted of; Advertising $26,910; Filing fees $1,317; Legal and accounting fees $44,280; Outside Services $57,378; Telephone $150; Transfer Agent fees $362; Automobile $854; Bank Charges $50 and Miscellaneous $1,500.
During the six months ended June 30, 2012, we had net loss of $135,343 compared to a net loss of $4,660 for the six months ended June 30, 2011.
During the six months ended June 30, 2012, we had general and administrative expenses of $290,328 compared to $4,660 for the six months ended June 30, 2011. Expenses for the six month period ended June 30, 2012 consisted of; Advertising $38,382; Filing fees $2,317; Edgar filing fees $2,175; Legal and accounting fees $141,088; Outside Services $99,549; Telephone $986; Transfer Agent fees $2,437; Automobile $1,731; Bank Charges $163 and Miscellaneous $1,500.
Liquidity and Capital Resources
On June 30, 2012, we had positive working capital of $1,500,932. While we expect that this may be sufficient to operate our business through the end of 2012, there can be no assurance that we will not need additional capital for operations. If we require additional capital, we may attempt to raise additional funds through sales of common stock or borrowings, but there are no assurances that we will raise sufficient amounts to meet our current needs.
Apart from our commitments related to our contracts, we have ongoing commitments for normal business expenses, including salaries, benefits and the like, and have made no other long term financial commitments pending receipt of additional funding. Should we not receive any additional funds; our priorities will be to exploit our current licenses.
18 |
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP.
Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements. We have consistently applied these policies in all material respects. We do not believe that our operations to date have involved uncertainty of accounting treatment, subjective judgment, or estimates, to any significant degree.
Off-Balance Sheet Financing Arrangements
We do not have any off-balance sheet financing arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
We do not consider the effects of interest rate movements to be a material risk to our financial condition. We do not hold any derivative instruments and do not engage in any hedging activities.
Item 4. Controls and Procedures
Based on management’s evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Accounting Officer), as of the end of the period covered by this report, our CEO and Chief Accounting Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits
31.1 | Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation. | |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
19 |
SIGNATURES
Pursuant to the requirements 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.
Date: August 20, 2012 | EXCEL CORPORATION | ||
(Registrant) | |||
By: | /s/ Ruben Azrak | ||
Ruben Azrak | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
By: | /s/ Ruben Azrak | ||
Ruben Azrak | |||
Principal Accounting Officer |
20 |
Exhibit Index
Exhibit Number |
Description | |
31.1 | Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation. | |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
21 |
Exhibit 31.1
CERTIFICATION
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation certify that:
1. I have reviewed this quarterly report on Form 10-Q, of Excel Corporation for the fiscal quarter ended June 30, 2012;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrants’ other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 20, 2012
/s/Ruben Azrak | |
Ruben Azrak | |
Chief Executive Officer and | |
Principal Accounting Officer |
Exhibit 32.1
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Ruben Azrak, Chief Executive Officer and Chief Accounting Officer of Excel Corporation, (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:
(1) | the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended June 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78 o(d)); and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act has been furnished to Excel Corporation and will be retained by Excel Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
Date: August 20, 2012
/s/ Ruben Azrak | |
Chief Executive Officer and | |
Principal Accounting Officer |