x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|
Florida
|
59-3350778
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
5025 West Lemon Street, Suite 200
Tampa, Florida
|
33609
|
|
(Address of principal executive offices)
|
(Zip Code)
|
(Former name, former address and former fiscal year, if changed since last report)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
||
Non-accelerated filer
|
o
|
Smaller reporting company
|
x
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Page
|
||||
PART I.
|
Financial Information
|
|||
4
|
||||
21
|
||||
26
|
||||
26
|
||||
PARTII.
|
Other Information
|
|||
27
|
||||
27
|
||||
27
|
||||
27
|
||||
27
|
||||
27
|
||||
28
|
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS | ||||||||
Current assets
|
||||||||
Cash
|
$ | 155,333 | $ | 2,057 | ||||
Accounts receivable
|
40,464 | - | ||||||
Prepaid expense
|
138,301 | 1,500 | ||||||
Accrued revenue
|
39,977 | 17,899 | ||||||
Total current assets
|
374,075 | 21,456 | ||||||
Property and equipment, net of accumulated depreciation
|
122,759 | 88,966 | ||||||
Other assets
|
||||||||
Advance payments for contractual obligations
|
166,239 | - | ||||||
Security deposit
|
- | 1,046 | ||||||
Total other assets
|
166,239 | 1,046 | ||||||
Total assets
|
$ | 663,073 | $ | 111,468 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities
|
||||||||
Note payable related party shareholders
|
$ | - | $ | 5,403,794 | ||||
Note payable
|
400,000 | 400,000 | ||||||
Current portion of capital lease payable
|
- | 4,072 | ||||||
Accounts payable and accrued expenses
|
553,410 | 983,896 | ||||||
Deferred revenue
|
328,885 | - | ||||||
Total current liabilities
|
1,282,295 | 6,791,762 | ||||||
Deferred revenue
|
414,555 | - | ||||||
Total liabilities
|
1,696,850 | 6,791,762 | ||||||
Preferred stock, $.001 par value, 5,000,000 shares authorized, 3,025,000
|
||||||||
shares issued and 3,000,000 outstanding at September 30, 2011
|
3,025 | 25 | ||||||
Additional paid-in capital
|
5,769,279 | - | ||||||
5,772,304 | 25 | |||||||
Stockholders' equity
|
||||||||
Common stock, $.001 par value; 250,000,000 authorized, 133,347,479
|
||||||||
and 108,702,874 shares issued and outstanding at September 30, 2011 | ||||||||
and December 31, 2010, respectively
|
133,448 | 108,803 | ||||||
Additional paid-in capital
|
57,548,374 | 56,934,164 | ||||||
Treasury stock, 25,000 shares of preferred, at cost
|
(25,931 | ) | (25,931 | ) | ||||
Accumulated defcit
|
(64,461,972 | ) | (63,697,355 | ) | ||||
Total stockholders' equity
|
(6,806,081 | ) | (6,680,319 | ) | ||||
Total liabilities and stockholders' equity
|
$ | 663,073 | $ | 111,468 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Sales
|
$ | 445,658 | $ | 207,302 | $ | 1,212,131 | $ | 580,494 | ||||||||
Cost of sales
|
202,774 | 113,108 | 583,125 | 311,024 | ||||||||||||
Gross profit
|
242,884 | 94,194 | 629,006 | 269,470 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Selling and general and administrative
|
406,994 | 288,868 | 1,329,694 | 907,712 | ||||||||||||
Depreciation and amortization
|
21,711 | 27,457 | 58,034 | 82,372 | ||||||||||||
Total expenses
|
428,705 | 316,325 | 1,387,728 | 990,084 | ||||||||||||
Net operating income
|
(185,821 | ) | (222,131 | ) | (758,722 | ) | (720,614 | ) | ||||||||
Other income (expense)
|
||||||||||||||||
Interest income (expense)
|
- | (6,078 | ) | (5,895 | ) | (20,432 | ) | |||||||||
Total other income (expense)
|
- | (6,078 | ) | (5,895 | ) | (20,432 | ) | |||||||||
Net income (loss) before income taxes
|
(185,821 | ) | (228,209 | ) | (764,617 | ) | (741,046 | ) | ||||||||
Provision for income taxes
|
- | - | - | - | ||||||||||||
Net income (loss)
|
$ | (185,821 | ) | $ | (228,209 | ) | $ | (764,617 | ) | $ | (741,046 | ) | ||||
