form10k.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934
 
For the fiscal year ended December 31, 2014
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 Commission File Number 000-53983
 
 4CABLE TV INTERNATIONAL, INC.
 (Name of registrant as specified in its charter)
 
Nevada
 
80-0955951
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification Number)
 
1248 Highway 501 Business Conway, South Carolina
 
29526
(Address of Principal Executive Offices)
 
(Zip Code)
 
 (843) 347-4933
 (Registrant’s telephone number)
 
Securities registered pursuant to Section 12(b) of the Act:
 
None
 
None
(Title of each class)
 
(Name of each exchange on which registered)
 
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
 
 
 

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
 
 
YES o
 
NO x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
 
 
YES o
 
NO x
 
 
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   o
 
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 (§ 232.405 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  x
 
NO  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a small reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer                  o
Accelerated filer     o
   
Non-accelerated filer (do not check if smaller reporting company)         o
Smaller reporting company  x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 
 
YES  o
 
NO  x
 
The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant was approximately $1,888,734 (based on 14,528,720 shares held by non-affiliates and closing market price of $0.13 per share as of June 30, 2014 (the last business day of the registrant’s most recently completed second quarter)), assuming solely for the purpose of this calculation that all directors, officers and greater than 10% stockholders of the registrant are affiliates. The determination of affiliate status for this purpose is not necessarily conclusive for any other purpose.

As of April 15, 2015, there were outstanding 49,340,003 shares of registrant’s common stock, par value $0.001 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Exhibits incorporated by reference are referred under Part IV.
 
 
2

 

TABLE OF CONTENTS

 
Page
   
PART I
 
4
11
23
23
24
24
PART II
 
24
29
29
35
35
35
35
37
PART III
 
38
42
45
47
48
PART IV
 
49
50
51
 
EXHIBIT 21
 
EXHIBIT 31.1
 
EXHIBIT 31.2
 
EXHIBIT 32
 

 
3

 
PART I
 
ITEM 1— BUSINESS
 
Background
 
4CableTV International, Inc. was incorporated in Nevada on November 8, 2007.

4Cable TV, Inc., a wholly owned subsidiary of 4Cable TV International, Inc., was incorporated on May 19, 2005 as a South Carolina Corporation and has been a specialty solutions provider for the cable television (“CATV”) sector spanning the range of repair, upgrading, and testing. The Company provides service and customized solutions to CATV operators and was founded by two veterans of the cable industry seeking a new challenge to work on diagnostic and repair issues for cable operators.
Products

We currently offer the following suite of products:

 
·
RF2F™   (RF to Fiber):  This proprietary line of coax-to-fiber taps allows cable operators to reach homes within their franchise authorized area that was previously not economically reachable.  Fiber optics allows longer distances between the existing network and the new users at a lower cost per foot for the cable.

 
·
PowerMiser:  This circuitry allows a low current 1 GHz amplifier (and/or line extender) to be constructed with a dramatic 50% decrease in current power requirements, while maintaining essentially the same operational specifications.

 
·
RFoG (RF over Glass): This signal distribution technology combines the existing cable TV infrastructure with the efficiencies of fiber optics to effectively reach the home in a way that is competitive with the existing options.  Other solutions require a new back office infrastructure while RFoG uses the existing infrastructure.  RF2F™ is an extension of RFoG technology and RF2F™ has been referred to as point to point RFoG.

 
·
Node+0:  This application combines the RFoG technology platform with our PowerMiser engineering to take fiber signal all the way to the last device before the customer.  This results in a much more reliable system with lower operating and maintenance costs.

 
·
SOLAR-CATV:  This extension of the PowerMiser and the Node+0 utilizes solar power and helps the operator extend service to areas not presently served without adding power sources.

 
·
DSR (Dynamically Scalable Return): This technology allows nodes, R-ONU’s (RFoG optical network units) to dynamically adjust their return bandwidth simply be changing the channel lineup at the head end.  Present technology requires that the diplex filters in each unit be changed, which in many cases means an amplifier rebuild or the replacement of the plug in diplex filters at a considerable cost.
 
 
4

 

Additionally, the below listed products are in development:
 
 
·
Legacy component replacement/upgrades: Recent consolidation among hardware manufacturers has led to a large number of CATV infrastructure products which are near the end of their operational life. These products represent a large installed base and an opportunity for upgraded replacement parts.  We presently have replacement modules for some Magnavox, Motorola and SA (Cisco) units.  As the basic circuits are the same, existing circuitry can be adapted to the physical size required.  Each new module will take 1-3 months to be ready for production.
 
 
·
Direct manufacture of EDFA’s: Our current EDFA (erbium doped fiber amplifiers) offerings are purchased from a manufacturer in China. We can manufacture our own line of EDFA’s at a lower cost provided we have the sales volume to support the effort.  We have completed most of the engineering and have units in field trials.  We expect to begin production the second quarter of 2014.
 
Revenues and Customers
 
We generate revenue through the sales of our products and repair and upgrade services to cable TV system operators.  Our initial customers have been independent cable TV operators. However, management is actively pursuing sales to the large multiple system operators (“MSOs”), such as Comcast and Time Warner. This process involves educating these potential customers on our product offerings. This vetting process is already under way and we hope to be in a position to begin MSO sales sometime within the next 12 months.  Our sales efforts to-date have been limited by our capital availability and personnel resources.

Industry
 
The domestic cable TV industry appears to be stable as the providers of cable TV are branching into the telephone and internet areas. The National Cable and Telecommunications Association (NCTA) puts 2011 total industry revenue at $97 billion. Cable providers have not suffered the same loss of market share that land line telephone companies have seen as households have increasingly cancelled basic telephone accounts in conjunction with increased mobile phone use. The international cable TV market is expected to grow as countries become more developed and demand for Western conveniences increases.  It is estimated by Cable Spotlight Magazine that worldwide cable TV subscribers will exceed 500 million by 2014 with much of the growth coming from China and Latin America.  We believe Latin America in particular offers a unique opportunity because of their high energy costs and the potential benefits that could be provided by our power saving equipment.  In addition, Latin America’s power reliability is low and our PowerMisers product can reduce the cost of providing emergency standby power.

 
5

 
The domestic cable TV industry includes large MSOs, as well as more than 900 independent cable operators which serve over 7.6 million subscribers.  Viewed as a group, these independent operators would be the third largest cable provider in the United States (behind Time Warner Cable with over 12 million subscribers and ahead of Cox with over 5 million).
 
Subscriber base of basic video providers as of August 2013 (courtesy of NCTA):

Rank
MSO
Basic Video Subscribers
1
Comcast Corporation
21,995,000
2
DirecTV
20,080,000
3
Dish Network Corporation
14,056,000
4
Time Warner Cable, Inc.
12,218,000
5
Verizon Communications, Inc.
4,726,000
6
Cox Communications, Inc.
4,540,000
7
AT&T, Inc.
4,536,000
8
Charter Communications, Inc.
4,158,000
9
Cablevision Systems Corporation
3,197,000
10
Bright House Networks LLC
2,013,000
 
Our Market
 
These independent cable operators discussed above will be the initial focus of our sales efforts as they are typically able to make purchasing decisions much quicker than the larger MSOs.  We believe we can offer these providers field-tested and proven technologies that will enable them to operate more efficiently and more profitably. These independent providers are under extreme pressure from large cap market leaders, bundled offerings by telecom firms, satellite providers, and a variety of internet delivery systems. We believe our products can provide substantial relief to them by preserving their operating margins.

We also realize that the up-front cost of our products could be prohibitive to smaller operators. In this regard, we are currently considering specialty financing solutions which would allow us to offer financing alternatives along with our product offerings.

The majority of our sales are currently in the US, with a minor portion in Europe. Electricity prices in Europe and South America are roughly twice those in the United States.  These higher energy regions are natural markets for our PowerMiser product.  In order to expand our ability to penetrate these markets, we intend to rely on strategic alliances with distributors who can help us quickly expand our reach and increase production volume.

 
6

 
Technology
 
We have developed, and deployed proprietary circuitry, the PowerMiser technology platform, that enables new modules to be  installed in existing trunk amplifiers and line extenders that will draw fifty percent less current while maintaining the same operational specifications, for all brands, and at all bandwidths.  This is especially significant for systems upgrading to 1 GHz which will positively affect return on investment calculations for operators.
 
Flexibility and adaptability for cutting edge technology in extreme economic conditions. Capitalizing on the knowledge gained from our RFoG product, we have developed RF2F (RF to Fiber) which will allow the operator to begin an RFoG plant from almost anywhere in the system.  The RF2F-Mini is a tap that allows cable companies to serve previously un-served customers with up to 5,000 foot fiber drops.
 
Carbon footprint. The top MSOs (Comcast, TWC, and Cox) have made public declarations regarding their desire to decrease the carbon footprint of their systems.  However, the means to do so are currently limited.  We believe this field is fertile for companies which can provide proven technology to allow these MSOs to achieve the desired carbon reductions. We believe our products can help them achieve this goal, without the associated decreases in bandwidth which are traditionally correlated to reduced power
 
Intellectual Property
 
Our success depends in part upon our ability to protect our core technology and intellectual property. To establish and protect our proprietary rights, we will rely on a combination of patents, patent applications, trademarks, copyrights, trade secrets, including know-how, license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment agreements, and other contractual rights.
 
We have current Trademark applications for PowerMiser and for RF2F.  As soon as they are in use we will apply for Solar-CATV, and DSR.   We have a provisional Patent filed for our Dynamically Scalable Return (DSR), patent application number 61878595 filed September 16, 2013, and our latest version of RF2F and are actively pursuing a full patent application.
 
Manufacturing
 
We currently have 11,000 square feet of manufacturing, engineering, sales and administrative space located in Conway, South Carolina.  This facility is equipped with the necessary equipment and stations to allow us to handle most manufacturing in-house.  The vast majority of the products we offer are made in our own facility, with the exception of some fiber optic components which we buy from Chinese manufacturers.
 
 
7

 
Distribution and Marketing
 
Gene Faulkner was hired as VP of Sales and Marketing on August 1, 2013. He has established a dealer representative network for the majority of the US and all of Canada. A new web site has been designed to increase internet traffic.  Gene Faulkner resigned in February 2015 and was replaced by John Homsey.

We have developed an application to run on an iPad or Android device to replace the hardcopy Broadband Pocket Guide currently used by designers, engineers, and field personnel.  This app allows us to highlight the Company name on the latest technology.

We market our products through a combined use of direct sales personnel, distributors, and independent companies.

 
·
Direct Sales: Sales of products by our personnel in territories not served by any third party sales partner.  We will work directly with all MSO corporate, divisional and regional offices providing pre- and post-sales support for our products, working with the lab and lab staff of the MSO corporate offices for approvals of any and all of our products, and introducing those products to the CATV marketplace. In addition we will manage the sales efforts of all third party sale partners.  Sales partners act as distributors, buying our products at a discount and then marking them up and selling and billing the customer directly.  This model is especially useful when dealing in other countries, as the sales partner handles all local taxes and import paperwork and duties, if any.
 
 
·
Distributers: Some products which we market are suitable for sales by a distribution partner. These products are typically less complex devices, with limited (or no) options required, making them suitable for long-term stocking on distributors’ shelves.
 
 
·
“Sales Reps”: Independent sales representatives are companies contracted to provide sales and sales support to a specific territory using their own sales staff.

Competition
 
We believe there are no directly competitive products currently available which offer similar services and features as available in our proprietary equipment at a similar price point.

In the direct replacement modules market segment we have three direct competitors, but with much higher power requirements. The machinery requirements and general knowledge of the industry in general and electronics in particular present significant barriers to entry into the industry.
 
8

 
4Cable believes it has several key strengths in its marketplace:

 
·
The ability to design, build and market products not currently conceived by any competition, such as RF2F Mini.  We believe there are no direct competitive products available.
 
 
·
The ability to design or supply products that might be available through a competitive source but offer features not available at all through those same competitors, such as the AC power consumption savings offered by our PowerMiser product.  In areas of the world with high power costs this can be an important advantage.
 
 
·
The ability to build products that might be available from a competitive source, but are offered at a significant pricing advantage from those other sources, such as our line of optical products.  For example we can sell an EDFA for 50% less than the major companies while still achieving a 100% margin. When EDFA’s were first deployed about 20 years ago they were considered exotic technology and the component parts were very expensive.  Today the cost of these component parts have dropped significantly, yet amongst our major competitors there has not been a corresponding decrease in the sale price of EDFA products.

Direct or indirect competition to products marketed by 4Cable include:

 
·
Cisco (Products once owned and marketed by Scientific Atlanta)
 
 
·
Arris (Now controlling products once owned by C-Cor and Motorola)
 
 
·
Broadband International, Inc.
 
 
·
CableServ

We believe we have a strong opportunity to expand our market share.  We believe 4Cable TV is well known throughout the CATV industry, especially in the smaller markets, and we believe that sales to a few systems inside one major MSO would help speed acceptance of our company and products within other systems of the same organization.
 
9

Government Regulation
 
As a manufacturer of laser emitters, we will be required to register our devices with the Food and Drug Administration (FDA).  The FDA classifies laser emitters labels based upon strength and requires all laser products to have warning labels with specific language depending upon the classification for the product.
 
We may also elect to seek UL (Underwriters Laboratories) approval for certain of our products as well, as certain purchasers require such approval, however we are not statutorily required to have UL approval of our products.
 
We will rely on legal and operational compliance programs, as well as local counsel, to guide our businesses in complying with applicable laws and regulations of the jurisdictions in which we do business.
 
