-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S/p9TfN6+ZXJD9hDj2DQH58bprddjLP3CAD4zwRnl5jRZPvARPlGO8BuNGGU+IKB BoqpSN1wiBg8Md+//UjWtQ== 0001214659-08-002683.txt : 20081215 0001214659-08-002683.hdr.sgml : 20081215 20081215144243 ACCESSION NUMBER: 0001214659-08-002683 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20081031 FILED AS OF DATE: 20081215 DATE AS OF CHANGE: 20081215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINOTEC GROUP INC CENTRAL INDEX KEY: 0000831378 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 760251547 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-20966 FILM NUMBER: 081249465 BUSINESS ADDRESS: STREET 1: 110 WALL STREET SUITE 15C CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2127018527 MAIL ADDRESS: STREET 1: 1825 EYE STREET, N.W., SUITE 400 CITY: WASHINGTON STATE: DC ZIP: 20006 FORMER COMPANY: FORMER CONFORMED NAME: ONLINE INTERNATIONAL CORP /NV/ DATE OF NAME CHANGE: 19990923 FORMER COMPANY: FORMER CONFORMED NAME: CONDOR WEST CORP DATE OF NAME CHANGE: 19920703 10-Q 1 r12158010q.txt FOR THE QUARTER ENDED OCTOBER 31, 2008 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the quarter ended October 31, 2008 Commission file number 033-20966 -------------------------------- Finotec Group, Inc. ------------------- (Exact name of registrant as specified in Its charter) Nevada 76-0251547 ------ ---------- (State or other jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 228 East 45 Street, Suite 1801, New York, NY 10017 -------------------------------------------------- (Address of principal executive offices and zip code) 718-513-3620 ------------ (Registrant's telephone number, including area code) 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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of"accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No |X| Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: Class Outstanding at November 30, 2008 ----- -------------------------------- Common Stock, par value $0.001 per share 86,721,825 1 FINOTEC GROUP, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets October 31, 2008 (unaudited) and January 31, 2008 ....................3 Consolidated Statements of Operations Three Months and Six Months ended October 31, 2008 and 2007 (unaudited).................................4 Statements of Cash Flows - Nine Months ended October 31, 2008 and 2007 (unaudited).................................5 Notes to Consolidated Financial Statements (unaudited)................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................10 Item 3. Quantitative and Qualitative Disclosures About Market Risk...........16 Item 4T Controls and Procedures..............................................16 PART II. OTHER INFORMATION Item 1. Legal Proceedings ...................................................18 Item 1A. Risk Factors ........................................................19 Item 2. Unregistered Sale of Equity Securities ..............................19 Item 6. Exhibits.............................................................19 Signature ..................................................................20 2 CONSOLIDATED BALANCE SHEETS
October 31, 2008 (Unaudited) January 31, 2008 -------------------------------------------------------------------------------------------------------------- A S S E T S Current Assets Cash and cash equivalents 7,200,521 9,135,591 Marketable securities - 486,151 Prepaid and other current assets 483,227 293,562 - ---------------------------------------------------------------------------------------------------------------- Total Current Assets 7,683,748 9,915,304 Property and equipment, net 689,643 729,532 Forward transaction - 354,100 - ---------------------------------------------------------------------------------------------------------------- Total Assets 8,373,391 10,998,936 ================================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term bank credit 27,516 22,493 Accounts payable and accrued expenses 817,164 945,151 Customers' deposits 5,415,051 6,151,755 Accrued severance payable 180,299 188,158 Forward transaction-Customers and Hedging 10,090 546,578 - ---------------------------------------------------------------------------------------------------------------- Total Liabilities, All Current 6,450,120 7,854,135 - ---------------------------------------------------------------------------------------------------------------- Stockholders' Equity Common stock, $.001 par value, 100,000,000 shares Authorized, 86,721,825 shares issued and outstanding 92,098 70,892 Treasury shares, at cost - 2,687,500 shares - (156,513) Additional paid-in-capital 5,858,059 1,545,378 Accumulated other comprehensive income (loss) (130,012) (159,916) Accumulated income 3,896,874) 1,844,960 - ---------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 1,923,271 3,144,801 - ---------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity 8,373,391 10,998,936 ================================================================================================================
See accompanying notes to consolidated financial statements. 3 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended Three Months Ended October 31, October 31, 2008 2007 2008 2007 - ------------------------------------------------------------------------------------------------------------------------------------ Revenues Net gains from foreign currency future operations 1,547,408 4,446,529 929,225 1,318,793 Consulting 2,967 589 (37) 6 - ------------------------------------------------------------------------------------------------------------------------------------ Total Revenues 1,550,375 4,447,118 929,188 1,318,799 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Expenses Selling, general and administrative 824,486 520,619 239,577 148,496 Salaries 2,106,902 1,864,320 312,730 369,976 Research and development 271,261 297,800 161,606 176,565 Technology and computer 663,704 272,401 319,655 272,401 Commissions brokers 193,355 (188,195) 94,735 94,046 Bonuses & cash back-withholding 411,643 218,466 54,787 77,115 Marketing 1,415,237 542,337 255,122 281,326 Professional fees 537,601 309,138 166,949 129,262 Financial data 179,778 155,786 29,488 42,041 Depreciation 207,274 142,482 64,701 42,636 Exceptional (40,562) 80,726 (51,165) 80,276 Other expense 552,897 322,431 168,823 66,368 - ------------------------------------------------------------------------------------------------------------------------------------ Total Operating Expenses 7,323,576 4,538,311 1,817,007 1,780,957 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Income (Loss) (5,773,201) (91,193) (887,819) (462,158) Other Income (Expense) Interest income (expense), net 54,563 1,000,200 11,642 624,791 Financing income (expense) (23,197) (952,094) 116,236 (357,486) - ------------------------------------------------------------------------------------------------------------------------------------ Income (Loss) Before Income Taxes 31,366 48,106 127,878 267,305 Income tax refund - - - - ---------------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) (5,741,835) (43,087) (759,941) (194,853) ==================================================================================================================================== Weighted average number of common shares outstanding 86,721,825 65,315,741 86,721,825 65,315,741 ==================================================================================================================================== Basic and diluted loss per common share * * * * ==================================================================================================================================== * Less than $.01 per share