Net loss per weighted share,
|
||||||||||||||||
basic and fully diluted
|
$ | (0.0014 | ) | $ | (0.0021 | ) | $ | (0.0061 | ) | $ | (0.0079 | ) | ||||
Weighted average number of common
|
||||||||||||||||
shares outstanding, basic and fully diluted
|
133,347,479 | 108,702,874 | 125,027,127 | 94,365,511 |
Additional
|
||||||||||||||||||||||||
Common Stock
|
Paid-in
|
Treasury
|
Accumulated
|
|||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Stock
|
Deficit
|
Total
|
|||||||||||||||||||
Balance, December 31, 2009
|
86,957,874 | $ | 87,058 | $ | 56,738,459 | $ | (25,931 | ) | $ | (62,776,524 | ) | (5,976,938 | ) | |||||||||||
Common shares issued for services
|
2,000,000 | 2,000 | 18,000 | 20,000 | ||||||||||||||||||||
Common shares issued in settlement
|
||||||||||||||||||||||||
of debt obligations
|
19,745,000 | 19,745 | 177,705 | 197,450 | ||||||||||||||||||||
Net loss
|
(920,831 | ) | (920,831 | ) | ||||||||||||||||||||
Balance, December 31, 2010
|
108,702,874 | $ | 108,803 | $ | 56,934,164 | $ | (25,931 | ) | $ | (63,697,355 | ) | $ | (6,680,319 | ) | ||||||||||
Common shares issued for cash
|
1,000,000 | 1,000 | 199,000 | 200,000 | ||||||||||||||||||||
Common shares issued for
|
||||||||||||||||||||||||
debt conversion
|
1,942,905 | 1,943 | 219,895 | 221,838 | ||||||||||||||||||||
Restricted common shares issued
|
||||||||||||||||||||||||
for services
|
2,420,000 | 2,420 | 21,780 | 24,200 | ||||||||||||||||||||
Restricted common shares issued
|
||||||||||||||||||||||||
for Directors' Fees
|
9,000,000 | 9,000 | 81,000 | 90,000 | ||||||||||||||||||||
Restricted common shares issued
|
||||||||||||||||||||||||
as part of Talent contract
|
10,000,000 | 10,000 | 90,000 | 100,000 | ||||||||||||||||||||
Restricted common shares issued
|
||||||||||||||||||||||||
to Early Enlister subscribers
|
281,700 | 282 | 2,535 | 2,817 | ||||||||||||||||||||
Net loss
|
(764,617 | ) | (764,617 | ) | ||||||||||||||||||||
Balance, September 30, 2011
|
133,347,479 | $ | 133,448 | $ | 57,548,374 | $ | (25,931 | ) | $ | (64,461,972 | ) | $ | (6,806,081 | ) |
|
Nine Months Ended
|
|||||||
September 30,
|
||||||||
2011
|
2010
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash flows from operations
|
||||||||
Net income (loss)
|
$ | (764,617 | ) | $ | (741,046 | ) | ||
Adjustment to reconcile net loss to net cash:
|
||||||||
Depreciation and amortization
|
58,034 | 82,372 | ||||||
Expenses settled by issuance of common stock
|
128,128 | - | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(40,464 | ) | 6,269 | |||||
Deposits
|
1,046 | - | ||||||
Accounts payable and accrued expenses
|
159,837 | 121,623 | ||||||
Accrued revenue
|
(22,078 | ) | - | |||||
Prepaid expenses
|
(103,467 | ) | 597 | |||||
Advance payments on contractual obligations
|
(110,684 | ) | - | |||||
Deferred revenue
|
743,440 | - | ||||||
Net cash provided by (used for) operating activities
|
49,175 | (530,185 | ) | |||||
Cash flows from investing activities
|
||||||||
Capital expenditures
|
(91,827 | ) | - | |||||
Net cash provided by financing activities
|
(91,827 | ) | - | |||||
Cash flows from financing activities
|
||||||||
Issuance of common stock
|
200,000 | 217,450 | ||||||
Due to related party shareholders
|
- | 55,907 | ||||||
Proceeds from long-term borrowing
|
- | 296,524 | ||||||
Payments on capital lease obligation
|
(4,072 | ) | (41,161 | ) | ||||
Net cash provided by financing activities
|
195,928 | 528,720 | ||||||
Net increase (decrease) in cash
|
153,276 | (1,465 | ) | |||||
Cash, beginning of period
|
2,057 | 5,085 | ||||||
Cash, end of period
|
$ | 155,333 | $ | 3,620 | ||||
Supplemental disclosures:
|
||||||||
Cash paid during the year for:
|
||||||||
Interest
|
$ | 113 | $ | 20,432 |
1.