We do not anticipate at this time that the cost of compliance with U.S. and foreign laws will have a material financial impact on our operations, business or financial condition, but there are no guarantees that new regulatory and tariff legislation may not have a material negative effect on our business in the future.
 
As most of our present business is in the United States, which does not participate in the Restriction of Hazardous Substances Directive (RoHS) our products are non-RoHS compliant.  As we move into countries that are RoHS compliant, we will have to migrate our production to a RoHS compliant product.  During the transition phase our cost, due to duplicate inventories and some duplication in manufacturing equipment, may be marginally higher.  However, we believe that increase in cost will be transitory and should not materially affect our operations.
 
Employees
 
We have fourteen full-time employees and two part-time employees.  All employees are required to execute non-disclosure agreements as part of their employment.  None of our employees are subject to collective bargaining agreements.
 
10

 
 ITEM 1A— RISK FACTORS
 
With the exception of historical facts stated herein, the mattersdiscussed in this report on Form 10-K are “forward looking” statements that involve risks and uncertainties that could cause actual results to differ materially from projected results.  Such “forward looking” statements include, but are not necessarily limited to statements regarding anticipated levels of future revenues and earnings from the operations of 4Cable TV International, Inc. and its subsidiaries, (the “Company,” “we,” “us” or “our”), projected costs and expenses related to our operations, liquidity, capital resources, and availability of future equity capital on commercially reasonable terms. Factors that could cause actual results to differ materially are discussed below.  We disclaim any intent or obligation to publicly update these “forward looking” statements, whether as a result of new information, future events or otherwise.
 
Risks Related to Our Business
 
We have a limited operating history on which to evaluate our business or base an investment decision.
 
Our business prospects are difficult to predict because of our limited operating history, early stage of development and unproven business strategy.  We expect to incur losses over the near to mid-term, and certainly during the next 12 months, if not longer as we expand our product offering and increase our marketing and sales efforts.  Our sales and marketing efforts to-date have been limited and we face numerous risks and uncertainties as we attempt to expand the business. In particular, we have not proven our product will be attractive to larger companies in the industry.  If we are unable to make progress selling our products into these larger companies, are prospects will be limited and it will be difficult to accomplish our business goals.
 
If our actual results vary from our business plan, we may need to raise additional capital.
 
We anticipate that we will require capital of $1,000,000 over the next 12 months to carry out our business plan.  If sales increase greater than our projections, or if we encounter unforeseen costs, we may need to raise additional capital.
 
If we need to raise additional capital, there is no assurance that we will be able to obtain financing on terms acceptable to us, or at all.  If we are unable to raise capital when needed, our business, financial condition and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations. If additional financing is obtained it may involve the sale of additional equity securities with the consequence of dilution to our current investors.
 
11

Our management and internal systems might be inadequate to handle our potential growth.
 
Successful implementation of our business strategy will require us to develop our operations and effectively manage growth. Growth will place a significant strain on our management, financial, product design, marketing, distribution and other resources, which would cause us to face operational difficulties.  To manage future growth, our management must build operational and financial systems and expand, train, retain and manage our employee base. Our management may not be able to manage our growth effectively in which case, our expansion would be halted or delayed and we may lose our opportunity to gain significant market share or the timing advantage with which we would otherwise gain significant market share.  Any inability to manage growth effectively may harm our ability to implement and execute our current or any subsequent business plans.
 
We may have negative cash flow from operations.
 
We have historically experienced losses and negative cash flows from operations and these conditions raise substantial doubt about our ability to continue as a going concern and management is attempting to raise additional capital to address our liquidity. We believe that our negative cash flow from operations may continue at least through 2015. There can be no assurance that we will ever be able to raise sufficient capital to generate positive cash flow from operations.
 
Failure to retire or refinance our existing debt obligations could adversely affect our financial condition.
 
We do not have sufficient funds to repay our current debt obligations. Accordingly, we will be required to obtain funds to repay these obligations either through refinancing or the issuance of additional equity or debt securities.
 
If the quality of our products does not meet our customers’ expectations, then our sales and operating earnings, and ultimately our reputation, could be negatively impacted.
 
Some of the products we sell could have quality issues resulting from the design or manufacture of the product.  These issues could be caused by components we purchase from other manufacturers or suppliers. Such quality issues, whether discovered pre-shipment and post-shipment, can have legal and financial ramifications, including: delays in the recognition of revenue, loss of revenue or future orders, customer-imposed penalties on us for failure to meet contractual requirements, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and brand name reputation.
 
In some cases, if the quality issue affects the product’s safety or regulatory compliance, then such a “defective” product may need to be recalled. Depending on the nature of the defect and the number of products in the field, it could cause us to incur substantial recall costs, in addition to the costs associated with the potential loss of future orders and the damage to our goodwill or brand reputation. In addition, we may be required, under certain customer contracts, to pay damages for failed performance that might exceed the revenue that we received from the contracts.  Recalls involving regulatory agencies could also result in fines and additional costs. Finally, recalls could result in third-party litigation by persons alleging harm, resulting from the use of the products.
 
Many of our components are designed or manufactured by third parties and if such third-parties lack sufficient quality control or if there are significant changes in the financial or business condition of such third-parties, it may have a negative impact on our business.
 
Although we manufacture most of our products in-house, we rely on third-parties to design or manufacture many of the components used in these products.  We could have difficulties fulfilling our orders and our sales and profits could be adversely affected if (i) we are not able to engage such manufacturers with the capabilities or capacities required by our business, (ii) such third parties lack sufficient quality control and fail to deliver quality components or products on time and at reasonable prices, (iii) if there are significant changes in the financial or business condition of such third parties.
 
12

 
Our success is dependent, in part, upon our ability to form successful strategic alliances. If these arrangements do not develop as expected, our business may be negatively impacted.
 
We plan to expand our sales reach by partnering with independent sales representatives to provide sales and sales support to a specific territory using their own sales staff.  However, such arrangements carry an element of risk because, in many cases, we may compete in some business areas with a company with which we have a partnership and, at the same time, cooperate with that company in other business areas.  These distributors may also market products which compete with ours.  Additionally, we will not have direct control over the representatives of these companies, and yet their performance may reflect on our business.  If such arrangements do not develop as expected, our business could be negatively impacted.
 
The significant up-front cost of our products could make it difficult to sell our products to smaller operators.

Although we believe our products are very price competitive, they still require significant up-front investments.  For the smaller cable operators which we intend to initially target, a large initial capital investment could make them unwilling or unable to purchase our products.  Our larger competitors may have the ability to offer financing to such customers to facilitate purchases, which is a service we do not currently offer.  If we are unable to effectively compete for the business of smaller cable operators, our business would be negatively impacted.

Our future operating results depend on our ability to purchase a sufficient amount of materials, parts and components to meet the demands of our customers and any reduction or interruption in supplies or significant increase in the price of supplies could have a negative impact on our business.
 
Our ability to meet customers’ demands depends, in part, on our ability to obtain timely and adequate delivery of quality materials, parts and components from our suppliers. If demand for our products increases from our current expectations, we could experience shortages.  Although we plan to work closely with our suppliers to avoid shortages, there can be no assurance that we will not encounter shortages in the future or that such shortages will not negatively impact our operations.
 
Furthermore, certain of our components may be available only from a single source or limited sources. We may not be able to diversify sources in a timely manner. A reduction or interruption in supplies or a significant increase in the price of supplies could have a negative impact on our business.  In the event any of these single source or limited source suppliers breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any damages we may suffer.
 
We are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws.
 
Our operations and the products we manufacture and sell are subject to a wide range of regulatory laws both in the United States and internationally.  Compliance with existing or future laws could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, and generally impact our financial performance.  Some of these laws may relate to the use, disposal, cleanup of, and exposure to certain substances.  In the United States, laws often require parties to fund remedial studies or actions regardless of fault and often times in response to action or omissions that were legal at the time they occurred.  Changes to U.S. environmental laws or our discovery of additional obligations under these laws could have a negative impact on our financial performance.
 
Laws focused on the energy efficiency of electronic products and accessories; recycling of both electronic products and packaging; and reducing or eliminating certain hazardous substances in electronic products continue to expand significantly.
 
13

Efforts to protect our intellectual property rights and to defend claims against us can increase our costs and will not always succeed; any failures could adversely affect sales and profitability or restrict our ability to do business.
 
Intellectual property rights will be crucial to our business. We endeavor to obtain and protect our intellectual property rights in jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported. Different nations may provide limited rights and inconsistent duration of protection for our products. We may be unable to obtain protection for our intellectual property in key jurisdictions. Even if protection is obtained, competitors, or others in the chain of commerce may raise legal challenges to our rights or illegally infringe on our rights, including through means that may be difficult to prevent or detect. In addition, because of the rapid pace of technological change, and the confidentiality of patent applications in some jurisdictions, competitors may be issued patents from applications that were unknown to us prior to issuance. These patents could reduce the value of our commercial or pipeline products or, to the extent they cover key technologies on which we have unknowingly relied, require that we seek to obtain licenses or cease using the technology, no matter how valuable to our business. We cannot assure we would be able to obtain such a license on acceptable terms. The extent to which we succeed or fail in our efforts to protect our intellectual property will affect our costs, sales and other results of operations.
 
If we are unable to establish sufficient sales and marketing capabilities we may not be able to generate sales and product revenue.
 
We currently have very limited operations for the sales, marketing and distribution of any products we develop.  The establishment of such organization will be critical to our success.  We expect to face competition in our efforts to establish strategic relationships from other companies vying for the same type of relationships.  If we are unable to establish an efficient sales and marketing platform, we may not be able to penetrate the market on a scale required to become viable or profitable.
 
If we do not maintain sufficient inventory levels or if we are unable to deliver our products to our customers in sufficient quantities, or if our inventory levels are too high, our operating results will be adversely affected.
 
If we do not accurately anticipate the future demand for our products or the time it will take to obtain new inventory, our inventory levels may not be appropriate and our results of operations may be negatively impacted.  If we fail to meet our shipping schedules, it could damage our relationships with distributors and/or customers, our shipping costs may increase and/or sales opportunities may be delayed or lost.  In order to be able to deliver our products in a timely manner, we will need to maintain adequate inventory levels.  If the inventory of our products held by distributors and/or retailers is too high, they will not place orders for additional products, which would unfavorably impact our future sales and adversely affect operating results.
 
It may be difficult for us to recruit and retain the types of engineers and other highly-skilled employees that are necessary to remain competitive.
 
Competition for key technical personnel in high-technology industries is intense.  We believe that our future success depends in large part on our continued ability to hire, assimilate, retain and leverage the skills of qualified engineers and other highly-skilled personnel needed to develop successful new products. We may not be as successful as our competitors at recruiting, assimilating, retaining and utilizing these highly-skilled personnel.

 
14


A small group of shareholders may have functional control of the Company.
 
The former shareholders of 4Cable TV hold a significant ownership interest in the Company.  They will be able to significantly influence, if not control, many aspects of the Company including the election of the Company's directors, increases in the authorized capital, dissolution, acquisitions, sale of assets or merger of the Company, and generally direct the affairs of the Company.
Risks Related to the Cable Industry
 
The cable industry currently faces a wide range of competition, and our businesses and results of operations could be adversely affected if cable providers are not able to effectively compete.
 
The consumer entertainment industry is intensely competitive and there are a growing number of companies that provide a broad range of entertainment alternatives to consumers.  Technological changes are further intensifying and complicating the competitive landscape and influencing consumer behavior. Companies continue to emerge offering alternative services, such as satellite television, Internet video streaming and downloading of video programming, and wireless services and devices.  Cable providers face substantial and increasing competition from providers of similar types of content to obtain talent, programming and other resources required in operating these businesses, such as Netflix and Amazon, which have their own high-quality original content.  The cable industry also competes with companies that offer programming and other communications services in bundled packages, including high-speed Internet and phone services.
 
Cable providers also face competition for consumers’ limited leisure time and discretionary spending from other sources, such as feature films, premium pay television services, video on demand services, the Internet, home video products, videogames, social networking, print media, live sports and other events and radio broadcasts. Technological developments, such as tablets and other mobile electronic devices, new video formats and Internet-delivered content, as well as an increase in the number of free or nominally priced online entertainment choices, have intensified the challenges posed by audience fragmentation.
 
In addition, cable providers compete for the sale of advertising time with other television networks and stations, as well as with all other advertising platforms, such as radio stations, print media and websites.  Increased competition for the leisure time of audiences and audience fragmentation, by the growing use of new technologies, or by the economy in general, may cause advertisers to alter their spending priorities based on these or other factors.
 
There can be no assurance that cable providers will be able to compete effectively against existing or new competitors.  A significant decrease in the size of the cable television market could have an adverse effect on our business.
 
15

 
Changes in consumer behavior driven by new technologies may adversely affect our businesses.
 
New technologies, particularly alternative methods for the distribution, sale and viewing of content, have been, and will likely continue to be, developed that further increase the number of competitors that all cable providers face and that drive changes in consumer behavior. These technologies may affect the demand for cable television products and services, as the number of entertainment choices available to, and the manner in which they are delivered to, consumers continue to increase and evolve.
 
Newer services and technologies that may compete with cable television video services include digital distribution services and devices that offer Internet video streaming and downloading of movies, television shows and other video programming that can be viewed on television sets and computers, as well as other devices such as smartphones and tablets. Some of these services charge a nominal or no fee for access to their content, which could adversely affect the demand for cable television video services.  In addition, consumers are increasingly interested in accessing information, entertainment and communication services outside the home, and newer services in wireless Internet technology, such as 3G and 4G wireless broadband services and wide area Wi-Fi networks, and devices such as wireless data cards, tablets, smartphones and mobile wireless routers that connect to such devices, may compete with cable’s high-speed Internet services. The success of any of these ongoing and future developments may have an adverse effect on cable’s competitive position, business and results of operations.
 