See accompanying notes to consolidated financial statements. 4 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
========================================================================================================================= FOR THE NINE MONTHS ENDED OCTOBER 31, 2008 2007 - ------------------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income (loss) $ (5,741,835) $ (43,086) Adjustment to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities Depreciation 207,274 98,704 Loss on sold assets 18,119 Changes in Operating Assets and Liabilities (Increase) decrease in prepaid and other current assets (189,666) (103,560) Increase in accrued expenses (163,836) 40,179 Increase in customers' deposits (736,704) 1,878,671 Increase in forward transaction (182,388) 141,735 Increase in compensation reserve (7,859) (34,685) Decrease in other current liabilities 35,849 271,268 Increase in marketable securities 486,153 240,826 - ------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Used in) Operating Activities (6,274,893) 2,492,052 - ------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities Acquisition of property and equipment (167,408) (292,845) Selling of property and equipment 32,823 - - ------------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Investing Activities (134,585) (292,845) - ------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Short term bank Credit 5,023 (15,426) Proceeds of stock issuance - 2,000 Stock issuance 4,490,400 - - ------------------------------------------------------------------------------------------------------------------------- Net Cash (Used in) Provided by Financing Activities 4,495,423 (13,426) Effect of Foreign Currency Translation (21,015) (25,890) - ------------------------------------------------------------------------------------------------------------------------- Net Increase in Cash and Cash Equivalents (1,935,070) 2,157,891 Cash and Cash Equivalents - Beginning 9,135,591 5,494,944 - ------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents - Ending $ 7,200,521 $ 7,652,835 ========================================================================================================================= Supplemental Disclosure of Cash Flow Information Cash paid during the period for income taxes - - =========================================================================================================================
See accompanying notes to consolidated financial statements. 5 FINOTEC GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ================================================================================ 1. Summary of Significant Accounting Policies Interim Financial The accompanying unaudited consolidated financial Information statements of the Company (as defined below) should be read in conjunction with the consolidated financial statements and notes thereto filed with the U.S. Securities and Exchange Commission in the Company's Annual Report on Form 10-KSB for the fiscal year ended January 31, 2008. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the financial position of the Company and its consolidated subsidiaries at October 31, 2008, and the results of their operations and their cash flows for the three months ended October 31, 2008 and October 31, 2007. The results of interim periods are not necessarily indicative of the results that may be expected for the year ending January 31, 2009. Description of Finotec Group, Inc. ("Finotec, Inc.), a Nevada Business corporation, is principally engaged, through its wholly-owned subsidiaries, in offering foreign currency market trading to professionals and retail clients over its web-based trading system. Shares in Finotec began trading on the Over the Counter Bulletin Board listings. (OTCBB: FTGI). Finotec Group's United Kingdom subsidiary, Finotec Trading UK, Limited, has been authorized by the UK's Financial Services Authority (FSA) to act as a Market Maker, as defined by the FSA, in the United Kingdom. As of November 9, 2007, Finotec Trading UK, Limited, is approved by the FSA as a Market Maker and Principal, and thus Finotec Trading UK, Limited, may now offer UK clients certain regulated investment instruments such as Commodity Futures, Commodity options and options on commodity futures, Contract for Differences, Futures, Options, Rights to or interests in investments, Rolling spot forex contracts, and Spread Bets. Risk Management These Finotec Group activities give rise to risks which are monitored and managed as follows: Credit risk Clients are required to deposit cleared funds as margin before they can trade. If the client margin falls below the minimum required to maintain a position, they will be notified that they are on margin call and can only reduce their positions or provide additional funds. At any time the client is on margin call, the company may, at its discretion, liquidate some or all of that client's positions in order to bring them back into line with their margin requirements. The company also has potential credit risk exposure to market counterparties with which it hedges and with banks. The company has a defined risk appetite for exposure to each market counterparty and bank to which it has credit exposure. 