|
Nature of operations
|
2.
|
Liquidity
|
3.
|
Summary of significant accounting policies
|
Computers and office equipment
|
5 years
|
Furniture and fixtures
|
7 years
|
4.
|
Property and equipment
|
September 30, 2011
|
||||
Capitalized leases
|
$ | 248,077 | ||
Equipment
|
206, 924 | |||
455,001 | ||||
Less: accumulated depreciation
|
(332,242 | ) | ||
$ | 63,548 |
5.
|
Notes Payable—Related Party Shareholders
|
6.
|
Notes Payable
|
7.
|
Intellectual Property
|
Description
|
September 30, 2011
|
|||
Patents pending and developed technology
|
$ | 758,922 | ||
Trademarks and other
|
189,072 | |||
Total
|
947,994 | |||
Less: Accumulated depreciation
|
(947,994 | ) | ||
Unamortized intellectual property
|
$ | - |
8.
|
Income Taxes
|
September 30, 2011
|
December 31, 2010
|
|||||||
Deferred tax asset
|
||||||||
Net operating loss carryforwards
|
$ | 18,400,000 | $ | 18,400,000 | ||||
Deferred tax liability
|
18,400,000 | 18,400,000 | ||||||
Less: Valuation allowance
|
(18,400,000 | ) | (18,400,000 | ) | ||||
Net deferred tax asset
|
$ | - | $ | - |
September 30, 2011
|
December 31, 2010
|
|||||||
Statutory federal income tax expense
|
(34 | ) % | (34 | ) % | ||||
State and local income tax
|
(4 | ) | (4 | ) | ||||
Valuation allowance
|
38 | 38 | ||||||
- | % | - | % |
9.
|
Common Stock
|
10.
|
Preferred stock
|
1.
|
Upon a Change of Control Event or an equity raise for the company, or its subsidiaries, of Twenty million dollars ($20,000,000) or greater, and at the discretion of the New Control party or equity party either:
|
a.
|
Cash redemption with an 8% per annum accrued interest rate, or
|
b.
|
Stock conversion redemption with a 50% premium to the preceding Twenty (20) day average closing price of the Common Stock prior to a Change of Control Event or equity infusion as described above.
|
c.
|
Any combination of 1(a) or 1(b) above.
|
2.
|
Conversion rights in to the Common Stock after Two Years from issue with a Twenty Five (25%) discount to the preceding Twenty (20) day average closing price of the Common Stock.
|
11.
|
Stockholders’ Equity
|
12.
|
Capital Lease - Future Minimum Lease Payments
|
13.
|
Related Party
|
14.
|
Restatement
|
Consolidated Balance Sheet at June 30, 2011
|
||||||||||||
Original
|
Change
|
Restated
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||
ASSETS | ||||||||||||
Current assets
|
||||||||||||
Cash
|
$ | 420,051 | $ | - | $ | 420,051 | ||||||
Accounts receivable
|
29,802 | 29,802 | ||||||||||
Prepaid expense
|
140,415 | 140,415 | ||||||||||
Accrued revenue
|
31,306 | 31,306 | ||||||||||
Total current assets
|
621,574 | - | 621,574 | |||||||||
Property and equipment, net of accumulated depreciation
|
63,548 | 63,548 | ||||||||||
Other assets
|
||||||||||||
Advance payments for contractual obligations
|
197,658 | 197,658 | ||||||||||
Security deposit
|
- | - | ||||||||||
Total other assets
|
197,658 | - | 197,658 | |||||||||
Total assets
|
$ | 882,780 | $ | - | $ | 882,780 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
Current liabilities
|
||||||||||||
Note payable related party shareholders
|
$ | - | $ | - | $ | - | ||||||
Note payable
|
400,000 | 400,000 | ||||||||||
Current portion of capital lease payable
|
- | 0 | ||||||||||
Accounts payable and accrued expenses
|
507,836 | 507,836 | ||||||||||
Deferred revenue
|
334,457 | 334,457 | ||||||||||