Some of these newer technologies also give consumers greater flexibility to watch programming on a time-delayed or on-demand basis or to fast-forward or skip advertisements within cable television programming, which also may adversely impact the advertising revenue we receive. Delayed viewing and advertising skipping have become more common as the penetration of DVRs has increased and as content has become increasingly available via video-on-demand services and Internet sources. These and other changes in technology, distribution platforms and consumer behavior could have an adverse effect on the cable industry, which could indirectly affect the demand for our products.
 
Service disruptions could harm the reputation of the cable industry in general or specific providers.

Communication and transmitter facilities are used by cable providers to transmit programming to affiliates.  Shutdowns or service disruptions pose significant risks to the industry and its reputation. Such events may be caused by power outages, natural disasters (including extreme weather), terrorist attacks, failures or impairments of communications satellites or on-ground uplinks or downlinks used to transmit programming, or other similar events.  Any significant disruption in service could cause consumers to switch to competing technologies, which could have an adverse impact on the cable industry and the demand for our products.
 
16

 
Risks Relating to our Common Stock and our Status as a Public Company
 
The relative lack of public company experience of our management team may put us at a competitive disadvantage.
 
Our management team has limited public company experience which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002. The majority of the individuals who now constitute our senior management team have never limited experience with the responsibilities of managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately responds to such increased legal, regulatory compliance and reporting requirements. Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties and distract our management from attending to the growth of our business.
 
Shares of our common stock that have not been registered under the Securities Act of 1933, as amended, regardless of whether such shares are restricted or unrestricted, are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which apply to a “shell company.” In addition, any shares of our common stock that are held by affiliates, including any received in a registered offering, will be subject to the resale restrictions of Rule 144(i).
 
Pursuant to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of cash and cash equivalents and nominal other assets. As such, we may have previously been deemed a “shell company” pursuant to Rule 144 prior to the Exchange Transaction, and as such, sales of our securities pursuant to Rule 144 are not able to be made until a period of at least twelve months has elapsed from the date on which our Current Report on Form 8-K is filed with the Commission reflecting our status as a non- “shell company.” Therefore, any restricted securities we sell in the future or issue to consultants or employees, in consideration for services rendered or for any other purpose will have no liquidity until and unless such securities are registered with the Commission and/or until a year after the date of the filing of our Current Report on Form 8-K disclosing the share exchange transaction with the shareholders of 4Cable TV, and we have otherwise complied with the other requirements of Rule 144. As a result, it may be harder for us to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it will be harder for us to raise funding through the sale of debt or equity securities unless we agree to register such securities with the Commission, which could cause us to expend additional resources in the future. Our previous status as a “shell company” could prevent us from raising additional funds, engaging employees and consultants, and using our securities to pay for any acquisitions (although none are currently planned), which could cause the value of our securities, if any, to decline in value or become worthless. Lastly, any shares held by affiliates, including shares received in any registered offering, will be subject to the resale restrictions of Rule 144(i).
 
17

 
We will be required to incur significant costs and require significant management resources to evaluate our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act, and any failure to comply or any adverse result from such evaluation may have an adverse effect on our stock price.
 
As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with the Annual Report on Form 10-K. This report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities. Management believes that its internal controls and procedures are currently not effective to detect the inappropriate application of U.S. GAAP rules. Management realize there are deficiencies in the design or operation of our internal control that adversely affect our internal controls which management considers to be material weaknesses including those described below:
 
 
i)
We have insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.
  
 
 ii)
We do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the management’s view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over our financial statements.  We expect that Ross DeMello C.G.A., who became a director effective 3/1/2014, will head up the Audit Committee when formed, as well as help management implement internal controls.
 
 
 iii)
We did not perform an entity level risk assessment to evaluate the implication of relevant risks on financial reporting, including the impact of potential fraud-related risks and the risks related to non-routine transactions, if any, on our internal control over financial reporting. Lack of an entity-level risk assessment constituted an internal control design deficiency which resulted in more than a remote likelihood that a material error would not have been prevented or detected, and constituted a material weakness.
 
 
 iv)
We lack personnel with formal training to properly analyze and record complex transactions in accordance with U.S. GAAP.

 
 v)
We have not achieved the optimal level of segregation of duties relative to key financial reporting functions.
 
 
18

 
Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources. We cannot assure you that we will be able to fully comply with Section 404 or that we and our independent registered public accounting firm would be able to conclude that our internal control over financial reporting is effective at fiscal year end. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities, as well as subject us to civil or criminal investigations and penalties. In addition, our independent registered public accounting firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating effectively.
 
The issuance of common stock upon conversion of our convertible debt will cause immediate and substantial dilution.
 
The issuance of common stock upon conversion of our outstanding convertible debt in the aggregate amount of $312,650 in principal and $9,585 of accrued interest, which allow the holders thereof the right to convert such amounts from time to time, subject to certain limitations, into common stock of the Company, as is determined by dividing the amount converted by conversion prices as follows:
 
 
·
The 2013 convertible debt is convertible at $0.12 per share of the Company’s common stock.  Unpaid interest is subject to conversion.
 
 
·
The Typenex convertible debt is convertible into shares of the Company’s common stock at the option of the lender at the lesser of the lender conversion price and 70% of the average market price of the three lowest trading prices in the twenty trading days preceding conversion.  Unpaid interest is subject to conversion.
 
 
·
The KBM convertible debt is convertible into shares of the Company’s common stock at the option of the lender at 59% of the average market price of the three lowest trading prices in the ten trading days preceding conversion.  Unpaid interest is subject to conversion.
 
 
·
The JMJ convertible debt is convertible into shares of the Company’s common stock at the option of the lender at the lesser of $0.12 per share and 60% of the lowest trading price in the twenty-five trading days preceding conversion.  Unpaid interest is subject to conversion.
 
 
·
The LG convertible debt is convertible into shares of the Company’s common stock at the option of the lender at 60% of the lowest closing price in the ten trading days preceding conversion.  Unpaid interest is subject to conversion.
 
The issuance of these shares of common stock will result in immediate and substantial dilution to the interests of other stockholders.
 
19

 
The continuously adjustable conversion price feature of our convertible debt could require us to issue a substantially greater number of shares, which may adversely affect the market price of our common stock and cause dilution to our existing stockholders.
 
Our existing stockholders may experience substantial dilution of their investment upon conversion of the convertible debt. The convertible debt is convertible into shares of common stock as described in the risk factor above entitled “The issuance of common stock upon conversion of our convertible debt will cause immediate and substantial dilution”, at a discount to the trading price of our common stock. As a result, the number of shares issuable could prove to be significantly greater in the event of a decrease in the trading price of our common stock, which decrease could cause substantial dilution to our existing stockholders. As sequential conversions and sales take place, the price of our common stock may decline, and if so, the holders of the convertible debt would be entitled to receive an increasing number of shares, which could then be sold, triggering further price declines and conversions for even larger numbers of shares, which would cause additional dilution to our existing stockholders and could cause the value of our common stock to decline.
 
Our outstanding options, warrants and convertible securities may adversely affect the trading price of our common stock.
 
As of December 31, 2014, there were outstanding stock options to purchase approximately 7,350,000 shares of our common stock, outstanding warrants to purchase approximately 875,000 shares of common stock and convertbile debt into approximately 3,976,000 shares of common stock. For the life of the options and warrants, the holders have the opportunity to profit from a rise in the market price of our common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding securities will also dilute the ownership interests of our existing stockholders. The availability of these shares for public resale, as well as any actual resale of these shares, could adversely affect the trading price of our common stock.
 
We cannot predict the size of future issuances of our common stock pursuant to the exercise of outstanding options or warrants or conversion of other securities, or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock. Sales or distributions of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may cause the market price of our common stock to decline.
 
If we lose our key management personnel, we may not be able to successfully manage our business or achieve our objectives, and such loss could adversely affect our business, future operations and financial condition.
 
Our future success depends in large part upon the leadership and performance of our executive management team and key consultants. If we lose the services of one or more of our executive officers or key consultants, or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives. We do not have “Key-Man” life insurance policies on our key executives. If we lose the services of any of our key consultants, we may not be able to replace them with similarly qualified personnel, which could harm our business. The loss of our key executives or our inability to attract and retain additional highly skilled employees may adversely affect our business, future operations, and financial condition.
 
20

The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.
 
Our Articles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to our company and shareholders for damages for breach of fiduciary duty as a director or officer to the extent provided by Nevada law. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.
 
Our stock is categorized as a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations which may limit a shareholder’s ability to buy and sell our stock.
 
Our stock is categorized as a penny stock. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than US$ 5.00 per share or an exercise price of less than US$ 5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
 
Three of our directors and executive officers own approximately 38.0% of our common stock, and three of our major shareholders own approximately 34.4% of our common stock, which may give them influence over important corporate matters in which their interests are different from your interests.
 
Three of our directors and executive officers beneficially own approximately 38.0% of our outstanding shares of common stock, and our largest three non-director or officer shareholders own approximately 34.4% of our outstanding shares of common stock (excluding exercise of warrants held thereby) based on a total of 49,340,003 shares of common stock outstanding as of April 15, 2015. These directors, executive officers and major shareholders will be positioned to influence or control to some degree the outcome of matters requiring a shareholder vote, including the election of directors, the adoption of amendments to our certificate of formation or bylaws and the approval of mergers and other significant corporate transactions. These directors, executive officers and major shareholders, subject to any fiduciary duties owed to the shareholders generally, may have interests different than the rest of our shareholders. Their influence or control of our company may have the effect of delaying or preventing a change of control of our company and may adversely affect the voting and other rights of other shareholders. In addition, due to the ownership interest of these directors and officers in our common stock, they may be able to remain entrenched in their positions.
 
21

 
FINRA sales practice requirements may also limit a shareholder’s ability to buy and sell our stock.
 
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
 
To date, we have not paid any cash dividends and no cash dividends will be paid in the foreseeable future.
 
We do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. We presently intend to retain all earnings for our operations.
 
A limited public trading market exists for our common stock, which makes it more difficult for our stockholders to sell their common stock in the public markets.
 
Our common stock is currently traded under the symbol “CATV,” but currently with low or no volume, based on quotations on the “Over-the-Counter Bulletin Board,” meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent.  This situation is attributable to a number of factors, including the fact that we are a small company which is still relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our stock until such time as we became more viable.  Additionally, many brokerage firms may not be willing to effect transactions in the securities.  As a consequence, there may be periods of several days or more when trading activity in our stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that trading levels will be sustained.
 
In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities.  Due to the volatility of our common stock price, we may be the target of securities litigation in the future.  Securities litigation could result in substantial costs and divert management’s attention and resources.
 
Shareholders should also be aware that, according to SEC Release No. 34-29093, the market for “penny stock,” such as our common stock, has suffered in recent years from patterns of fraud and abuse.  Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.  Our management is aware of the abuses that have occurred historically in the penny stock market.  Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the future volatility of our share price.
 
22

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.
 
Our articles of incorporation authorize the issuance of up to 300,000,000 shares of common stock with a par value of $0.001 per share and 10,000,000 shares of preferred stock with a par value of $0.01 per share. Our Board of Directors may choose to issue some or all of such shares to acquire one or more companies or properties and to fund our overhead and general operating requirements. The issuance of any such shares may reduce the book value per share and may contribute to a reduction in the market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will reduce the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation.
 
We may not qualify to meet listing standards to list our stock on an exchange.
 
The SEC approved listing standards for companies using reverse acquisitions to list on an exchange may limit our ability to become listed on an exchange. We would be considered a reverse acquisition company (i.e., an operating company that becomes an Exchange Act reporting company by combining with a shell Exchange Act reporting company) that cannot apply to list on NYSE, NYSE Amex or Nasdaq until our stock has traded for at least one year on the U.S. OTC market, a regulated foreign exchange or another U.S. national securities market following the filing with the SEC or other regulatory authority of all required information about the merger, including audited financial statements. We would be required to maintain a minimum $4 share price ($2 or $3 for Amex) for at least thirty (30) of the sixty (60) trading days before our application and the exchange’s decision to list. We would be required to have timely filed all required reports with the SEC (or other regulatory authority), including at least one annual report with audited financials for a full fiscal year commencing after filing of the above information. Although there is an exception for a firm underwritten IPO with proceeds of at least $40 million, we do not anticipate being in a position to conduct an IPO in the foreseeable future. To the extent that we cannot qualify for a listing on an exchange, our ability to raise capital will be diminished.
 
ITEM 1B— UNRESOLVED STAFF COMMENTS
 
 None.  
 
ITEM 2 — PROPERTIES
 
The principal executive offices for the Company are located at: 1248 Highway 501 Business, Conway, South Carolina 29526.  The monthly rent for this property and related expenses is $2,395 per month, pursuant to a Rent to Own Contract with Shirley Faye M. Strickland, until the aggregate purchase price of $337,000 has been paid.  The Company also leases office space on a month-to-month basis at 1256 Highway 501 Business, Conway, South Carolina 29526.  The monthly rent for this property and related expenses is $1,500 per month.  The Company’s main telephone number is: 1-843-347-4933.  The Company’s website is located at: www.4Cable.tv.
 
23

 
ITEM 3— LEGAL PROCEEDINGS
 
 None.
 
ITEM 4— MINE SAFETY DISCLOSURES
 
 Not applicable.
 
PART II
 
ITEM 5— MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
 Market Information
 
 Our common stock is quoted on the OTCQB under the symbol CATV.
 