6 1. Summary of Significant Accounting Policies (Continued) Liquidity risk The company has significant net cash balances as at the balance sheet date and continually monitors its capital adequacy. Foreign currency risk The company has financial instruments which are denominated predominantly in US dollars. The gains and losses arising from the company's exposure are recognised in the profit and loss account. Market price risk Market risk arises from open contracts with customers and counterparties. Exposure to market risk is closely monitored in accordance with limits and reduced through hedging. Principles of The consolidated financial statements include the Consolidation accounts of Finotec Inc. and its wholly owned subsidiaries, Finotec Trading, Inc. ("Finotec Trading") and its owned subsidiary Finotec Trading Cyprus Ltd., Finotec Ltd., Finotec USA Inc., Finotec Trading Polska S.A., Finotec Trading UK Ltd, and Finotec Ltd.'s 99.7% owned subsidiary, Forexcash Global Trading Ltd. ("Forexcash") (collectively referred to as the "Company", unless otherwise indicated). All material intercompany transactions and balances have been eliminated in consolidation. Since the liabilities of Forexcash exceed its assets, and the owner of the 0.3% minority interest has no obligation to supply additional capital, no minority interest has been recorded in the consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Earning Per Common Basic earnings per share is based on the weighted Share effect of all common shares issued and outstanding, and is calculated by dividing net income (loss) by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income (loss) by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all stock options. The dilutive effect of stock options was not assumed for the three months ended October 31, 2008 and 2007, because the effect of these securities is antidilutive. 7 1. Summary of Significant Accounting Policies (Continued) Marketable Securities Marketable securities consist principally of corporate stocks. Management has classified the Company's marketable securities as available for sale securities in the accompanying consolidated financial statements. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity. Realized gains and losses on available-for-sale securities are included in interest income. Gains and losses, both realized and unrealized, are measured using the specific identification method. Market value is determined by the most recently traded price of the security at the balance sheet date. As of October 31, 2008 the market value of the security equals its cost. 2. Property and Equipment Property and equipment consist of the following:
Estimated Useful October 31, 2008 January 31, 2008 Lives (Years) (Unaudited) -------------------------------------------------------------------------------------- Computer equipment 3 $ 914,275 812,028 Purchased software 3 238,643 240,985 Office furniture and Equipment 7 241,430 171,654 Leasehold improvements 10 126,648 120,221 Vehicles 15 5,131 70,145 -------------------------------------------------------------------------------------- Total Property and Equipment at Cost 1,526,126 1,415,033 Less accumulated depreciation And amortization 836,463 685,501 -------------------------------------------------------------------------------------- Property and Equipment - Net $ 689,643 $ 729,532
3. Legal Proceedings In May, 2004, the Tel-Aviv Stock Exchange Ltd. ("the Stock Exchange") submitted a claim against the Company for a permanent and temporary restraining order to prevent the Company from using the Tel-Aviv 25 Index and/or any other index owned by the Stock Exchange as part of the Company's online trading at its website. The Company claimed that the Stock Exchange does not have copyrights regarding the indexes and that it did not mislead the public in any way. In addition, the Company claims that it does not actually use the said index in any way. The Company answered the claim for a temporary restraining order, and in June, 2004, the Court accepted the Company's claim. In August, 2005, the Stock Exchange appealed to the Supreme Court, and thereafter the Company submitted its response to the appeal. The Supreme Court accepted the company's claim. A preliminary hearing was held in March 2008 with another preliminary hearing in the case scheduled for October 2008. The hearing scheduled for October 2008 was postponed by the court. The parties are considering a settlement agreement. Management does not expect this claim to have a material effect on the Company's financial position or results of operations. 8 3. Legal Proceedings (Continued) In November 2007 a Finotec customer filed a claim for approx NIS 152 thousands for alleged trading profits the company cancelled. The company claimed there was no basis for the claim. At the suggestion of the court the claim was settled in March 2008 with the company making an NIS 25 thousand payment to the customer. In February 2008, a shareholder of the Company filed a claim against the Company in the District Court of Clark County, Nevada, relating to the requirement by the Company's transfer agent, Standard Register and Transfer Company that such shareholder provide collateral in order to replace a stock certificate that shareholder claims to have lost. The Company and the shareholder have resolved the matter and signed a Settlement Agreement. Management does not expect either claim to have a material effect on the Company's financial position or results of operations. 4. Issuances of equity securities On June 16, 2008, the Company entered into definitive agreements for the sale of 4,347,824 shares of Common Stock at a price of $0.23 per share. As a part of the transaction, the Company agreed to issue accompanying warrants to purchase an aggregate of 10,000,000 shares of Common Stock at an exercise price of $0.50 per share. Four investors subscribed to the investment. The shares of Common Stock sold in the private placement offering have not been registered and may not be offered or sold absent registration or an applicable exemption from such registration requirements. All such shares are subject as well to a registration rights agreement. The transaction closed in mid-June 2008. 2,487,500 treasury shares were issued as part of the 4,347,824 shares issued thereunder. On July 29, 2008, the Company entered into a definitive agreement for the sale of 3,333,333 shares of Common Stock at a price of $0.30 per share for a total of $1 million. As a part of the transaction, the Company agreed to issue accompanying warrants to purchase an aggregate of 1,428,571 shares of Common Stock at an exercise price of $0.70 per share. The shares of Common Stock sold in the private placement offering have not been registered and may not be offered or sold absent registration or an applicable exemption from such registration requirements. All such shares are subject as well to a registration rights agreement. The transaction closed on July 31, 2008. On October 31, 2008, the Company entered into definitive agreements and received funds for the sale of 12,724,444 shares of Common Stock at a price of $0.18 per share and 800,000 shares of Common Stock at a price of $0.25 per share. As a part of the transaction, the Company agreed to issue accompanying warrants to purchase 5,777,776 shares of Common Stock at an exercise price of $0.45 per share and warrants to purchase 400,000 shares of Common Stock at an exercise price of $0.50. Five new investors subscribed to the 9 investment. The shares of Common Stock sold in the private placement offering were not registered under the Securities Act of 1933, as amended, and may not be offered or sold absent registration or an applicable exemption from such registration requirements. All such shares are subject as well to a registration rights agreement. The offering closed on November 2, 2008. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements of Finotec Group, Inc. and its subsidiaries contained herein. The results of operations for an interim period are not necessarily indicative of results for the year, or for any subsequent period. BUSINESS OVERVIEW Finotec Group Finotec Group Inc. is a holding company with no activities other than holding two wholly owned companies Finotec Trading Inc. and Forexcash Global Trading Ltd. These companies, directly and through their subsidiaries, deal primarily in two distinct areas: 1. Finotec Trading Inc. - marketing, sales, market trading and facilitation; and 2. Forexcash Global Trading Ltd - financial technology development. Finotec Trading Inc. (New York), or Finotec Trading Inc., was established in November 2001 with the express intent of providing retail customers access to the largest financial market for online foreign currency trading. Finotec Trading Inc. (New York) is the market-making arm of the corporation, distributing the live and instantaneously executable trading prices in global currencies, equities, indices, commodities and interest rate products through the group's online trading system. The centralized dealing room services clients, aggregates globally derived risk in real-time and hedges residual market exposure with the underlying markets. In 2005 Finotec Trading Inc. established its dealing room in Cyprus through a wholly owned subsidiary Finotec Trading Cyprus Ltd. In 2007, the dealing room was moved to the UK. Currently, the subsidiary in Cyprus engages primarily in sales and marketing of the Company's products. During 2007, Finotec Trading Inc. additionally established three wholly owned subsidiaries: o In the United Kingdom, Finotec Trading UK Limited, or Finotec UK, for the purpose of obtaining the necessary authorization to act as a market maker in Foreign Exchange and CFD's in the UK and Europe. In November 2007, Finotec UK received such authorization from the UK Financial Services Authority ("FSA"). Such authorization was accompanied by approvals from the other European countries allowing Finotec UK to offer cross-border investment services within their borders. o In the United States, Finotec USA, Inc., a Delaware corporation, for the purpose of obtaining the necessary authorization from the National Futures Association (NFA) to act as a market maker in Foreign Exchange in the US. 10 o In Poland, Finotec Trading Polska S. A., for the purpose of obtaining the necessary authorization to act as a market maker in Foreign Exchange and CFD's in Poland and Eastern Europe. As a result of the FSA approval received by Finotec UK, and the accompanying approvals in other European countries, including Poland, the Company decided to discontinue the authorization process in Poland and is currently planning to dissolve or sell this subsidiary. On August 9, 2001 (the "Merger Date"), Finotec Group, Inc., formerly Online International Corporation ("Finotec Group"), a Nevada corporation without significant operations, acquired all of the outstanding shares of Finotec Ltd. ("Finotec Ltd.") (formerly Priory Marketing Ltd.), an Isle of Man company. The transaction was effected by the issuing of 21,500,000 shares of Finotec Group common stock to the stockholders of Finotec Ltd. This resulted in the former Finotec Ltd. stockholders owning approximately 61.5% of the outstanding shares of Finotec Group. For financial reporting purposes, the transaction was recorded as a recapitalization of Finotec Ltd., with Finotec Ltd. receiving the $1,320,363 net assets (assets of $1,404,636, less liabilities of $84,273) of Finotec Group as a capital contribution. Finotec Ltd. is the continuing surviving entity for accounting purposes, but is adopting the capital structure of Finotec Group, which is the continuing parent entity for legal purposes. All references to common stock have been restated to reflect the equivalent number of Finotec Group shares. Finotec Ltd. was formed in December 2000, at which time it acquired 99.7% of the outstanding stock of Forexcash Global Trading Ltd. ("Forexcash"), an Israeli corporation, which had been incorporated on June 23, 1998. This transaction is treated as a recapitalization of Forexcash with Forexcash as the continuing accounting entity and Finotec Ltd. as the continuing parent for legal purposes. Finotec Group Inc. is traded on the OTC bulletin board under the symbol FTGI.OB. Operations Customers can open accounts with Finotec Trading UK Ltd. by several methods; 1. Directly with Finotec Trading UK Ltd. 2. Via affiliates and Introducing Brokers ("IB's") that sign commission sharing agreement Finotec Trading UK Ltd. As part of its code of conduct, all customer monies are segregated in custodian accounts which have been set up in the United Kingdom and various other countries. Since its inception Finotec has secured a number of IB contracts, with investment houses, financial institutions and high wealth individuals. Finotec's website and trading system may be accessed on www.finotec.com. The system also provides a `demo' trading system and an e-learning center that may be accessed by registering on the website. The Company currently develops, through its subsidiaries, markets and operates a software system delivering foreign exchange, commodities, and futures (CFDs) investment services to the public through the Internet. The Company also operates an Internet-based brokerage firm for institutional, professional and serious active individual traders in the financial instruments markets, especially foreign currency and CFDs. The Company offers an electronic trading platform which seamlessly integrates strategy trading tools, historical and streaming real-time market data, and direct-access order-routing and execution. In addition, the Company operates an internal risk management module that guides the Company as to when to hedge positions or not and systems that provide real time management of equity positions and margin requirements. The Company also acts as a market maker in relevant jurisdictions. 