Total current liabilities
|
1,242,293 | - | 1,242,293 | |||||||||
Deferred revenue
|
488,442 | - | 488,442 | |||||||||
Total liabilities
|
1,730,735 | - | 1,730,73 | |||||||||
Temporary equity
|
||||||||||||
Preferred stock, $.001 par value, 5,000,000 shares authorized,
|
||||||||||||
3,025,000 shares issued and 3,000,000 outstanding at June 30, 2011
|
- | 3,025 | 3,025 | |||||||||
Additional paid-in capital
|
- | 5,769,279 | 5,769,279 | |||||||||
5,772,304 | 5,772,304 | |||||||||||
Stockholders' equity
|
||||||||||||
Common stock, $.001 par value; 250,000,000 authorized, 133,347,479
|
||||||||||||
and 108,702,874 shares issued and outstanding at June 30, 2011
|
||||||||||||
and December 31, 2010, respectively
|
133,448 | 133,448 | ||||||||||
Preferred stock, $.001 par value, 5,000,000 shares authorized,
|
||||||||||||
3,025,000 shares issued and 3,000,000 outstanding at June 30, 2011
|
3,025 | (3,025 | - | |||||||||
Additional paid-in capital
|
63,248,502 | (5,700,128 | ) | 57,548,374 | ||||||||
Treasury stock, 25,000 shares of preferred, at cost
|
(25,931 | ) | (25,931 | ) | ||||||||
Accumulated defcit
|
(64,206,999 | ) | (69,151 | ) | (64,276,150 | ) | ||||||
Total stockholders' equity
|
(847,955 | ) | (5,772,304 | ) | (6,620,259 | ) | ||||||
Total liabilities and stockholders' equity
|
$ | 882,780 | $ | - | $ | 882,780 |
Consolidated Statement of Operations
|
Consolidated Statement of Operations
|
|||||||||||||||||||||||
For the Three Months ended June 30, 2011
|
For the Six Months ended June 30, 2011
|
|||||||||||||||||||||||
Original
|
Change
|
Restated
|
Original
|
Change
|
Restated
|
|||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||||
Sales
|
$ | 473,321 | $ | - | $ | 473,321 | $ | 766,472 | $ | - | $ | 766,472 | ||||||||||||
Cost of sales
|
220,935 | 220,935 | 371,088 | 371,088 | ||||||||||||||||||||
Gross profit
|
252,386 | - | 252,386 | 395,384 | - | 395,384 | ||||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Selling and general and administrative
|
564,724 | 564,724 | 931,962 | 931,962 | ||||||||||||||||||||
Depreciation and amortization
|
18,277 | 18,277 | 36,322 | 36,322 | ||||||||||||||||||||
Total expenses
|
583,001 | - | 583,001 | 968,284 | - | 968,284 | ||||||||||||||||||
Net operating income
|
(330,615 | ) | - | (330,615 | ) | (572,900 | ) | - | (572,900 | ) | ||||||||||||||
Other income (expense)
|
||||||||||||||||||||||||
Interest income (expense)
|
69,151 | (69,151 | ) | - | 63,256 | (69,151 | ) | (5,895 | ) | |||||||||||||||
Total other income (expense)
|
69,151 | (69,151 | ) | - | 63,256 | (69,151 | ) | (5,895 | ) | |||||||||||||||
Net income (loss) before income taxes
|
(261,464 | ) | (69,151 | ) | (330,615 | ) | (509,644 | ) | (69,151 | ) | (578,795 | ) | ||||||||||||
Provision for income taxes
|
- | - | - | - | - | - | ||||||||||||||||||
Net income (loss)
|
$ | (261,464 | ) | $ | (69,151 | ) | $ | (330,615 | ) | $ | (509,644 | ) | $ | (69,151 | ) | $ | (578,795 | ) | ||||||
Net loss per weighted share,
|
||||||||||||||||||||||||
basic and fully diluted
|
$ | (0.0020 | ) | $ | - | $ | (0.0025 | ) | $ | (0.0044 | ) | $ | - | $ | (0.0050 | ) | ||||||||
Weighted average number of common
|
||||||||||||||||||||||||
shares outstanding, basic and fully diluted
|
132,298,669 | - | 132,298,669 | 115,936,119 | - | 115,936,119 | ||||||||||||||||||