The following is the range of high and low bid prices for our common stock for the periods indicated.  Prior to the fourth quarter of 2013 there was no active trading market for shares of our common stock.  The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions.
 
Fiscal Year Ended December 31, 2014
 
High
   
Low
 
First Quarter (March 31, 2014)
 
$
0.28
   
$
0.21
 
Second Quarter (June 30, 2014)
 
$
0.24
   
$
0.08
 
Third Quarter (September 30, 2014)
 
$
0.17
   
$
0.07
 
Fourth Quarter (December 31, 2014)
 
$
0.19
   
$
0.07
 


Fiscal Year Ended December 31, 2013
 
High
   
Low
 
First Quarter (March 31, 2013)
 
$
N/A
   
$
N/A
 
Second Quarter (June 30, 2013)
 
$
N/A
   
$
N/A
 
Third Quarter (September 30, 2013)
 
$
N/A
   
$
N/A
 
Fourth Quarter (December 31, 2013)
 
$
0.40
   
$
0.21
 
 
Stockholders
 
As of April 15, 2015, there were 49,340,003 shares of common stock issued and outstanding held by 42 stockholders of record (number of stockholders does not include street name holders).
 
 
24

 
Dividends
 
We have not paid dividends to date and do not anticipate paying any dividends in the foreseeable future. Our Board of Directors intends to follow a policy of retaining earnings, if any, to finance our growth.  The declaration and payment of dividends in the future will be determined by our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements and other factors.

Securities Authorized for Issuance Under Equity Compensation Plan

The following table sets forth information, as of December 31, 2014, with respect to our compensation plans under which common stock is authorized for issuance.

Equity Compensation Plan Information
 
Plan Category
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(A)
 
Weighted-average exercise price of outstanding options, warrants and rights
(B)
 
Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in Column A)
(C)
             
Equity compensation plans approved by stockholders
 
7,350,000
 
$                 0.100
 
650,000
Equity compensation plans approved by stockholders
 
875,000
 
$                 0.085
 
-
Total
 
8,225,000
 
$                 0.185
 
650,000

Stock Transfer Agent

Our stock transfer agent is Quicksilver Stock Transfer, located at 6623 Las Vegas Boulevard, Suite 255, Las Vegas, NV 89119.
 
25

 
Unregistered Sales of Equity Securities

On September 13, 2013, 4Cable issued 1,045,000 shares of common stock for payment of $13,142 owed for services to a former officer.  

On September 30, 2013, the Company issued 20,900,000 shares of common stock in exchange for the 2,600 outstanding shares of 4Cable TV, pursuant to a share exchange agreement dated April 4, 2013 that closed on September 30, 2013. At the time of such issuance there were 23,650,000 shares of the Company’s common stock outstanding, and after giving effect to such issuance there were an aggregate of 44,550,000 shares of the Company outstanding. In accordance with recapitalization accounting, the 23,650,000 shares are considered the issuance of shares by the private entity for the net monetary assets of the public shell, which was approximately $0.

On October 18, 2013, the Company awarded 500,000 shares of restricted stock to its officers and employees which had a fair value of $0.26 per share based on the closing value of the common stock on that date, of which 50% of the shares vest after one year (October 18, 2014) with the remaining 50% vesting after two years (October 15, 2015). The fair value of the restricted stock granted was determined to be same as the trading market price of the common stock at the time of issuance. Stock-based compensation expense was recorded for the year ended December 31, 2014 of $42,308 ($13,356 in 2013) representing the amount of expense that has vested to December 31, 2104. Unrecognized compensation expense of $36,066 will be recognized over the remaining vesting term (approximately 0.8 years). The issuance of the shares of restricted stock was conducted by the Company and was issued in reliance upon Rule 506 of Regulation D of the Securities Act of 1933, as amended, and comparable exemptions for sales to accredited investors under state securities laws.

In December 2013, the Company issued a 15% convertible note payable for $50,000, due June 2014.  The interest on the convertible note payable is 15% per annum, payable monthly.  The convertible note payable is convertible into shares of common stock at the option of the lender at a conversion price of $0.25 per share.  In July 2014, the Company entered into an amendment with the note holder to extend the maturity date of this note to December 1, 2014 at a conversion price of $0.12 per share.  The convertible notes were issued in reliance upon Rule 4(a)(2) of the Securities Act of 1933, as amended, and comparable exemptions for sales to accredited investors under state securities laws. The Company is in default on this note and is presently negotiating a new repayment plan.

During 2014, the Company had issued 1,590,000 shares at $0.10 per share for $159,000 received in a private placement.
 
During 2014, the Company issued 50,000 shares of its common stock at $0.19 per share for payment of $9,500 in advertising expense.

During 2014, the Company issued 650,003 shares of its common stock at $0.105 per share for payments to Consultants for a payment of $65,000.

During 2014, the Company issued 2,000,000 shares of its common stock at $0.105 per share to Company employees in recognition of services provided to the Company.

 
26

 

In October 2014, the Company issued a convertible note payable for $87,500 to Typenex Co-Investment, LLC (“Typenex”), due November 2015.  The interest on the convertible note payable is 8% per annum.  The note contained an original issue discount of $12,500 which was excluded from the cash proceeds received.  The convertible note payable is convertible into shares of the Company’s common stock at the option of the lender at the lesser of the lender conversion price and 70% of the average market price of the three lowest trading prices in the twenty trading days preceding conversion.  Unpaid interest is subject to conversion.  In connection with the Typenex convertible note,  the Company also issued 437,500 warrants to Typenex to purchase an equivalent number of shares of the Company’s common stock with an exercise price of $0.20.  This convertible note and the warrants were issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
In November 2014, the Company issued a convertible note payable for $54,000 to KBM Worldwide, Inc. (“KBM”), due August 2015.  The interest on the convertible note payable is 8% per annum.  The note contained an original issue discount of $4,000 which was excluded from the cash proceeds received.  The convertible note payable is convertible into shares of the Company’s common stock at the option of the lender at 59% of the average market price of the three lowest trading prices in the ten trading days preceding conversion.  Unpaid interest is subject to conversion.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
In November 2014, the Company issued a convertible note payable for $55,000 to JMJ Financial (“JMJ”), due November 2016 with the option to borrow an additional $295,000.  The interest on the convertible note payable is 12% per annum.  The note contained an original issue discount of $5,000 which was excluded from the cash proceeds received.  The convertible note payable is convertible into shares of the Company’s common stock at the option of the lender at the lesser of $0.12 per share and 60% of the lowest trading price in the twenty-five trading days preceding conversion.  Unpaid interest is subject to conversion.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
In December 2014, the Company issued a convertible note payable for $66,150 to LG Capital Funding, LLC (“LG”), due November 2015.  The interest on the convertible note payable is 8% per annum.  The note contained an original issue discount of $6,150 which was excluded from the cash proceeds received.  The convertible note payable is convertible into shares of the Company’s common stock at the option of the lender at 60% of the lowest closing price in the ten trading days preceding conversion.  Unpaid interest is subject to conversion.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
 
27

 
Subsequent to our fiscal year end, on January 5, 2015, the Company entered into a convertible promissory note agreement for $54,000 with a third party. The conversion price is variable.  The note matures in 9 months and bears annual interest of 8%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
Subsequent to our fiscal year end, on January 21, 2015 the Company entered into a promissory note agreement for $150,000 with a third party with cash proceeds of $148,125 and an origination fee of $1,875.  The note matures in 17 months and bears annual interest of 36%.  This promissory note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
Subsequent to our fiscal year end, on January 23, 2015, the Company entered into a convertible promissory note agreement for $26,500 with a third party with cash proceeds of $25,000 and deferred financing costs of $1,500.  The conversion price is variable.  The note matures in 12 months and bears annual interest of 8%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
Subsequent to our fiscal year end, on January 30, 2015, the Company entered into a convertible promissory note agreement for $55,750 with a third party.  The conversion price is variable.  The note matures in 9 months and bears annual interest of 10%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.
 
Subsequent to our fiscal year end, on February 26, 2015, the Company entered into a convertible promissory note agreement for $31,500 with a third party with cash proceeds of $30,000 and an original issue discount of $1,500.  The conversion price is variable.  The note matures in 12 months and bears annual interest of 8%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act,  and comparable exemptions for sales to accredited investors under state securities laws.

 
28

 

ITEM 6— SELECTED FINANCIAL DATA
 
Not required under Regulation S-K for “smaller reporting companies.”
 
ITEM 7— MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.  Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments.  Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change.  These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf.  We disclaim any obligation to update forward-looking statements.
 
Overview
 
We were incorporated under the laws of the State of Nevada on November 8, 2007 under the name “Liberto, Inc.”  On April 25, 2013, we affected an 11-for-1 forward split of our common stock payable in the form of a stock dividend.

On September 30, 2013, we closed a voluntary share exchange transaction pursuant to the Exchange Agreement by and among the Company, 4Cable TV, and the Selling Shareholders.

In accordance with the terms of Exchange Agreement, on the Closing Date, we issued 20,900,000 shares of its common stock to the Selling Shareholders in exchange for 100% of the issued and outstanding capital stock of 4Cable TV.  Immediately prior to the Exchange Transaction, the Company had 23,650,000 shares of common stock issued and outstanding. Immediately after the Exchange Transaction, the Company had 44,550,000 shares of common stock issued and outstanding.

Prior to the Exchange Transaction, we were focused on the development, manufacture and sale of artificial lobster meat.  We were a public reporting “shell company,” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.  As a result of the Exchange Transaction, the Selling Shareholders acquired approximately 46.91% of our issued and outstanding common stock, 4Cable TV became our wholly-owned subsidiary, and we acquired the business and operations of 4Cable TV.
 
On January 30, 2014, our Board of Directors adopted the 2014 Equity Incentive Plan and reserved 6,000,000 shares of the Company’s common stock for issuance thereunder to officers, directors, employees and consultants of the Company.

On February 3, 2015, we amended our Articles of Incorporation to authorize 310,000,000 shares of capital stock, par value $0.001 per share, 300,000,000 of which are designated as Common Stock and 10,000,000 of which are designated as Preferred Stock.
 
4Cable TV was incorporated on May 19, 2005 as a South Carolina corporation.  4Cable TV has certain valuable business and intellectual property related to cable television transmission hardware.
 
29

 
Results of Operations
 
The following discussion of the financial condition, results of operations, cash flows, and changes in our financial position should be read in conjunction with our audited consolidated financial statements and notes included herein. Such financial statements have been prepared in conformity with U.S. GAAP and are stated in United States dollars.

  
   
December 31,
2014
   
December 31,
2013
 
 
Statements of Operations Data
             
Sales
  $ 1,027,113     $ 1,028,053  
Cost of sales
    745,529       716,045  
Gross profit
    281,584       312,008  
Selling, general and administrative expenses, and R&D expenses
    1,079,396       355,231  
Interest expense
    154,298       85,356  
Loss on change in fair value of derivative
    117,079       -  
Net loss
  $ (1,069,189 )   $ (128,579 )

Sales
 
Our sales totaled $1,027,113 for the year ended December 31, 2014, compared to $1,028,053 for the year ended December 31, 2013.  We were able to maintain sales levels positively impacted by increased efficiency in our production area in 2013. 
 
Cost of sales
 
Cost of sales consists primarily of material cost, labor cost, and related expenses which are directly attributable to the selling of our products. Cost of sales for the year ended December 31, 2014 were $745,529, compared to $716,045 for the year ended December 31, 2013.  The increase in cost of sales is due to increased labor and material costs. 

Gross profit
 
Gross profit for the year ended December 31, 2014 was $281,584, compared to $312,008 for the year ended December 31, 2013.  Our decrease in gross profit is due to the increase in labor and material costs.
 
 
30

 
Selling, general and administrative expenses, and R&D expenses
 
Selling, general and administrative expenses, and R&D expenses for the year ended December 31, 2014 were $1,079,396, compared to $355,231 for the year ended December 31, 2013.  The increase in our selling, general and administrative expenses was primarily  due to a higher volume of compliance work done by outside professionals and the impact of stock-based compensation plans instituted for employees.
 
Interest expense
 
Interest expense for the year ended December 31, 2014 was $154,298, compared to $85,356 for the year ended December 31, 2013.  The increase in interest expense during 2014 was due to higher debt and capital lease obligations in 2014.

Loss on change in fair value of derivatives
 
Loss on change in fair value of derivatives for the year ended December 31, 2014 was $117,079, compared to $-0- for the year ended December 31, 2013.  In 2013, the Company had no derivative liabilities.

Net loss
 
Our net loss for the year ended December 31, 2014 was $1,069,189. This was impacted primarily by the costs associated with the higher selling, general and administrative expenses and higher debt costs.
 
Liquidity and Capital Resources
 
As at December 31, 2014, we have $722,067 in total assets and $801,443 in current liabilities and $1,137,877 in total liabilities, compared to $719,400 in assets and $329,285 in current liabilities and $632,147 in total liabilities as at December 31, 2013.  Our net working capital deficit as at December 31, 2014 was $466,626 compared to $12,104 at December 31, 2013.

As of December 31, 2014, we had cash of $36,734. We anticipate that a substantial amount of cash will be used as working capital and to execute our strategy and business plan.  As such, we further anticipate that we will have to raise additional capital of approximately $1,000,000 to fund our operational and research and development needs over the next twelve months.
 
During the year ended December 31, 2014, we funded our operations from advances resulting from the merger, interest bearing debt, sale of common stock and operating revenues. During the year ended December 31, 2014, we generated revenues of $1,027,113 and we raised $159,000 from the sale of common stock and net proceeds of $235,000 from the issuance of convertible promissory notes.
 