11 Under our business model, we seek recurring revenues mainly by offering, through use of a software system developed by its subsidiary, Forexcash, online real-time trading in financial instruments. Forexcash is a front and back office market maker application for online real-time trading in financial instruments. We use our capabilities to provide strategy trading tools, and the unique quality and functionality of those tools attracts our target customer base of institutional, professional and serious active individual traders. We market our services primarily through our subsidiaries who operate call centers and Internet sites. The Company also intends to promote white-label systems directly to financial institutions such as commercial banks. We also provide training in online trading. Recent Developments In December 2008, the Company announced that it is implementing a new price quoting method to allow its clients to be directly connected to market prices. Under the method, instead of having quotes reflecting Finotec prices, clients may now trade at market prices with the addition of a predefined and fixed commission. This new method continues the Company's goal of providing its clients with greater price transparency. Under the new price quoting method, clients can be directly connected to very competitive market prices through Finotec's trading platform which are available as a result of Finotec's high monthly volume of trade - around 10 billion dollars per month - and its relationship with 18 of the world's largest and most aggressive banks. RESULTS OF OPERATIONS THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2008 AND 2007 NET GAINS (LOSSES) FROM FOREIGN CURRENCY FUTURE OPERATIONS Net gains from foreign currency future operations are comprised primarily of spread-based brokerage fees earned from our clients' brokerage transactions. Total net gain from foreign currency future operations was $929,225 for the three months ended October 31, 2008, as compared to a net gain from foreign currency future operations of $1,318,793 for the three months ended October 31, 2007. This decrease of $389,568 is attributable to a variety of factors affecting our operations relating to the general global downturn in the financial markets. The Company had net losses of $759,941 for the three months ended October 31, 2008, as compared to a net loss of $194,853 for the three months ended October 31, 2007, a decrease of $565,088. This loss is primarily attributable to the factors outlined above and costs relating to implementation of the Company's recently announced new price quoting method. Total net gain from foreign currency future operations was $1,547,408 for the nine months ended October 31, 2008, as compared to a net gain from foreign currency future operations of $4,446,529 for the nine months ended October 31, 2007. This decrease of $2,899,121 is attributable to a variety of factors affecting our operations relating to the general global downturn in the financial markets. The Company had net losses of $5,741,835 for the nine months ended October 31, 2008, as compared to a net loss of $43,087 for the nine months ended October 31, 2007, a decrease of $5,698,766. This decrease is primarily attributable to the factors outlined above, the expenses associated with establishment of the Company's London office and expenses relating to implementation of the Company's recently announced new price quoting method. 12 OPERATING EXPENSES RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily of personnel costs associated with product development and management of the brokerage products and services Finotec offers to its clients. Research and development expenses for the three months ended October 31, 2008 were $161,606, as compared to $176,565 for the three months ended October 31, 2007, a decrease of $14,959. Research and development expenses for the nine months ended October 31, 2008 were $271,261, as compared to $297,800 for the nine months ended October 31, 2007, a decrease of $26,539. OPERATING EXPENSES. Operating expenses were $1,817,007 for the three months ended October 31, 2008, as compared to $1,780,957 for the three months ended October 31, 2007, an increase of $36,050. Operating expenses for the nine months ended October 31, 2008 were $7,323,576, as compared to $4,538,311 for the nine months ended October 31, 2007, an increase of $2,785,265. This increase was due largely to the establishment of the Company's London office and a new facility rented by the Company's subsidiary in Israel and expenses relating to implementation of the Company's recently announced new price quoting method. ADJUSTED OPERATING EXPENSES. Adjusted operating expenses consist of operating expenses adjusted by removing research and development, depreciation and exceptional expenses. Adjusted operating expenses were $1,641,865 for the three months ended October 31, 2008, as compared to $1,481,480 for the three months ended October 31, 2007. This increase of $160,385 was primarily due to exceptional expenses resulting from changes, due to currency fluctuations, in the value to fixed assets that the Company sold outside of the ordinary course of operations. Adjusted operating expenses for the nine months ended October 31, 2008 were $6,885,603, as compared to $4,017,303 for the nine months ended October 31, 2007, an increase of $2,868,300. This increase was due largely to the establishment of the Company's London office and a new facility rented by the Company's subsidiary in Israel and expenses relating to implementation of the Company's recently announced new price quoting method. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses were $239,577 for the three months ended October 31, 2008, as compared to $148,496 for the three months ended October 31, 2007. This increase of $91,081 was primarily attributable to the factors outlined above. Selling, general and administrative expenses were $824,486 for the nine months ended October 31, 2008, as compared to $520,619 for the nine months ended October 31, 2007. This increase of $303,867 was primarily attributable to the factors outlined above. LIQUIDITY AND CAPITAL RESOURCES The Company's cash balance decreased by $531,297 from a cash balance at January 31, 2008 of $9,135,591 to $7,200,521 at October 31, 2008. This decrease is primarily attributable to the Company's losses during the nine months ended October 31, 2008. Net cash used in operating activities amounted to $6,274,893 for the nine months ended October 31, 2008, compared to net cash provided by operating activities of $2,492,052 for the nine months ended October 31, 2007, a decrease of $8,766,945. This decrease is attributable to a variety of factors, including the general global downturn in the financial markets, client reactions to market uncertainties as well as expenses associated with the establishment of the Company's London office and expansion of business throughout Europe as well as costs associated with the development and launch of the Company's spread-betting platform and other new product offerings. 