Consolidated Statement of Cash Flows
|
||||||||||||
For the six months ended June 30, 2011
|
||||||||||||
Original
|
Change
|
Restated
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||
Cash flows from operations
|
||||||||||||
Net income (loss)
|
$ | (509,644 | ) | $ | (69,151 | ) | $ | (578,795 | ) | |||
Adjustment to reconcile net loss to net cash:
|
||||||||||||
Depreciation and amortization
|
36,322 | 36,322 | ||||||||||
Expenses settled by issuance of common stock
|
128,128 | 128,128 | ||||||||||
Changes in operating assets and liabilities:
|
||||||||||||
- | - | |||||||||||
Accounts receivable
|
(29,802 | ) | (29,802 | ) | ||||||||
Deposits
|
1,046 | 1,046 | ||||||||||
Accounts payable and accrued expenses
|
45,112 | 69,151 | 114,263 | |||||||||
Accrued revenue
|
(13,407 | ) | (13,407 | ) | ||||||||
Prepaid expenses
|
(105,581 | ) | (105,581 | ) | ||||||||
Advance payments on contractual obligations
|
(142,103 | ) | (142,103 | ) | ||||||||
Deferred revenue
|
822,899 | 822,899 | ||||||||||
Net cash provided by (used for) operating activities
|
232,970 | - | 232,970 | |||||||||
Cash flows from investing activities
|
||||||||||||
Capital expenditures
|
(10,904 | ) | (10,904 | ) | ||||||||
Net cash provided by financing activities
|
(10,904 | ) | - | (10,904 | ) | |||||||
Cash flows from financing activities
|
||||||||||||
Issuance of common stock
|
200,000 | 200,000 | ||||||||||
Due to related party shareholders
|
- | - | ||||||||||
Proceeds from long-term borrowing
|
- | - | ||||||||||
Payments on capital lease obligation
|
(4,072 | ) | (4,072 | ) | ||||||||
Net cash provided by financing activities
|
195,928 | - | 195,928 | |||||||||
Net increase (decrease) in cash
|
417,994 | - | 417,994 | |||||||||
Cash, beginning of period
|
2,057 | 2,057 | ||||||||||
Cash, end of period
|
$ | 420,051 | $ | - | $ | 420,051 | ||||||
Supplemental disclosures:
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Interest
|
$ | 113 | $ | - | $ | 113 | ||||||
15.
|
Subsequent Events
|
Three Months ended September 30
|
|||||||||
2011
|
2010
|
% Change
|
|||||||
Sales
|
$
|
445,659
|
$
|
207,302
|
115. 0 %
|
||||
Cost of goods sold
|
202,774
|
113,108
|
79.3 %
|
||||||
Gross profit
|
242,884
|
94,194
|
157.9 %
|
||||||
Operating expenses:
|
|||||||||
Selling and general and administrative
|
406,994
|
288,868
|
40.9 %
|
||||||
Depreciation and amortization
|
21,711
|
27,457
|
( 20.9 %)
|
||||||
Total expenses
|
428,705
|
316,325
|
35.5 %
|
||||||
Net operating income
|
(185,821)
|
(222,131)
|
(16. 3% )
|
||||||
Interest (income) expense
|
0
|
6,078
|
(100%)
|
||||||
Net income (loss) before income taxes
|
(185,821)
|
(228,209)
|
( 18.6 %)
|
Nine Months ended September 30
|
|||||||||
2011
|
2010
|
% Change
|
|||||||
Sales
|
$
|
1,212,131
|
$
|
580,494
|
108.8 %
|
||||
Cost of goods sold
|
583,125
|
311,024
|
87.5 %
|
||||||
Gross profit
|
629,006
|
269,470
|
133.4 %
|
||||||
Operating expenses:
|
|||||||||
Selling and general and administrative
|
1, 329,694
|
907,712
|
46.5 %
|
||||||
Depreciation and amortization
|
58,034
|
82,372
|
( 29.6 %)
|
||||||
Total expenses
|
1, 387,728
|
990,084
|
40.2 %
|
||||||
Net operating income
|
(758, 722 )
|
(720,614)
|
5. 3 %
|
||||||
Interest (income) expense
|
5,895
|
20,432
|
( 71.2 %)
|
||||||
Net income (loss) before income taxes
|
( 764,617 )
|
(741,046)
|
( 3.2 %)
|
Exhibit No.