31

 
 
For the year ended December 31, 2014, we used net cash in operating activities of $411,967 compared to $223,081 of net cash used in operating activities in the year ended December 31, 2013.  Net cash used in operating activities for the year ended December 31, 2014, was primarily derived from our net loss of $1,069,189, offset by non- cash stock-based compensation of $343,128, loss on change in fair value of derivatives of $117,079, and an increase in accounts payable of $91,526.  Net cash used in operating activities for the year ended December 31, 2013, was primarily derived from our net loss of $128,579, increase in inventory of $65,806, and decrease in accounts payable of $39,590.

For the year ended December 31, 2014, we used net cash in investing activities of $14,977 compared to $44,789 of net cash used in investing activities in the year ended December 31, 2013.  Net cash used in investing activities for the year ended December 31, 2014 was derived from purchase of property, plant and equipment of $14,977.  Net cash used in investing activities for the year ended December 31, 2013 was derived from purchase of property, plant and equipment of $44,789.

For the year ended December 31, 2014, we generated net cash from financing activities of $441,750 compared to $273,081 of net cash provided by financing activities in the year ended December 31, 2013. Net cash provided by financing activities for the year ended December 31, 2014 was primarily derived from proceeds from borrowings of convertible debt of $235,000, sale of common stock of $159,000 and capital contributions of $63,998, offset by principal payments on notes payable of $174,692.  Net cash provided by financing activities for the year ended December 31, 2013 was primarily derived from capital contributions of $227,533, proceeds from borrowings of debt of $57,936, and proceeds from borrowings of convertible debt of $50,000, offset by principal payments on debt of $49,965.

Our current cash requirements are significant due to the planned development and expansion of our business.  Accordingly, we expect to continue to use debt and equity financing to fund operations for the next twelve months.
 
In order to execute on our business strategy, we expect that we will require additional capital of at least $1,000,000 during the next twelve months.  We do not expect that our revenues from operations will be wholly sufficient to fund our operating plan.  Such working capital will most likely be obtained through equity or debt financings until such time as our operations are producing revenue in excess of operating expenses.  There are no assurances that we will be able to raise the required working capital on terms favorable, or that such working capital will be available on any terms when needed. The terms of such working capital may result in substantial dilution to existing shareholders.  Any failure to secure additional financing may force us to modify our business plan.  In addition, we cannot be assured of profitability in the future.
 
 
32

Off-Balance Sheet Arrangements
  
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.  We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements.  Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.  We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Contractual Obligations

The following table outlines payments due under our significant contractual obligations over the periods shown, exclusive of interest:
 
   
Payments due by Period
 
Contractual Obligations
                             
At December 31, 2014
 
Less than
   
One to
   
Three to
   
More Than
       
  
 
One Year
   
Three Years
   
Five Years
   
Five Years
   
Total
 
Related Parties Debt
 
$
149,000
   
$
-
   
$
-
   
$
-
   
$
149,000
 
Convertible Debt
 
$
258,000
   
$
55,000
   
$
-
   
$
-
   
$
313,000
 
Capital Lease Obligations
 
$
56,000
   
$
97,000
   
$
84,000
   
$
184,000
   
$
421,000
 
Long-Term Debt Obligations
 
$
49,000
   
$
1,000
   
$
-
   
$
-
   
$
50,000
 

The above table outlines our obligations as of December 31, 2014 and does not reflect any changes in our obligations that have occurred after that date.

Critical Accounting Policies

Accounts Receivable

Accounts receivable represents receivables, net of allowances for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on historical experience and other currently available information. When a specific account is deemed uncollectible, the account is written off against the allowance.

 
33

 
The Company factors substantially all of its invoices for certain customers (approved by the third party factor) without recourse to the Company (for up to 80% of the invoice balance) and paid factoring fees of approximately $34,000 and $39,000 for the years ended December 31, 2014 and 2013, respectively.

Under the Company’s factoring agreement, invoices for products are generated and transmitted to our customers, with copies to the factor as products are shipped to our customers.  The factor collects the amounts due and remits collected funds to us, less factoring fees. The invoiced amounts are reported as accounts receivable on the Company’s balance sheets, generally when the merchandise is shipped to the Company’s customer until payment is received from the factor.
 
Inventories
 
Inventories are stated at the lower of cost or market. Inventory cost is determined on a weighted average cost method. The Company maintains reserves to reduce the value of inventory to the lower of cost or market, including reserves for excess and obsolete inventory.
 
Property, Plant and Equipment
 
Property, plant and equipment are stated at cost, net of accumulated depreciation. Expenditures that extend the life, increase the capacity, or improve the efficiency of property and equipment are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Depreciation is recognized using the straight-line method over the following approximate useful lives:
 
Machinery and equipment, including capitalized leased equipment
5 to 7 years
Buildings, including capitalized leased buildings
30 years
 
Stock-Based Compensation

The Company sometimes grants shares of stock for goods and services and in conjunction with certain agreements. These grants are accounted for based on the grant date fair values.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the selling price is fixed or determinable and collectability is reasonably assured. Product sales revenue is recognized when the risks and rewards of ownership have passed to the customer and revenue is measurable. Service revenue is recognized at the time the service is complete and the customer has received an invoice. Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns.

 
34

 
ITEM 7A— QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not applicable.
 
ITEM 8— FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
Reference is made to the financial statements, the reports of our independent registered public accounting firm, and the notes thereto of this report, which financial statements, reports, and notes are incorporated herein by reference.
 
ITEM 9— CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.

ITEM 9A— CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
Our management with the participation and under the supervision of our Principal Executive Officer and Principal Financial Officer reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined by Rule 13a-15(e) or 15d-15(e)) of the Exchange Act Rule 13a-15 as of the end of the period covered by this report.  Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are not effective as of December 31, 2014 in ensuring 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 the Securities and Exchange Commission’s rules and forms.  This conclusion is based on findings that constituted material weaknesses.  A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.
 
 
35

 
Management’s Report on Internal Control Over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework in 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.  Management concluded, as of December 31, 2014, that our internal control over financial reporting was not effective.  Management realized there were deficiencies in the design or operation of the Company’s internal control that adversely affected the Company’s internal controls which management considers to be material weaknesses.
In performing the above-referenced assessment, our management identified the following material weaknesses:
 
 
i)
We have insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis.
  
 
 ii)
We do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is the management’s view that to have an audit committee, comprised of independent board members, and an independent audit committee financial expert is an important entity-level control over our financial statements.  We expect that Ross DeMello C.G.A., who became a director effective 3/1/2014, will head up the Audit Committee when formed, as well as help management implement internal controls.
 
 
 iii)
We did not perform an entity level risk assessment to evaluate the implication of relevant risks on financial reporting, including the impact of potential fraud-related risks and the risks related to non-routine transactions, if any, on our internal control over financial reporting. Lack of an entity-level risk assessment constituted an internal control design deficiency which resulted in more than a remote likelihood that a material error would not have been prevented or detected, and constituted a material weakness.
 
 
 iv)
 
We lack personnel with formal training to properly analyze and record complex transactions in accordance with U.S. GAAP.

 
 v)
We have not achieved the optimal level of segregation of duties relative to key financial reporting functions.


We feel the weaknesses identified above have not had any material affect on our financial results. We are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes as our financial situation allows, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources and personnel to potentially mitigate these material weaknesses.

Our present management will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
 
 
36

 
Changes in Internal Controls Over Financial Reporting
 
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the fiscal year ending December 31, 2014 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
 
ITEM 9B— OTHER INFORMATION
 
On January 5, 2015, the Company entered into a convertible promissory note agreement for $54,000 with a third party. The conversion price is variable.  The note matures in 9 months and bears annual interest of 8%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.

On January 21, 2015 the Company entered into a promissory note agreement for $150,000 with a third party with cash proceeds of $148,125 and an origination fee of $1,875.  The note matures in 17 months and bears annual interest of 36%.  This promissory note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.

On January 23, 2015, the Company entered into a convertible promissory note agreement for $26,500 with a third party with cash proceeds of $25,000 and deferred financing costs of $1,500.  The conversion price is variable.  The note matures in 12 months and bears annual interest of 8%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.

On January 30, 2015, the Company entered into a convertible promissory note agreement for $55,750 with a third party.  The conversion price is variable.  The note matures in 9 months and bears annual interest of 10%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.

On February 6, 2015, the Company granted options to purchase 400,000 shares of common stock at an exercise price of $0.10 per share. The options have terms of four years and fully vest in February 2019.  On each anniversary following the grant date, 100,000 options will fully vest.  The aggregate fair value of the options on the date of grant, using the Black-Scholes model, was $46,908. Variables used in the Black-Scholes option-pricing model for the options issued included: (1) a discount rate of 1.03%, (2) expected term of 4 years, (3) expected volatility of 81.84%, and (4) zero expected dividends.  

On February 26, 2015, the Company entered into a convertible promissory note agreement for $31,500 with a third party with cash proceeds of $30,000 and an original issue discount of $1,500.  The conversion price is variable.  The note matures in 12 months and bears annual interest of 8%.  This convertible note was issued in reliance upon Regulation D of the Securities Act to investors who are “accredited investors,” as such term is defined in Rule 501(a) under the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.

 
37

 


PART III
 
ITEM 10— DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
Directors and Executive Officers
 
The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person:
 
Name
Age
Position
Steven K. Richey
68
Director, President and Chief Executive Officer
Susan Richey
59
Secretary
Andrew Staniak
70
Director, Vice President
Ross DeMello
65
Director, Interim Chief Financial Officer
John Homsey  55 Vice President - Sales and Marketing

Biographies

Steven K. Richey

Steven K. Richey was appointed President, Chief Executive Officer and a Director of the Company in September 2013.  Mr. Richey co-founded 4Cable TV in May, 2005, and has been the CEO and President since that time.  Prior to that he was Vice President New Product Development at dB-tronics from 2002 to 2005, where he was responsible for engineering and board designs for amplifier upgrades.  Before that Mr. Richey served as President and CEO of Richey Pacific Cablevision from 1985 to 1999 and was Chief Engineer at CADCO Technologies.  He was the owner/operator of Pacific Cablevision, a 150 system private cable operation in California, Arizona and Texas from 1985 to 1999 which conducted a public offering in 1990.  He was a founder and on the board of directors of the PCTA (Private Cable Television Association) from 1990 to 1998.   He began his career at AMECO in 1964.  He attended Arizona State University and Phoenix College in the 1960’s.  He is basically self-taught in electronics.   He has attended classes and seminars over the years to supplement his knowledge.  He has written over 30 published articles and has spoken at national and international cable TV events.   He invented the Satellite Block Down converter, now used in all satellite systems and the first Cable TV Emergency Alert System, now required in all cable systems.  Mr. Richey’s knowledge of the cable industry and electronics expertise provide him with an understanding of the operations of the Company which are invaluable to the Board.

 
38

 
Susan Richey

Susan Richey was appointed Secretary and a Director of the Company in September 2013.  She resigned as a Director in March 2014.  From 1990 to 1994 Mrs. Richey worked as a marketing account specialist supporting up to eight retail outlets in Southern California.  Mrs. Richey worked in the garment industry as an Executive Assistant, and Event Planner for Barbara-Barbara   From 1985 to 1989 she worked for Golden States Food as a product receiving and dispersing specialist.  She attended Brigham Young University and studied Business and Accounting and is one class short of her degree.  She has been Secretary and Treasurer of 4Cable TV since 2005.

Andrew Staniak

Andrew Staniak was appointed Vice President and a Director of the Company in September 2013.  Mr. Staniak co-founded 4Cable TV in May, 2005, and has been the CTO and Vice-President since that time.  Prior to that he was the Chief Technology Officer of dB-tronics from 2001 to 2004.  Before that Mr. Staniak served as Director of the Validation Lab with Antec, Inc., from 1995 to 2001 where his duties included evaluation of GaAs (Gallium Arsenide) hybrids for fiber nodes and RF amplifiers.  From 1980 to 1995 he was employed by Teleprompter and Century Communications as a Regional Engineer.  From 1974 to 1980 he was employed by the New York Cable Television Commission as a Senior CATV Specialist where he ran operational tests on the State’s cable systems to determine if they were operating within the established rules.  He began his career in Cable TV in 1966 with General Electric.  He graduated with a B.S. in Electrical Engineering from Radio Electronics Technical School in 1965.  Mr. Staniak’s knowledge of the cable industry and electronics expertise provides him with an understanding of the operations of the Company which are invaluable to the Board.

Ross DeMello

Ross DeMello joined the Company in March 2014 as a Director.  Mr. DeMello has over three decades of experience in financial accounting in public practice and industrial sectors. As a successful global business development leader, strategist, and financial executive, Mr. DeMello has led several companies globally. His accomplishments include growing owner operated businesses through mergers and acquisitions, assisting in business valuations, and planning exit strategies. He held directorship positions in junior mining and exploration companies, and was the Chief Executive Officer of an entertainment company listed on the VSE, MSE and the TSX exchanges.  Mr. DeMello is a member of the Certified General Accountants Association.   He received his certification as a Certified General Accountant in 1986. From 2000 to 2009 he was a Partner at Morgan & Co – Chartered Accountants.  In 2010 Mr. DeMello became a partner at Loen & Co, a Partnership of Designated Accountants & Tax Professionals, where he continues to practice. Mr. DeMello’s experience and financial background make him a valuable member of the Board.

Our CFO, George Schnellman passed away on May 3, 2014.  Mr. DeMello was appointed as interim CFO.
 