13 Net cash used in investing activities for the nine months ended October 31, 2008, was $134,585 as compared to net cash used in investing activities of $292,845 for the nine months ended October 31, 2007, a decrease of $158,260. This decrease primarily resulted from a decrease in the acquisition of property and equipment and a sale of fixed assets. Future capital requirements and the adequacy of available funds will depend on numerous factors, including the successful commercialization of our products, competing technological and market developments, and the development of strategic alliances for the development and marketing of our products. The Company is actively seeking financings to satisfy its ongoing cash requirements. In the second quarter of fiscal 2008, during April 2008, due to lower-than-expected revenues, the Company laid off approximately 15% of its employees and engaged in other cost-cutting measures. The Company has implemented further cost-cutting measures during this quarter. Such action may have a material adverse effect on the Company's operations and results. On June 16, 2008, the Company entered into definitive agreements for the sale of 4,347,824 shares of Common Stock at a price of $0.23 per share. As a part of the transaction, the Company agreed to issue accompanying warrants to purchase an aggregate of 10,000,000 shares of Common Stock at an exercise price of $0.50 per share. Four investors subscribed to the investment. The shares of Common Stock sold in the private placement offering have not been registered under the Act and may not be offered or sold absent registration or an applicable exemption from such registration requirements. All such shares are subject as well to a registration rights agreement. The transaction closed in mid-June 2008. In addition, on July 29, 2008, the Company entered into a definitive agreement for the sale of 3,333,333 shares of Common Stock at a price of $0.30 per share for a total of $1 million. As a part of the transaction, the Company agreed to issue accompanying warrants to purchase an aggregate of 1,428,571 shares of Common Stock at an exercise price of $0.70 per share. The shares of Common Stock sold in the private placement offering have not been registered and may not be offered or sold absent registration or an applicable exemption from such registration requirements. All such shares are subject as well to a registration rights agreement. The transaction closed on July 31, 2008. Additionally, on October 31, 2008, the Company entered into definitive agreements and received funds for the sale of 12,724,444 shares of Common Stock at a price of $0.18 per share and 800,000 shares of Common Stock at a price of $0.25 per share. As a part of the transaction, the Company agreed to issue accompanying warrants to purchase 5,777,776 shares of Common Stock at an exercise price of $0.45 per share and warrants to purchase 400,000 shares of Common Stock at an exercise price of $0.50. Five new investors subscribed to the investment. The shares of Common Stock sold in the private placement offering have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold absent registration or an applicable exemption from such registration requirements. All such shares are subject as well to a registration rights agreement. The transaction closed on November 2, 2008. Such funds will be used for working capital purposes and further expansion of the Company's marketing strategy. The Company intends to try to obtain additional funds when necessary through equity or debt financing, strategic alliances with corporate partners and others, or through other sources. In the event Finotec's plans change or its assumptions change or prove to be inaccurate or the funds available prove to be insufficient to fund operations at the planned level (due to further unanticipated expenses, delays, problems or otherwise), Finotec could be required to obtain additional funds earlier than expected. Finotec does not have any committed sources of additional financing, and there can be no assurance that additional funding, if necessary, will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to further delay, scale-back, or eliminate certain aspects of our operations or attempt to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product 14 candidates, products, or potential markets. If adequate funds are not available, Finotec's business, financial condition, and results of operations will be materially and adversely affected. During the six months ended July 31, 2008, the Company experienced a significant increase in the number of new client accounts opened as well as an increase in the level of gross new client deposits. The current quarter has similarly seen a further increase in the level of gross new client deposits. However, there can be no assurance that such factors will necessarily have a positive effect on future results of operations. In addition, the Company has announced several new product offerings, including an option pricer and white label online trading platform. The Company has announced in December that it is implementing a new pricing method to allow clients to be directly connected to market prices. Under the new pricing method, instead of having quotes reflecting pre-defined Finotec prices, clients may now trade at market prices with the addition of a predefined and fixed commission. This new pricing method is continues the Company's goal of providing its clients with greater price transparency. Under the new pricing method, clients can be directly connected to very competitive market prices through Finotec's trading platform which are available as a result of Finotec's high monthly volume of trade - around 10 billion dollars per month -- and its relationship with 18 of the world's largest and most aggressive banks. Finotec expects that its operating results will fluctuate significantly from quarter to quarter in the future and will depend on a number of factors, most of which are outside Finotec's control. Non-GAAP Operating Expenses - --------------------------- We present Non-GAAP operating expenses to provide investors with a supplemental measure of our operating performance. A reconciliation between results in a GAAP and Non-GAAP basis is provided in a table below. Operating expenses is adjusted from results based on GAAP to exclude research and development expenses, depreciation and exceptional expenses which result from changes, due to currency fluctuations, in the value to fixed assets that the Company sold outside of the ordinary course of operations. These fixed assets consisted primarily of a small fleet of vehicles that the Company ceased using as part of its business operations. These non-GAAP financial measures are provided to enhance overall understanding of the Company's current financial performance and prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude research and development expenses, depreciation and other expenses that the Company believes are not indicative of our core operating results. Our non-GAAP adjusted operating expenses measure is not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses adjusted operating expenses internally to understand, manage and evaluate our business and make operating decisions. We believe this measure helps investors to understand our current and future operating expenses. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Pursuant to the requirements of SEC Regulation G, reconciliations between the Company's GAAP and non-GAAP financial results for the three and nine months ended October 31, 2008 and 2007 are provided below and investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in our SEC filings: 15 Three Months Ended October 31, ---------------------------------------- 2008 2007 ------------------- ------------------- Operating Expenses $ 1,817,007 $ 1,780,957 Less: Research and Development (161,606) (176,565) Less: Depreciation (64,701) (42,636) Adjusted For: Exceptional 51,165 (80,276) ------------------- ------------------- Adjusted Operating Expenses $ 1,641,865 $ 1,481,480 =================== =================== Nine Months Ended October 31, ---------------------------------------- 2008 2007 ------------------- ------------------- Operating Expenses $ 7,323,576 $ 4,538,311 Less: Research and Development (271,261) (297,800) Less: Depreciation (207,274) (142,482) Adjusted For: Exceptional 40,562 (80,726) ------------------- ------------------- Adjusted Operating Expenses $ 6,885,603 $ 4,017,303 =================== =================== ISSUES, UNCERTAINTIES AND RISK FACTORS The Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations in this report should be read and evaluated together with the issues, uncertainties and risk factors relating to our business described in our other public filings with the SEC, including our annual report filed on Form 10-KSB. While we have been and continue to be confident in our business and business prospects, we believe it is very important that anyone who reads this report consider the issues, uncertainties and risk factors described below, which include business risks relevant both to our industry and to us in particular. These issues, uncertainties and risk factors are not intended to be exclusive. This report also contains statements that are forward-looking 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. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. When used in this report, the words "believes," "plans," "estimates," "expects," "intends," "designed," "anticipates," "may," "will," "should," "could," "become," "upcoming," "potential," "pending," and similar expressions, if and to the extent used, are intended to identify the forward-looking statements. All forward-looking statements are based on current expectations and beliefs concerning future events that are subject to risks and uncertainties. Actual results may differ materially from the results suggested in this report. Factors that may cause or contribute to such differences, and our business risks and uncertainties generally, include, but are not limited to, the items described below, as well as in other sections of this report and in our other public filings and our press releases. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable to the registrant as a smaller reporting company. ITEM 4T. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures Management of the Company, with the participation of the Chief Executive Officer (who also serves as the Chief Financial Officer), evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of October 31, 2008. Based upon this evaluation, the Chief Executive Officer (who also serves as the Chief Financial Officer) has concluded that the Company's disclosure controls and procedures were not effective as of October 31, 2008 due to the material weaknesses in internal control over financial reporting as described below. (b) Management's Report on Internal Control Over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections 16 of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness represents a significant deficiency (as defined in the Public Company Accounting Oversight Board's Auditing Standard No. 5), or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting as of October 31, 2008 based on the framework published by the Committee of Sponsoring Organizations of the Tread way Commission, Internal Control -- Integrated Framework. Management has identified the following material weaknesses in the Company's internal control over financial reporting as of October 31, 2008. Material weaknesses identified in Finotec Group, Inc are as follows: Entity Level Controls: - ---------------------- o The Audit Committee is inactive. o There is no internal audit function. o Management does not perform a periodic check of the access rights of all users to ensure that their access is suitable to their positions and functions. Remediation Plan: - ----------------- o The Audit Committee will be activated. o The Company will implement an internal audit function. o The CFO will extract from the information system an access list for all employees and ensure that each function, screen and field is suitable to the employee's job description. o The CFO will ensure that the access rights are adequately segregated. Financial Statements: - --------------------- o Lack of documentation at the financial statement preparation process creates the potential of the occurrence of a material error occurring in the financial statements. Remediation Plan: - ----------------- o The Company will retain evidence of all the controls performed in the financial statement preparation process. Treasury and Cash Management: - ----------------------------- o Lack of documentation in the Treasury and Cash Management process creates the potential of the occurrence of a material error occurring in the financial statements. Remediation Plan: - ----------------- o The Company will retain evidence of all the controls performed in the process. Revenue: - -------- o Lack of documentation in the Order to Cash process creates the potential of the occurrence of a material error occurring in the financial statements. Remediation Plan: - ----------------- o The Company will retain evidence of all the controls performed in the process. Human Resources & Payroll: - -------------------------- o Lack of documentation in the human resources and payroll processes creates the potential of the occurrence of a material error occurring in the financial statements. 17 Remediation Plan: - ----------------- o The Company will retain evidence of all the controls performed in the process. Information Technology: - ----------------------- o The Company does not have a permission and access right table specifying group authorizations. Some employees have more authorizations than their role definition. There is no authorization procedure. o The Company does not have password complexity procedure. User passwords do not require any complexity, and there is no requirement for password change. o No Formal system development, acquisition and program change policies and procedures exist for development/acquisitions of new systems and changes to existing systems. o The developers have access to the production. Remediation Plan: - ----------------- o The Company will examine and minimize user rights and will prepare permissions table and access rights that includes group permissions and prepare access to programs and data procedures. o The Company will prepare "Access to Programs and Data" procedure. Passwords to the database will be managed and complex. o The Company will write a methodology for system development, acquisitions and change management. o The Company will prevent the developers from accessing the production environment. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In May, 2004, the Tel-Aviv Stock Exchange Ltd. ("the Stock Exchange") submitted a claim against the Company for a permanent and temporary restraining order to prevent the Company from using the Tel-Aviv 25 Index and/or any other index owned by the Stock Exchange as part of the Company's online trading at its website. The Company claimed that the Stock Exchange does not have copyrights regarding the indexes and that it did not mislead the public in any way. In addition, the Company claims that it does not actually use the said index in any way. The Company answered the claim for a temporary restraining order, and in June, 2004, the Court accepted the Company's claim. In August, 2005, the Stock Exchange appealed to the Supreme Court, and thereafter the Company submitted its response to the appeal. The Supreme Court accepted the company's claim. A preliminary hearing was held in March 2008 with another preliminary hearing in the case scheduled for October 2008. The hearing scheduled for October 2008 was postponed by the court. The parties are considering a settlement agreement. Management does not expect this claim to have a material effect on the Company's financial position or results of operations. In February 2008, a shareholder of the Company filed a claim against the Company in the District Court of Clark County, Nevada, relating to the requirement by the Company's transfer agent, Standard Register and Transfer Company that such shareholder provide collateral in order to replace a stock certificate that shareholder claims to have lost. The Company and the shareholder have resolved the matter and in October 2008 the parties signed a settlement agreement. In September 2008, a Finotec customer filed a claim for approx NIS 148,000 for disputed trading profits. Finotec's motion for permission to file a defense was filed in November 2008, and the court has set the matter for a hearing on February 8, 2009. 18 Management does not expect any of these claims to have a material effect on the Company's financial position or results of operations. ITEM 1A. RISK FACTORS Not applicable to the registrant as a smaller reporting company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (A) SALES OF UNREGISTERED SECURITIES On October 31, 2008, the Company received funds for the sale of 12,724,444 shares of Common Stock at a price of $0.18 per share and 800,000 shares of Common Stock at a price of $0.25 per share. As a part of the transaction, the Company agreed to issue accompanying warrants to purchase 5,777,776 shares of Common Stock at an exercise price of $0.45 per share and warrants to purchase 400,000 shares of Common Stock at an exercise price of $0.50. Five new investors subscribed to the investment. The offering closed on November 2, 2008. The aggregate amount of consideration received by the Company in the offering was a total of $2,490,400. The shares of Common Stock sold in the private placement offering were not registered under the Securities Act of 1933, as amended, and may not be offered or sold absent registration or an applicable exemption from such registration requirements. All such shares are subject as well to a registration rights agreement. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REPORT: 31.1 Section 302 certification 31.2 Section 302 certification 32.1 Section 906 certification 32.2 Section 906 certification 19 SIGNATURE 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. Finotec Group, Inc. Registrant Date: December 15, 2008 /s/ Didier Essemini -------------------------- Didier Essemini Chief Executive Officer and Chief Financial Officer 20 EX-31.1 2 ex31_1.txt Exhibit 31.1 CERTIFICATION I, Didier Essemini, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Finotec Group, Inc. (the "Company"); 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 circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report. 4. The Company's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company 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 Company, 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 Company'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 Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions); a) all significant deficiencies in the design or operation of internal controls which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial data; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. /s/ Didier Essemini -------------------------------- Didier Essemini, Chief Executive Officer (Principal Executive Officer) Dated: December 15, 2008 EX-31.2 3 ex31_2.txt Exhibit 31.2 CERTIFICATION I, Didier Essemini, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Finotec Group, Inc. (the "Company"); 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 circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report. 4. The Company's other certifying officer 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company 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 Company, 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 Company'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 Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions); a) all significant deficiencies in the design or operation of internal controls which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial data; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. /s/ Didier Essemini -------------------------------- Didier Essemini, Chief Financial Officer (Principal Financial Officer) Dated: December 15, 2008 EX-32.1 4 ex32_1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Finotec Group, Inc. (the "Company") on Form 10-Q for the quarter ended October 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report), the undersigned as officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to such officer's knowledge, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in that Form 10-Q. Date: December 15, 2008 Signed: /s/ Didier Essemini ---------------------------- Didier Essemini Chief Executive Officer (Principal Executive Officer) The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-Q or as a separate disclosure document. EX-32.2 5 ex32_2.txt Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Finotec Group, Inc. (the "Company") on Form 10-Q for the quarter ended October 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report), the undersigned as officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to such officer's knowledge, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in that Form 10-Q. Date: December 15, 2008 Signed: /s/ Didier Essemini ---------------------------- Didier Essemini Chief Financial Officer (Principal Financial Officer) The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-Q or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----