|
Title of Document
|
|
3.1
|
Articles of Incorporation of the Company effective as of January 1, 1996, as amended by the Articles of Amendment dated as of January 9, 1996 (1)
|
|
3.2
|
Bylaws of the Company (1)
|
|
3.3
|
Articles of Amendment of the Articles of Incorporation of IO World Media Corporation filed June 1, 2001 (2)
|
|
3.4
|
Articles of Amendment of the Articles of Incorporation of PowerCerv Corporation for Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock filed August 31, 2001 (2)
|
|
3.5
|
Amendment to the Articles of Incorporation of PowerCerv Corporation dated December 21, 2005 (3)
|
|
3.6
|
Amendment to the Articles of Incorporation, effective as of April 28, 2011 (2)
|
|
31.1
|
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
32.1
|
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
|
EX-101.INS
|
XBRL INSTANCE DOCUMENT
|
|
EX-101.SCH
|
XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
|
|
EX-101.CAL
|
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
|
|
EX-101.DEF
|
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
|
|
EX-101.LAB
|
XBRL TAXONOMY EXTENSION LABELS LINKBASE
|
|
EX-101.PRE
|
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
|
1.
|
Incorporated herein by reference to the Company’s Registration Statement on Form S-1 (File No. 333-00250).
|
2.
|
Incorporated herein by reference to the Company’s Quarterly Report on Form 10-Q as filed with the SEC on August 8, 2011.
|
3.
|
Incorporated herein by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on April 21, 2011.
|
IOWORLDMEDIA, INCORPORATED | |||
Date: June 12, 2012
|
By:
|
/s/ Thomas Bean | |
Thomas Bean | |||
Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors | |||
(1)
|
I have reviewed this amended quarterly report on Form 10-Q/A of ioWorldMedia, Incorporated for the quarter ended September 30, 2011, as filed with the Securities and Exchange Commission on the date hereof;
|
||
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
(4)
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
d)
|
Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
|
||
(5)
|
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
/s/ Thomas Bean | |
Thomas Bean
|
||
Chief Executive Officer and Chief Financial Officer
|
||
(Principal Executive Officer and Principal Financial Officer)
|
/s/ Thomas Bean | |
Thomas Bean
|
|
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)
|
|
Date: June 12, 2012
|
Summary of significant accounting policies
|
9 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Sep. 30, 2011
|
|||||||
Accounting Policies [Abstract] | |||||||
Summary of significant accounting policies |
Basis of Presentation and Principles of Consolidation
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, Radioio, SearchPlay, ioBusinessMusic and Radioio Live. All intercompany balances and transactions have been eliminated in consolidation.
The information furnished in this Quarterly Report reflects all adjustments consisting of only normal recurring adjustments, which are in the opinion of management necessary for a fair presentation of the results for the interim periods. The results of operations for the nine months ended September 30, 2011 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2011.
These financial statements were approved by management and available for issuance on November 10, 2011. Subsequent events have been evaluated through this date.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities at the date of the financial statements, as well as their related disclosures. Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers short-term interest bearing investments with initial maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash in banks, free credit on investment accounts and money market accounts.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount. Any allowance for doubtful accounts is the Company’s best estimate of the amount of probable losses to the Company’s existing accounts receivable. No allowance for doubtful accounts was recorded for the quarter ended September 30, 2011.
Accrued Revenue
Accrued revenues represent estimates of ad revenue, based on ad runs, expected collections on those runs and reports of expected amounts to be paid by third parties placing ads.
Securities Owned
All securities owned are valued at market and unrealized gains and losses are reflected in revenues.
Property and Equipment
Equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance are expensed as incurred while betterments and improvements are capitalized.
The Company provides for depreciation and amortization over the following estimated useful lives:
Long-Lived Assets
In accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360 “Property, Plant, and Equipment,” the Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. There were no impairment charges during the nine month periods ended September 30, 2011 and 2010.
Revenue recognition
The Company derives revenue primarily from premium listener subscription plans and from advertising. The Company offers a number of subscription plans on a monthly and annual basis. Revenue from subscribers is recognized on a monthly pro-rata basis over the life of the subscription beginning January 1, 2011 effective with the launch of Radioio Live and the material level of annual and multi-year subscriptions sold. The subscriptions collected in advance are recorded as Deferred Revenue with the portion to be earned over the upcoming year classified as a current liability and the portion to be earned after September 30, 2012 classified as a long term liability. Prior to January 1, 2011 subscription revenue was recognized as received from subscribers.
Advertising revenue is recognized in the period in which the advertisement is broadcast or run on the Company’s website.