John Homsey

On February 6, 2015, Mr. John Homsey was appointed Vice President – Sales and Marketing.  Mr. Homsey brings over 25 years of experience providing technical sales solutions to Cable (MSO) and Telecom providers and managing leading edge solutions, services and new product introductions. Mr. Homsey has served in executive sales and technical positions throughout his career with firms ranging from large multinationals to mid-sized cable industry suppliers. Prior to joining 4Cable, Mr. Homsey was Vice President of Professional Services, Sales & Sales Engineering at Genesis Networks where he directed the professional deployment and service teams. Previously he was Product Sales Manager of Access Networks with Communications Test Design Inc. (CDTI), where he managed and directed the P&L of CDTI's strategic business sector and 'Fiber-to-the-Home'. From 2006-2011 he was Senior Director, Professional Services, Sales and Technical Sales at Hitachi Communications Technologies America, where he managed sales, sales engineering and business development teams. Mr. Homsey also spent several years with Wave7 Optics, Inc., an early pioneer in the fiber-to-the-home and business (FTTx) optical access market, and has years of system operational experience as Engineering Director with Cablevision Systems. Mr. Homsey holds a Telecommunication Technology Degree from Wentworth Technical Institute, Bachelor of Business Administration from Ashford University and Masters Certification in Project Management from Villanova University.
 
39

 
Terms of Office
 
The Company’s directors are appointed for a one-year term to hold office until the next annual general meeting of the Company’s shareholders or until removed from office in accordance with the Company’s bylaws and the provisions of the Nevada Revised Statutes.  The Company’s directors hold office after the expiration of his or her term until his or her successor is elected and qualified, or until he or she resigns or is removed in accordance with the Company’s bylaws and the provisions of the Nevada Revised Statutes.
 
The Company’s officers are appointed by the Company’s Board of Directors and hold office until removed by the Board.
 
Involvement in Certain Legal Proceedings
 
No director, executive officer, significant employee or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
 
Committees of the Board
 
Our Board of Directors held no formal meetings during the fiscal year ended December 31, 2014.  All proceedings of the Board of Directors were conducted by resolutions consented to in writing by the directors and filed with the minutes of the proceedings of the directors.  Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Nevada Revised Statutes and the bylaws of our company, as valid and effective as if they had been passed at a meeting of the directors duly called and held.  We do not presently have a policy regarding director attendance at meetings.
 
We do not currently have standing audit, nominating or compensation committees, or committees performing similar functions.  Ross DeMello C.G.A. became a director effective March 1, 2014 and it is expected that he will head up the Audit Committee when it is formed, as well as help management implement internal controls. Due to the size of our board, our Board of Directors believes that it is not necessary to have standing nominating or compensation committees at this time because the functions of such committees are adequately performed by our Board of Directors.  We do not have a nominating or compensation committee charter as we do not currently have such committees.  We do not have a policy for electing members to the board.  None of our directors are independent directors as defined in the NASD listing standards.
 
Audit Committee
 
Our Board of Directors has not established a separate audit committee within the meaning of Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Instead, the entire Board of Directors acts as the audit committee within the meaning of Section 3(a)(58)(B) of the Exchange Act and will continue to do so until such time as a separate audit committee has been established.  Ross DeMello C.G.A. became a director effective 3/1/2014 and it is expected that he will head up the Audit Committee when it is formed, as well as help management implement internal controls.
 
40

Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act requires our directors, executive officers, and shareholders holding more than 10% of our outstanding Common Stock to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of our Common Stock. Executive officers, directors, and persons who own more than 10% of our Common Stock are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.
 
In connection with the acquisition of 100,000 shares of our common stock on October 18, 2013, George Schnellman was required to file a Form 4 no later than October 22, 2013.  Mr. Schnellman filed the Form 4 on October 28, 2013.
 
Except as set forth above, based solely upon a review of Forms 3, 4, and 5 delivered to us as filed with the SEC during our most recent fiscal year, none of our executive officers and directors, and persons who own more than 10% of our Common Stock failed to timely file the reports required pursuant to Section 16(a) of the Exchange Act.
 
Nominations to the Board of Directors
 
Our directors take a critical role in guiding our strategic direction and oversee the management of the Company.  Board candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and social perspective, concern for the long-term interests of the shareholders, diversity, and personal integrity and judgment.
 
In addition, directors must have time available to devote to Board activities and to enhance their knowledge in the growing business.  Accordingly, we seek to attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities to the Company.
 
In carrying out its responsibilities, the Board will consider candidates suggested by shareholders.  If a shareholder wishes to formally place a candidate’s name in nomination, however, he or she must do so in accordance with the provisions of the Company’s Bylaws.  Suggestions for candidates must be sent to the Board of Directors, c/o 4Cable TV International, Inc., 1256 Highway 501 Bus, Conway, SC 29526.

Board Leadership Structure and Role on Risk Oversight
 
Steven K. Richey currently serves as the Company’s principal executive officer and a director.  The Company determined this leadership structure was appropriate for the Company due to our small size and limited operations and resources.  The Board of Directors will continue to evaluate the Company’s leadership structure and modify as appropriate based on the size, resources and operations of the Company.
 
41

Compensation Committee Interlocks and Insider Participation
 
No interlocking relationship exists between our board of directors and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.
 
Family Relationships
 
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers, except that Steven K. Richey and Susan Richey are husband and wife.
 
Code of Ethics
 
The company has adopted a code of ethics which has been published on the Governance tab of our web site at http://www.4cable.tv/corporate-governance/

ITEM 11— EXECUTIVE COMPENSATION
 
Executive Compensation
 
The summary compensation table below shows certain compensation information for services rendered in all capacities to us by our principal executive officer and principal financial officer and by each other executive officer whose total annual salary and bonus exceeded $100,000 during the fiscal years ended December 31, 2012, 2013 and 2014.  Other than as set forth below, no executive officer’s total annual compensation exceeded $100,000 during our last fiscal period.

 
42

 
Summary Compensation Table

Name and Principal Position
(a)
 
Year
(b)
 
Salary
($)
(c)
   
Bonus
($)
(d)
   
Stock
Awards
($)
(e)
   
Option
Awards
($)
(f)
   
Non
Equity
Incentive
Plan
Compensation
($)
(g)
   
Non-qualified
Deferred
Compensation
Earnings
($)
(h)
   
All Other
Compensation
($)
(i)
   
Total
($)
(j)
 
Steven K. Richey
(Principal Executive Officer)
 
2014
   
41,900
     
-
     
-
     
108,165
     
-
     
-
     
-
     
150,065
 
   
2013
   
20,437
     
-
     
-
     
-
     
-
     
-
     
-
     
20,437
 
   
2012
   
21,500
     
-
     
-
     
-
     
-
     
-
     
-
     
21,500
 
                                                                     
Ross DeMello
(Principal Financial Officer)
 
2014
      -         -      
150,000
     
108,165
        -         -         -      
258,165
 
   
2013
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
                                                                     
George Schnellman
(former Principal Financial Officer)
 
2014
   
4,780
     
-
     
-
     
-
     
-
     
-
     
-
     
4,780
 
   
2013
   
20,922
     
-
     
1,100
     
-
     
-
     
-
     
-
     
22,022
 
   
2012
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
 
None of our executive officers received, nor do we have any arrangements to pay out, any bonus, stock awards, option awards, non-equity incentive plan compensation, or non-qualified deferred compensation.
 
 
43

 
Outstanding Equity Awards at Year Ended December 31, 2014
 
The following table sets forth information as of December 31, 2014 concerning outstanding equity awards for the executive officers named in the Summary Compensation Table.
 
Outstanding Equity Awards at Fiscal Year-End
 
   
Option Awards
 
Stock Awards
 
   
Number of securities underlying unexercised options (#) exercisable
   
Number of securities underlying unexercised options (#) unexercisable
   
Option Exercise Price
 
Option expiration date
 
Number of shares or units of stock that have not vested (#)
 
Market value of shares or units of stock that have not vested ($)
 
Steven K. Richey
    -       1,500,000     $ 0.10  
12/31/2024
    -     $ -  
Ross DeMello
    -       1,500,000     $ 0.10  
12/31/2024
    -     $ -  

Director Compensation
 
We have no standard arrangement to compensate directors for their services in their capacity as directors.  Directors are not paid for meetings attended.  However, we intend to review and consider future proposals regarding board compensation.  All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.

Employment Agreements
 
None of our executive officers currently have employment agreements with us and the manner and amount of compensation for the above-referenced new officer and director has not yet been determined.
 
Potential Payments Upon Termination or Change-in-Control
 
We currently have no employment agreements with any of our executive officers, nor any compensatory plans or arrangements resulting from the resignation, retirement or any other termination of any of our executive officers, from a change-in-control, or from a change in any executive officer’s responsibilities following a change-in-control. As a result, we have omitted this table.
 
Compensation Committee Interlocks and Insider Participation
 
No interlocking relationship exists between our Board of Directors and the Board of Directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.
 
44

 
ITEM 12— SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERS
 
The following table sets forth certain information as of April 15, 2015 with respect to the beneficial ownership of our common stock for (i) each director and officer, (ii) all of our directors and officers as a group, and (iii) each person known to us to own beneficially 5% or more of the outstanding shares of our common stock.  To our knowledge, except as indicated in any footnotes to this table or pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to the shares of common stock indicated.
 
Name and Address of
Beneficial Owner(1)
Shares Beneficially Owned
Percentage Beneficially Owned(2)
Directors and Executive Officers
   
Steven K. Richey (3)
Director, President and Chief Executive Officer
415 Wellman Ct
Conway, South Carolina  29526
8,038,140
16.29%
Susan Richey (3)
Secretary
415 Wellman Ct
Conway, South Carolina  29526
8,038,140
16.29%
Andrew Staniak
Vice President and Director
908 St. James Ct
Aynor, South Carolina  29511
8,038,140
16.29%
George Schnellman (Deceased May 3, 2014) (4)
Chief Financial Officer
1313 Woody Ln.
Conway, South Carolina  29526
1,145,000
2.32%
Ross De Mello
 Ste 1200, 543 Granville St.
Vancouver, B.C. Canada
V6C 1X8
Chief Financial Officer and Director
   
           1,500,000
                    3.04%
 
 
45

 
 
All Officers and Directors as a group
18,821,280
38.15%
5% Shareholders
   
Rickey Luke
216 Highland Trail
LaGrange, GA  30240
3,778,720
7.66%
Rosielyn S. Baclig (5)
Lot 7B Blk 7 Emerald St.
Gold RivervilleSubd Burgos
Montalban, Rizal, Philippines
6,600,000
13.38%
Edmundo O. Carreos (5)
Lot 7B Blk 7 Emerald St.
Gold RivervilleSubd Burgos
Montalban, Rizal, Philippines
6,600,000
13.38%
 
(1)
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act.  Pursuant to the rules of the SEC, shares of common stock which an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be beneficially owned and outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
 
(2)
Based on 49,340,003 shares of our common stock outstanding as of April 15, 2015.
 
(3)
Includes 8,038,140 shares held jointly by Steven K. Richey and Susan Richey.
 
(4)
Mr. Schnellman passed away on May 3, 2014 and Mr. DeMello was then appointed as interim CFO.
 
(5)
Resigned as a director and officer of the Company effective April 4, 2013.
 
 
46

 
 
Equity Compensation Plan Information
 
The following table sets forth information, as of December 31, 2014, with respect to our compensation plans under which common stock is authorized for issuance.

Equity Compensation Plan Information
 
   
Plan Category
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(A)
   
Weighted-average exercise price of outstanding options, warrants and rights
(B)
   
Number of securities remaining available for future issuance under equity compensation plan (excluding securities reflected in Column A)
(C)
 
                   
Equity compensation plans approved by stockholders
    7,350,000     $ 0.10       650,000  
Equity compensation plans approved by stockholders
    437,500     $ 0.12       -  
Total
    7,787,500     $ 0.22       650,000  

Stock Transfer Agent

Our stock transfer agent is Quicksilver Stock Transfer, located at 6623 Las Vegas Boulevard, Suite 255, Las Vegas, NV 89119.
 
ITEM 13— CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
Related Party Transactions
 
The shareholders of the Company have advanced the Company money and have received partial payment on those advances. The total related parties payable at December 31, 2014 and 2013 was approximately $10,000 and $46,000, respectively. All related party advances bear no interest, are payable on demand and are classified on the accompanying balance sheet as short term liabilities.

The shareholders of the Company have loaned the Company money and have received partial payment on those loans. The total related parties debt at December 31, 2014 and 2013 was approximately $149,000 and $23,000, respectively. All related party loans have interest rates between 6% and 7%, are payable on demand and are classified on the accompanying balance sheet as short term liabilities.

Review, Approval or Ratification of Transactions with Related Persons
 
We rely on our board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company. To ensure that potential conflicts of interest are avoided or declared and to comply with the requirements of the Sarbanes Oxley Act of 2002, on September 30, 2013 our Board of Directors adopted a Code of Ethics that provides an ethical standard for all employees, officers and directors
 
 
47

 
Director Independence
 
During the year ended December 31, 2014, we did not have any independent directors on our board.  We evaluate independence by the standards for director independence established by applicable laws, rules, and listing standards including, without limitation, the standards for independent directors established by The New York Stock Exchange, Inc., the NASDAQ National Market, and the Securities and Exchange Commission.
 
Subject to some exceptions, these standards generally provide that a director will not be independent if (a) the director is, or in the past three years has been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (f) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $1,000,000 or two percent of that other company’s consolidated gross revenues.
 
ITEM 14— PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 The following table shows the fees paid or accrued by us for the audit and other services provided by the Company’s principal accountant for the fiscal periods shown.

   
December 31, 2014
   
December 31, 2013
 
Audit Fees
 
$
55,195
   
$
44,892
 
Audit — Related Fees
   
-
     
-
 
Tax Fees
   
-
     
-
 
All Other Fees
   
-
     
-
 
Total
 
$
55,195
   
$
44,892
 

Audit fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by the above auditors in connection with statutory and regulatory fillings or engagements.
 
The full Board of Directors pre-approves all audit and non-audit services to be performed by the independent registered public accounting firm in accordance with the rules and regulations promulgated under the Securities Exchange Act of 1934, as amended.  The Board of Directors pre-approved 100% of the audit and audit-related services performed by the independent registered public accounting firm in the past fiscal year.  The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
 
48

 
PART IV
 
ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 
(a)           Financial Statements and Financial Statement Schedules
 
(1)   Financial Statements are listed in the Index to Financial Statements of this report.
 
(b)   Exhibits

The following exhibits are included as part of this report by reference:

2.1
 
Share Exchange Agreement, dated August 4, 2013 (incorporated by reference from registrant’s Current Report on Form 8-K filed on April 8,2013)
     
2.2
 
Amendment to Share Exchange Agreement, dated September 30, 2013 (incorporated by reference from registrant’s Current Report on Form 8-K filed on October 4, 2013)
     
3.1
 
Articles of Incorporation (incorporated by reference from registrant’s Quarterly report on Form 10-Q filed on August 19, 2013
     
3.2
 
Bylaws (incorporated by reference from registrant’s Registration Statement on Form SB-2 filed on January 22, 2008
     
3.3
 
Amendment to Articles of Incorporation (incorporated by reference from registrant’s Current Report on Form 8-K filed on February 3, 2015)
     
10.1
 
Rent to Own Contract between 4Cable TV, Inc. and Shirley Faye M. Strickland, dated August 7, 2012 (incorporated by reference from registrant’s Current Report on Form 8-K filed on October 4, 2013)
     
10.2
 
Monarch Agreement dated April 1, 2014.
     
10.3
 
Amended and Restated 2014 Equity Incentive Plan (incorporated by reference from registrant’s Current Report on Form 8-K filed on February 3, 2015)
     
10.4
 
Settlement Agreement (incorporated by reference from registrant’s Current Report on Form 8-K filed on February 12, 2015)
     
21
 
List of Subsidiaries
     
31.1
 
Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
     
31.2
 
Rule 13a-14(d)/15d-14(d) Certification (Principal Financial Officer)
     
32
 
Section 1350 Certifications
     
101*
 
Interactive data files pursuant to Rule 405 of Regulation S-T
*to be filed by amendment

 
49

 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

4CABLE TV INTERNATIONAL, INC.

Dated: April 15, 2015
/s/ Steven K. Richey
 
By: Steven K. Richey
 
Its: President
 
(Principal Executive Officer)
   
  /s/Ross DeMello
  By: Ross DeMello
 
(Principal Financial Officer, Principal Accounting Officer)
   

Pursuant to requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature
 
Capacity
 
Date
         
/s/ Steven K. Richey
 
Director
 
April 15, 2015
Steven K. Richey
       
         
/s/ Ross DeMello
 
 Director
 
April 15, 2015
Ross DeMello
       
         
 
 
50

 
4CableTV International, Inc.
Financial Statements

 
Page
F-1
Consolidated Balance Sheets – December 31, 2014 and 2013
F-2
Consolidated Statements of Operations – Years Ended December 31, 2014 and 2013
F-3
F-4
Consolidated Statements of Cash Flows – Years Ended December 31, 2014 and 2013
F-5
F-6 to F-28
 
 
51

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors, Audit Committee and Stockholders of
4Cable TV International, Inc.
Conway, SC

We have audited the accompanying consolidated balance sheets of 4Cable TV International, Inc. (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended. 4Cable TV International, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial positions of 4Cable TV International, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that 4Cable TV International, Inc. will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, 4Cable TV International, Inc. has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 /s/ GBH CPAs, PC  
 GBH CPAs, PC  
 www.gbhcpas.com  
 Houston, Texas  
 April 15, 2015  
 
F-1

 
4Cable TV International, Inc.
Consolidated Balance Sheets
 
   
December 31,
 2014
   
December 31,
2013
 
             
ASSETS
           
             
Current assets
           
  Cash and cash equivalents
  $ 36,734     $ 21,928  
  Accounts receivable, net of allowances for doubtful
               
     accounts of $16,039 and $2,836, respectively
    12,368       30,833  
  Inventories, net
    277,512       257,393  
  Prepaid expenses and other assets
    8,203       7,027  
                             Total current assets
    334,817       317,181  
                 
  Property, plant and equipment, net
    387,250       402,219  
                 
Total Assets
  $ 722,067     $ 719,400  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
                 
Current liabilities
               
  Accounts payable and accrued liabilities
  $ 221,730     $ 133,696  
  Related parties payable
    9,600       45,684  
  Related parties debt
    149,236       22,867  
  Current portion of notes payable
    48,734       48,998  
  Current portion of convertible debt, net of discount of $204,146 and $7,000, respectively
    53,504       43,000  
  Current portion of capital lease obligations
    34,360       35,040  
  Current portion of derivative liabilities
    284,279       -  
Total current liabilities
    801,443       329,285  
                 
Long-term liabilities
               
  Capital lease obligations
    260,361       300,094  
  Notes payable
    1,045       2,768  
  Convertible debt, net of discount of $47,772 and $-0-, respectively
    7,228       -  
  Derivative liabilities
    67,800       -  
Total long-term liabilities
    336,434       302,862  
                 
Total Liabilities
    1,137,877       632,147  
                 
                                Commitments and contingencies
               
                 
Stockholder's equity (deficit)
               
  Preferred stock;  $0.01 par value, 10,000,000 shares authorized;
-0- shares issued and outstanding
    -       -  
  Common stock;  $0.001 par value, 300,000,000 shares authorized; 49,340,003 and 45,050,000 shares issued and outstanding
    49,340       45,050  
  Additional paid-in capital
    1,024,024       462,188  
  Accumulated deficit
    (1,489,174 )     (419,985 )
                 
Total Stockholders' Equity (Deficit)
    (415,810 )     87,253  
                 
Total Liabilities and Stockholders' Equity (Deficit)
  $ 722,067     $ 719,400  
                 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-2

 
4Cable TV International, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2014 and 2013
 
   
December 31,
2014
   
December 31,
2013
 
             
Sales
  $ 1,027,113     $ 1,028,053  
Cost of goods sold
    (745,529 )     (716,045 )
Gross profit
    281,584       312,008  
                 
Operating costs and expenses
               
  Selling, general and administrative
    1,019,991       307,517  
  Research and development
    59,405       47,714  
Total operating costs and expenses
    1,079,396       355,231  
                 
Operating loss
    (797,812 )     (43,223 )
                 
Other expense
               
  Interest expense
    (154,298 )     (85,356 )
  Loss on change in fair value of derivatives
    (117,079 )     -  
Total other expense
    (271,377 )     (85,356 )
                 
Net loss
  $ (1,069,189 )   $ (128,579 )
                 
Net loss per common share - basic and diluted
  $ (0.02 )   $ (0.00 )
                 
Weighted average common shares outstanding - basic and diluted
    45,579,679       26,247,047  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-3

 
4Cable TV International, Inc.
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
For the Years Ended December 31, 2014 and December 31, 2013
 
    Common Stock     Additional Paid-     Accumulated      Total Stockholders’  
    Shares     Amount     In Capital     Deficit      Equity (Deficit)  
                               
Balance, December 31, 2012
    19,855,000     $ 19,855     $ 209,856     $ (291,406 )   $ (61,695 )
Stock-based compensation
    1,545,000       1,545       25,453       -       26,998  
Issuance of common stock for reverse merger
    23,650,000       23,650       (23,650 )     -       -  
Capital contributions
    -       -       227,533       -       227,533  
Conversion of related party debt and payables to additional paid-in capital
    -       -       15,996       -       15,996  
Beneficial conversion feature on issuance of convertible debt
    -       -       7,000       -       7,000  
Net loss
    -       -       -       (128,579 )     (128,579 )
Balance, December 31, 2013
    45,050,000       45,050       462,188       (419,985 )     87,253  
Issuance of common stock for cash
    1,590,000       1,590       157,410       -       159,000  
Stock-based compensation
    2,700,003       2,700       340,428       -       343,128  
Capital contributions
    -       -       63,998       -       63,998  
Net loss
    -       -       -       (1,069,189 )     (1,069,189 )
Balance, December 31, 2014
    49,340,003     $ 49,340     $ 1,024,024     $ (1,489,174 )   $ (415,810 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-4
 
4Cable TV International, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2014 and 2013
 
   
 
2014
   
 
 2013
 
             
Cash flows from operating activities
         
Net loss
  $ (1,069,189 )   $ (128,579 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
   Depreciation and amortization
    42,303       22,323  
   Inventory adjustment
    -       (27,328 )
   Amortization of debt discount
    17,732       -  
   Bad debt expense
    37,614       2,560  
   Stock-based compensation
    343,128       26,998  
   Loss on change in fair value of derivative
    117,079       -  
Changes in balances of operating assets and liabilities:
               
   Accounts receivable
    (22,641 )     (2,321 )
   Inventories
    (32,476 )     (65,806 )
   Prepaid expenses and other assets
    (1,176 )     (2,775 )
   Accounts payable and accrued liabilities
    91,526       (39,590 )
   Related parties payable
    64,133       (8,563 )
                 
Net cash used in operating activities
    (411,967 )     (223,081 )
                 
Cash flows from investing activities
               
  Purchase of property, plant and equipment
    (14,977 )     (44,789 )
                 
Net cash used in investing activities
    (14,977 )     (44,789 )
                 
Cash flows from financing activities
               
  Payments of capital lease obligations
    (40,413 )     (22,290 )
  Proceeds from notes payable
    172,705       57,936  
  Payments on notes payable
    (174,692 )     (49,965 )
  Proceeds from related parties debt
    40,846       11,484  
  Payments on related parties debt
    (14,694 )     (1,617 )
  Proceeds from convertible debt, net of costs
    235,000       50,000  
  Proceeds from sale of common stock
    159,000       -  
  Capital contributions
    63,998       227,533  
                 
Net cash provided by financing activities
    441,750       273,081  
                 
Net increase in cash
    14,806       5,211  
                 
Cash, beginning of year
    21,928       16,717  
                 
Cash, end of year
  $ 36,734     $ 21,928  
                 
SUPPLEMENTAL CASH FLOW DISCLOSURES
               
Cash paid for:
               
  Income taxes
  $ -     $ -  
  Interest
  $ 90,950     $ 85,536  
                 
Supplemental disclosure of non-cash investing and financing activities
               
Barter of parts and equipment
  $ 3,492     $ 13,001  
Reclassification of inventory to property, plant and equipment
  $ 12,537     $ -  
Purchase of equipment by capitalized lease obligation
  $ -     $ 52,063  
Purchase of building by capitalized lease obligation
  $ -     $ 87,000  
Conversion of related parties debt and payable to additional paid-in capital
  $ -     $ 15,996  
Beneficial conversion feature on issuance of convertible debt
  $ -     $ 7,000  
Fair value of derivatives – variable conversion feature and warrants
  $ 235,000     $ -  
Common stock issued for reverse merger
  $ -     $ 23,650  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
F-5

 
4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 

Description of Business
 
4CableTV International, Inc. was incorporated in Nevada on November 8, 2007.

On September 30, 2013, 4Cable TV International, Inc. completed a share exchange agreement with the shareholders of 4Cable TV, Inc. At the closing of the share exchange agreement, the shareholders of 4Cable TV, Inc. received 20,900,000 shares of common stock of 4Cable TV International, Inc. in exchange for 100% of the issued and outstanding capital stock they held in 4Cable TV, Inc., which totaled 2,600 common shares.
 
At the time of the merger, 4Cable International, Inc. was in essence a non-operating public shell corporation with nominal assets and as a result of the merger the owners and management of 4Cable TV, Inc. gained effective operating control of the combined company after the transaction.  This control is evidenced by the management group of 4Cable TV, Inc.: (1) holding the largest organized voting minority interest in the combined entity; and (2) controlling the make-up of the majority of the combined company’s board of directors and management team.  In addition, the assets and business potential of 4Cable TV, Inc., was dominate in relation to relative size in comparison to 4Cable TV International, Inc.

Accordingly, for financial reporting purposes, this merger transaction was deemed to be a capital transaction in substance and recorded as a reverse recapitalization of 4Cable TV, Inc. whereby 4Cable TV, Inc. is deemed to be the continuing, surviving entity for accounting purposes, but through reorganization, has deemed to have adopted the capital structure of 4Cable TV International, Inc. Accordingly, all references to common shares of 4Cable TV, Inc.’s common stock have been restated to reflect the equivalent number of 4Cable TV International, Inc.’s common shares.

Such shares received in the share exchange by the shareholders of 4Cable TV, Inc. are subject to a lock-up agreement, pursuant to which the recipients will agree to certain restrictions on transfer for the later to occur of one year from the date of the Exchange Agreement (September 30, 2013) or the Company’s completion of equity financing yielding aggregate gross proceeds of at least $1,800,000. The Company has not completed this contemplated financing of $1,800,000 as of December 31, 2014.

4Cable TV, Inc. was incorporated on May 19, 2005 as a South Carolina Corporation and has been a specialty solutions provider for the cable television (“CATV”) sector spanning the range of repair, upgrading, and testing. The Company provides service and customized solutions to CATV operators and was founded by two veterans of the cable industry seeking a new challenge to work on diagnostic and repair issues for cable operators.