Income Taxes
The Company files a consolidated income tax return with its subsidiaries. The Company accounts for income taxes in accordance with FASB ASC Topic 740 “Income Taxes”, which requires accounting for deferred income taxes under the asset and liability method. Deferred income tax assets and liabilities are computed for the difference between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on the enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.
The determination of the Company’s provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in the Company’s financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from tax authorities. When facts and circumstances change, the Company reassesses these probabilities and records any changes in the financial statements as appropriate. Accrued interest and penalties related to income tax matters are classified as a component of income tax expense.
In accordance with GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company files an income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. state and local jurisdictions. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce stockholders’ equity. This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities. It must be applied to all existing tax positions upon initial adoption and the cumulative effect, if any, is to be reported as an adjustment to stockholder’s equity as of January 1, 2009. Based on its analysis, the Company has determined that the adoption of this policy did not have a material impact on the Company’s financial statements upon adoption. However, management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof.
Interest and Penalty Recognition on Unrecognized Tax Benefits
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Comprehensive Income
The Company complies with FASB ASC Topic 220, “Comprehensive Income,” which establishes rules for the reporting and display of comprehensive income (loss) and its components.
Fair Value of Financial Instruments
The fair values of the Company’s assets and liabilities that qualify as financial instruments under FASB ASC Topic 825, “Financial Instruments,” approximate their carrying amounts presented in the accompanying consolidated statements of financial condition at September 30, 2011 and December 31, 2010.
Loss Per Common Share
The Company complies with the accounting and disclosure requirements of FASB ASC 260, “Earnings Per Share.” Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period. The calculation of diluted net loss per share excludes the conversion of any convertible debt obligations into common or preferred stock as of September 30, 2011 and 2010, respectively, since the effect of conversion is anti-dilutive.
Stock-Based Compensation
The Company complies with FASB ASC Topic 718 “Compensation – Stock Compensation,” which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award the requisite service period (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. No stock-based compensation expense under FASB ASC 718 was recorded during the nine month periods ended September 30, 2011 and 2010.
Valuation of Investments in Securities at Fair Value—Definition and Hierarchy
FASB ASC Topic 820 “Fair Value Measurements and Disclosures” provides a framework for measuring fair value under generally accepted accounting principles in the United States and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. FASB ASC Topic 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations, as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined.
Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
Valuation Techniques
The Company values investments in securities that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their last sales price as of the last business day of the reporting period. At September 30, 2011 and December 31, 2010, the Company had no investments classified as securities owned on the consolidated balance sheets.
Certificate of Deposits
The fair values of the bank certificate of deposits are based on the face value of the certificate of deposits.
Recently Adopted Accounting Pronouncements
In December 2010, FASB issued ASC ASU 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Topic 350) — Intangibles — Goodwill and Other.” ASU 2010-28 amends the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts and requires performing Step 2, if qualitative factors indicate that it is more likely than not that goodwill impairment exists. The amendments to this Update are effective for the Company in the first quarter of 2011. Any impairment to be recorded upon adoption will be recognized as an adjustment to our beginning retained earnings. The adoption of ASU 2010-28 did not have any financial impact on the consolidated financial statements.
In January 2010, the FASB issued Accounting Standards Update 2010-06, “Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements” (ASU 2010-06), to require new disclosures related to transfers into and out of Levels 1 and 2 of the fair value hierarchy and additional disclosure requirements related to Level 3 measurements. The guidance also clarifies existing fair value measurement disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The additional disclosure requirements are effective for the first reporting period beginning after December 15, 2009, except for the additional disclosure requirements related to Level 3 measurements, which are effective for fiscal years beginning after December 15, 2010. The adoption of the additional requirements did not have any financial impact on the Company’s consolidated financial statements.
In December 2009, the FASB issued Accounting Standards Update (ASU) 2009-17, “Consolidations (FASB ASC Topic 810) - Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities,” which codifies FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). ASU 2009-17 represents a revision to former FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities,” and changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. ASU 2009-17 also requires a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity will be required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. ASU 2009-17 is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009, or the Company’s fiscal year beginning January 1, 2010. Early application is not permitted. We have not yet determined the impact, if any, which of the provisions of ASU 2009-15 may have on the Company’s consolidated financial statements.
On October 1, 2009, the Company adopted FASB ASC Topic 820-10 (ASC 820-10), “Fair Value Measurements and Disclosures,” for nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption of ASC 820-10 did not have a material impact on the Company’s consolidated financial statements.