When used in these notes, the terms "Company", "we", "us" or "our" mean 4Cable TV International, Inc. (“4Cable”) and all entities included in our consolidated financial statements.
 
 
F-6

 
4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2.  Summary of Significant Accounting Policies

Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, 4Cable TV, Inc., after elimination of all intercompany accounts, transactions, and profits.

Estimates and Assumptions

Management uses estimates and assumptions in preparing financial statements in accordance with general accepted accounting principles.  Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.   Actual results could vary from the estimates that were assumed in preparing these financial statements.

The most significant estimates and assumptions include the:
 
  
Impairment, useful lives and salvage values of our machinery and equipment
 
 
Reserve for excess and obsolete inventory
 
 
Loss contingencies
 
 
Fair value of derivative liabilities
 
 
Allowance for doubtful accounts
 
 
Stock-based compensation

It is reasonably possible that these above significant estimates we make may change in the future and could have a material effect on our financial statements.

 
F-7

 
4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
Cash and Cash Equivalents

Cash and cash equivalents consist primarily of cash on deposit, certificates of deposit, money market accounts, and investment grade commercial paper that are readily convertible into cash and purchased with original maturities of three months or less.
 
Accounts Receivable

Accounts receivable represents receivables, net of allowances for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on historical experience and other currently available information. When a specific account is deemed uncollectible, the account is written off against the allowance.

The Company factors substantially all of its invoices for certain customers (approved by the third party factor) without recourse to the Company (for up to 80% of the invoice balance) and paid factoring fees of approximately $34,000 and $39,000 for the years ended December 31, 2014 and 2013, respectively.  Since this factoring arrangement is a financing activity, the Company recorded the fees paid as interest expense during 2014 and 2013.

Under the Company’s factoring agreement, invoices for products are generated and transmitted to our customers, with copies to the factor as products are shipped to our customers.  The factor collects the amounts due and remits collected funds to us, less factoring fees. The invoiced amounts are reported as accounts receivable on the Company’s balance sheets, generally when the merchandise is shipped to the Company’s customer until payment is received from the factor.
 
Concentrations of Risk

Sales to one customer accounted for approximately 68% and 74% of the Company’s total net sales during the years ended December 31, 2014 and 2013, respectively. Other than the largest customer, no customer accounted for 10% or more of the Company’s total net sales for 2014 and 2013.

Accounts receivable from two customers accounted for more than 10% of the Company’s net accounts receivable as of December 31, 2014 and four customers as of December 31, 2013 are as follows:

 
2014
 
2013
Customer A
      22%
 
19%
Customer B
      11%
 
10%
Customer C
       n/a
 
10%
Customer D
       n/a
 
11%
 
The Company purchased more than 10%  of its materials fromone vendor, and such purchases represented approximately 25% and 63% of the Company’s purchases for the years ended December 31, 2014 and 2013, respectively.

 
F-8

 
4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
Inventories
 
Inventories are stated at the lower of cost or market. Inventory cost is determined on a weighted average cost method. The Company maintains reserves to reduce the value of inventory to the lower of cost or market, including reserves for excess and obsolete inventory.
 
Property, Plant and Equipment
 
Property, plant and equipment are stated at cost, net of accumulated depreciation. Expenditures that extend the life, increase the capacity, or improve the efficiency of property and equipment are capitalized, while expenditures for repairs and maintenance are expensed as incurred. Depreciation is recognized using the straight-line method over the following approximate useful lives:
 
Machinery and equipment, including capitalized leased equipment
5 to 7 years
Buildings, including capitalized leased buildings
30 years
 
Impairment of Long-Lived Assets

The Company periodically reviews its long-lived assets and makes adjustments, if the carrying value exceeds fair value, based on the undiscounted cash flows expected to be derived from the use and ultimate disposition of the assets. Assets identified as impaired are carried at estimated fair value. Due to the changing technology and market conditions, it is possible that future impairment reviews may indicate additional impairments of our long-lived assets, which could result in charges that are material to the Company’s results of operations.

Derivative Liabilities

The Company follows Financial Accounting Standards Board (“FASB”), Derivatives and Hedging (“ASC 815-40”), which limits the extent to which the conversion or exercise price (the “strike price”) of an instrument can be adjusted for subsequent transactions. The Company utilizes a two-step process to determine whether an instrument is indexed to its stock: (a) evaluate the instrument’s contingent exercise provisions, if any and (b) evaluate the instrument’s settlement provisions. If it is determined the instrument is not indexed to the Company’s stock, the instrument is recognized as a derivative instrument at issuance and is measured at fair value at each reporting period and the change is recorded in earnings.
 
F-9

 
4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
Fair Value of Financial Instruments

The Company follows FASB ASC 820, Fair Value Measurement (“ASC 820”), which clarifies fair value as an exit price, establishes a hierarchal disclosure framework for measuring fair value, and requires extended disclosures about fair value measurements. The provisions of ASC 820 apply to all financial assets and liabilities measured at fair value.

As defined in ASC 820, fair value, clarified as an exit price, represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

 
Level 1 – Quoted prices in active markets for identical assets or liabilities.
 
 
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
 
The following table sets forth by level within the fair value hierarchy our financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2014 (rounded to the nearest thousand):

   
Fair Value Measurements at December 31, 2014
 
   
Quoted Prices in Active Markets for Identical Assets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
   
Total Carrying Value
 
Derivative liability - debt
  $ -     $ -     $ 290,000     $ 290,000  
Derivative liability – warrants
    -       -       62,000       62,000  
Total
    -       -       352,000       352,000  
Less: current portion
    -       -       (284,000 )     (284,000 )
Long-term portion
  $ -     $ -     $ 68,000     $ 68,000  

 
F-10

 
4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
The following table sets forth the changes in fair value measurements of our Level 3 debt and warrant derivative liabilities from December 31, 2013 to December 31, 2014 (rounded to the nearest thousand):

   
December 31, 2013
   
Additions
   
Increase in Fair Value of Derivative Liability
   
December 31, 2014
 
                         
Derivative liability - debt
  $ -     $ 235,000     $ 55,000     $ 290,000  
Derivative liability - warrants
    -       -       62,000       62,000  
      -     $ 235,000     $ 117,000       352,000  
Less: current portion
    -                       (284,000 )
Long-term portion
  $ -                     $ 68,000  

The following table sets forth a reconciliation of changes in the fair value of financial liabilities classified as level 3 in the fair value hierarchy from December 31, 2013 to December 31, 2014 (rounded to the nearest thousand):

   
2014
   
2013
 
January 1,
  $ -     $ -  
Additions
    235,000       -  
Unrealized loss
    117,000       -  
Settlements
    -       -  
Transfers
    -       -  
December 31,
  $ 352,000     $ -  
                 
Change in unrealized losses included in earnings related to derivatives still held as of December 31, 2014
  $ 117,000     $ -  

 
F-11

 
 4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
Product Warranties

The Company does not have any written obligation to replace malfunctioning equipment or repair defects.  To-date, such replacement or repair requests from customers have been immaterial in amount and frequency and the Company has dealt with such requests on a case-by-case basis.
 
Contingencies

Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the selling price is fixed or determinable and collectability is reasonably assured. Product sales revenue is recognized when the risks and rewards of ownership have passed to the customer and revenue is measurable. Service revenue is recognized at the time the service is complete and the customer has received an invoice. Revenue is recorded at the net amount to be received after deductions for estimated discounts, allowances and returns.
 
F-12

 4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
Barter Transactions

The Company barters parts and equipment with its dealers and suppliers.  Barter transactions are recorded at the estimated fair value of the product or service received or the estimated fair value of the service surrendered, whichever is more readily determinable.  The Company would have otherwise paid cash for such parts and equipment.  The Company had barter sales of approximately $3,500 and $13,000 for the years ended December 31, 2014 and 2013, respectively. These transactions were priced at standard dealer prices.
 
Advertising and Marketing Development

The Company expenses advertising and market development costs as incurred. Total advertising and marketing costs recorded in selling, general and administrative expenses were approximately $26,000 and $20,000 for the years ended December 31, 2014 and 2013, respectively.
 
Research and Development Costs

Research and development (“R&D”) costs are expensed in the period in which they are incurred. R&D costs include materials, equipment and facilities that have no alternative future use, depreciation on equipment and facilities currently used for R&D purposes, personnel costs, contract services and reasonable allocations of indirect costs, if clearly related to an R&D activity. Expenditures in the pre-production phase of an R&D project are recorded as R&D expense. However, costs incurred in the pre-production phase that are associated with output actually used in production are recorded in cost of sales. A project is considered finished with pre-production efforts when management determines that it has achieved acceptable levels of scrap and yield, which vary by project. Expenditures related to ongoing production are recorded in cost of sales. Total R&D costs were approximately $59,000 and $48,000 for the years ended December 31, 2014 and 2013, respectively. Research and Development costs are not included in cost of goods sold.

Income Taxes

The Company utilizes the liability method of accounting for income taxes.  Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to be reversed. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
 
F-13

 
 4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
Tax benefits that result from uncertain tax positions may be recognized only if they are considered more likely than not to be sustainable, based on their technical merits. The amount of benefit to be recognized is the largest amount of tax benefit that is at least 50% likely to be realized. The Company does not have any uncertain tax positions as of December 31, 2014 and 2013.

Basic and Diluted Net Loss Per Common Share
 
Basic loss per common share equals net loss divided by weighted average common shares outstanding during the period. Diluted loss per share includes the impact on dilution from all contingently issuable shares, including options, warrants and convertible securities. The common stock equivalents from contingent shares are determined by the treasury stock method. The Company incurred net losses for the years ended December 31, 2014 and 2013, and therefore, basic and diluted loss per share for those periods are the same as all potential common equivalent shares would be anti-dilutive.

Potential common equivalent shares are as follows:

   
2014
   
2013
 
Stock options
    7,350,000       -  
Warrants
    875,000       -  
Convertible debt
    3,975,963       200,000  
Total
    12,200,963       200,000  

Stock-Based Compensation

The Company sometimes grants shares of stock for goods and services and in conjunction with certain agreements. These grants are accounted for based on the grant date fair values.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgement and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which the Company will adopt the standard in 2017.

 
F-14

 
 4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
2. Summary of Significant Accounting Policies (continued)
 
In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to assess the company’s ability to continue as a going concern. Disclosures are required if there is substantial doubt as to the company’s continuation as a going concern within one year after the issue date of financial statements. The standard provides guidance for making the assessment, including consideration of management’s plans which may alleviate doubt regarding the company’s ability to continue as a going concern. ASU 2014-15 is effective for years beginning after December 15, 2016. We do not expect the adoption of this pronouncement to have a material impact on our consolidated financial statements.

Subsequent Events

The Company has evaluated all transactions from December 31, 2014 through the financial statement issuance date for subsequent event disclosure consideration.

3.  Going Concern
 
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company has suffered recurring losses from operations and had a working capital deficit and accumulated deficit at December 31, 2014. These factors raise substantial doubt about the ability of the Company to continue as a going concern.
 
Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to laws or regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business.
 
The ability of the Company to continue as a going concern is dependent upon its ability to raise capital to meet its obligations and attain profitable operations.  The accompanying financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
 
The Company’s management is planning to raise funds through sale of equity and long-term debt financing.

 
F-15

 
 4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
4. Inventories

The inventories consists of raw materials that are used in the preparation of goods for sale. There were no finished products at December 31, 2014 and 2013. The Company’s inventories consisted of the following (rounded to the nearest thousand):
 
   
December 31,
2014
   
December 31,
2013
 
Inventories
  $ 302,000     $ 278,000  
Less: excess and obsolete reserve
    (24,000 )     (21,000 )
Inventories, net
  $ 278,000     $ 257,000  
 
5. Property, Plant and Equipment

The Company’s property, plant and equipment consist of the following (rounded to the nearest thousand):
 
   
December 31,
2014
   
December 31,
2013
 
Capital lease – buildings
  $ 297,000     $ 293,000  
Capital lease – equipment
    81,000       81,000  
Computer equipment
    9,000       12,000  
Machinery and tools
    137,000       135,000  
Office equipment
    4,000       4,000  
Test equipment
    99,000       74,000  
Subtotal 
    627,000       599,000  
Less: Accumulated depreciation
    (240,000 )     (197,000 )
Total property, plant and equipment 
  $ 387,000     $ 402,000  
 
Depreciation expense for the years ended December 31, 2014 and 2013 was approximately $42,000 and $22,000, respectively.
 
F-16

 
 4Cable TV International, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
 
6. Notes Payable

Notes payable consist of the following items and payment terms (outstanding balances rounded to the nearest thousand):
   
December 31,
2014
   
December 31,
2013
 
On-Deck, interest at 31% per annum, paid in full during 2014
  $ -     $ 28,000  
Superior Finance, interest at 4.5%, repay at $62 per month, due May 2017, guaranteed by shareholder
    2,000       2,000  
Current Electronics, zero interest, repay at $500 per month
    1,000       5,000  
EBF Partners, original principal of $50,000, interest at 15%, payments of $540 per day, Due February 26, 2015
    17,000       -  
Strategic Funding, original principal of $60,000, interest at 11%, payments of $567 per day, due August 30, 2015
    1,000       -  
IOU Central, original principal of $18,000, interest at 15%, payments of $1,894 per month, due December 31, 2014 (a)
    1,000       -  
Loan from individual, interest at 15%, payments of interest only monthly, due July 10, 2015 (b)
    25,000       -  
Third party loans, interest range at 0% to 15%, various terms
    3,000       17,000  
Total notes payable
    50,000       52,000  
Current portion of notes payable