In August 2009, the FASB issued Accounting Standards Update 2009-05 (ASU 2009-05), “Fair Value Measurements and Disclosures (Topic 820) – Measuring Liabilities at Fair Value,” to amend FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” to provide guidance on the measurement of liabilities at fair value. The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles. The Company adopted the guidance in 2009, and there was no material impact on the Company’s consolidated financial statements or related footnotes.
In June 2009, the FASB issued the FASB Accounting Standards Codification (the “Codification”) and a new Hierarchy of Generally Accepted Accounting Principles which establishes only two levels of GAAP: authoritative and nonauthoritative. The Codification is now the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP, except for rules and interpretive releases of the SEC, which are additional sources of authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. The Codification is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Company adopted the new guidelines and numbering system prescribed by the Codification when referring to GAAP in the third quarter of 2009. The application of the Codification did not have an impact on the Company’s consolidated financial statements; however, all references to authoritative accounting literature will now be references in accordance with the Codification.
In May 2009, the FASB issued authoritative guidance for subsequent events, now codified as FASB ASC Topic 855, “Subsequent Events,” which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The guidance sets forth the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements. The guidance also requires the disclosure of the date through which an entity has evaluated subsequent events and whether this date represents the date the financial statements were issued or were available to be issued. The Company adopted this guidance in 2009 with no significant impact on the Company’s consolidated financial statements or related footnotes.
In April 2009, the FASB provided additional guidance for estimating fair value in accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” when the volume and level of activity for the asset or liability have significantly decreased. This additional guidance re-emphasizes that regardless of market conditions the fair value measurement is an exit price concept and clarifies and includes additional factors to consider in determining whether there has been a significant decrease in market activity for an asset or liability. This guidance also provides additional clarification on estimating fair value when the market activity for an asset or liability has declined significantly. The scope of this guidance does not include assets and liabilities measured under quoted prices in active markets. This guidance is applied prospectively to all fair value measurements where appropriate and will be effective for interim and annual periods ending after June 15, 2009. The adoption of the provisions of this guidance did not have any material impact on the Company’s consolidated financial statements.
In April 2009, FASB issued FSP FAS 107-1 and APB 28-1, now codified in FASB ASC Topic 825-10-65, “Interim Disclosures about Fair Value of Financial Instruments,” which amends U.S. GAAP to require entities to disclose the fair value of financial instruments in all interim financial statements. The additional requirements of this guidance also require disclosure of the method(s) and significant assumptions used to estimate the fair value of those financial instruments. Previously, these disclosures were required only in annual financial statements. The additional requirements of this guidance are effective for interim reporting periods ending after June 15, 2009. The adoption of the additional requirements did not have any financial impact on the Company’s consolidated financial statements.
In April, 2009, the FASB issued ASC Topic 320-10 (ASC 320-10), “Recognition and Presentation of Other-Than-Temporary Impairments,” which provides additional guidance designed to create greater clarity and consistency in accounting for and presenting impairment losses on securities. ASC Topic 320-10 provides greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. This statement also requires more timely disclosures and an increase in disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The Company adopted these statements April 1, 2009 without material effect on its consolidated financial statements.
On January 1, 2009, the Company adopted FASB ASC Topic 805 (ASC 805), “Business Combinations,” which generally requires an acquirer to recognize the identifiable assets acquired, liabilities assumed, contingent purchase consideration and any noncontrolling interest in the acquiree at fair value on the date of acquisition. It also requires an acquirer to recognize as expense most transaction and restructuring costs as incurred, rather than include such items in the cost of the acquired entity. For the Company, ASC 805 applies prospectively to business combinations for which the acquisition date is on or after October 1, 2009. The adoption of ASC 805 did not have a material impact on the Company’s consolidated financial statements.
Concentration of Credit Risk
The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes the Company is not exposed to any significant credit risk related to cash and cash equivalents.
Going Concern
The accompanying financial statements have been prepared assuming that the company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Currently, the Company has a minimum cash balance available for the payment of ongoing operating expenses, and its operations are not providing a source of funds from revenues sufficient to cover its operational costs to allow it to continue as a going concern. The continued operations of the Company are dependent upon generating profits from operations and raising sufficient capital through sales of Common Stock or issuance of debt securities, which would enable the Company to carry out its business plan.
In the event the Company does not generate sufficient funds from revenues or financing through the issuance of Common Stock or from debt financing, it may be unable to fully implement its business plan and/or pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities. |
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