10-Q/A 1 bcyp10q1_2013amendment.htm FORM 10-Q/A bcyp-10qq12013  

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Mark One)

 

 x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

 For the quarterly period ended March 31, 2013

 

 

                                                                                                                                                       OR

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

                                                           For the transition period from                                      to                                    


Commission File Number:  000-53981

 

BLUE CALYPSO, INC.

 (Exact name of registrant as specified in its charter)

 

Delaware

 

20-8610073

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

19111 North Dallas Parkway, Suite 200

Dallas, TX

 

75287

(Address of principal executive offices)

 

(Zip Code)

 

(972) 695-4776

 (Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes  o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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).  x Yes  o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one):

 

 Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer o

(Do not check if a smaller reporting company)

 

Smaller reporting company x

 

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o Yes  x No

 

 As of May 13, 2013 there were 132,838,336 shares of the issuer’s common stock outstanding.

 


 

 

EXPLANATORY NOTE

 

This Amendment No. 1 hereby amends our Quarterly Report on Form 10-Q (“Form 10-Q/A”) for the period ended March 31, 2013, which was originally filed with the Securities and Exchange Commission on May 15, 2012 (the “Original 10-Q”). This Amendment is being filed mainly to include restated financial statements as described in Note 2, Restatement of Previously Issued Financial Statements of the Notes to the condensed consolidated financial statements. The condensed consolidated financial statements are being restated to reflect the following:

 

On August 26, 2013, after consulting with the Company’s Audit Committee and with the Company’s newly appointed Independent Registered Public Accounting Firm, Marcum LLP, management changed its accounting for certain of the Company’s warrants previously issued in connection with preferred stock and common stock and conversion features related to previously issued convertible notes which were recorded in periods prior to the engagement of Marcum LLP in order to comply with US GAAP. Such warrants and the embedded conversion options should have been reflected as liabilities on the consolidated balance sheets included in the Original 10-Q, rather than as a component of equity.

 

Specifically, the change in treatment of the warrants and the conversion feature embedded in certain convertible notes resulted in a change to the equity, and liability portions of the consolidated balance sheets as of March 31, 2013 and resulted in a loss on the fair value of the derivative liabilities which impacted our results of operations and earnings (loss) per share as reported in our Original 10-Q. In addition, management determined that the Company had not properly accreted compensation expense for certain restricted stock grants for the period June1, 2012 to March 31, 2013. 

 

In addition, the Company has concluded that these accounting changes constitue an additional deficiency in the Company’s internal control over financial reporting as of March 31, 2013 and that its disclosure controls and procedures were not effective as of March 31, 2013.

 

The following sections of this Form 10-Q/A have been amended to reflect the restatement:

 

·         Part I – Item 1 – Financial Statements and Notes to the Condensed Consolidated Financial Statements;

·         Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations; and

·         Part I – Item 4 – Controls and Procedures.

 

For the convenience of the reader, this Form 10-Q/A sets forth the Original 10-Q in its entirety, as amended by, and to reflect the restatements, as described above. Except as described above, the Company has not modified or updated disclosures presented in this Amendment No. 1. Accordingly, this Amendment No. 1 does not reflect events occurring after the Original 10-Q or modify or update those disclosures affected by subsequent events, except as specifically referenced herein. Information not affected by the restatements is unchanged and reflects the disclosures made at the time of filing of the Original 10-Q.

 

This Form 10-Q/A has been signed as of a current date and all certifications of the Company’s Chief Executive Officer/Principal Executive Officer and Chief Financial Officer/Chief Accounting Officer and Principal Financial Officer are given as of a current date. Accordingly, this Form 10-Q/A should be read in conjunction with the Company’s filings with the Securities and Exchange Commission subsequent to the filing of the Original 10-Q, including any amendments to those filings.

 

 

 


 

 

 


Part 1 – Item 1

 

BLUE CALYPSO INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

(Restated)

 

 

 

 

 

 

 

March 31,

2013

 

December 31,

2012

 

Unaudited (Restated)

 

Audited (Restated)

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

64,593

 

 

218,798

Accounts receivable

 

0

 

 

43,868

Prepaid expenses

 

18,988

 

 

3,052

Total current assets

 

83,581

 

 

265,718

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $8,417 and 7,153 in 2013 and 2012 respectively

 

15,364

 

 

16,628

 

 

 

 

 

 

Capitalized software development costs, net of accumulated  amortization of $419,923 and $352,957 in 2013 and 2012, respectively

 

914,822

 

 

923,449

 

 

 

 

 

 

Total assets

$

1,013,767

 

$

1,205,795

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

75,635

 

 

84,947

Accrued liabilities

 

440,095

 

 

186,508

Unearned revenue

 

 

 

10,000

Notes payable - LMD

 

 

 

465,000

Notes payable-affiliate (net of discount of $244,705)

 

 

 

301,253

Warrant liability

2,638,876

10,854,204

      Debt liability- derivative

120,841

109,802

Total current liabilities

 

3,275,447

 

 

12,011,714

Long-term Liabilities

 

 

 

 

 

Notes payable - LMD

 

515,000

 

 

-

Note payable - debentures (net of discount of $200,535 and $213,500 in 2013 and 2012, respectively)

 

390,484

 

 

236,500

Commitments and contingencies (note 10)

 

 

 

-

 

 

 

 

 

Total liabilities

 

4,180,931

 

 

12,248,214

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

Series A convertible preferred stock, par value $.0001 per share (Authorized  5,000,000 shares; issued and outstanding 1,700,000 shares)

 

170

 

 

170

Common stock, par value $.0001 per share (Authorized  680,000,000 shares; issued and outstanding shares of 125,135,113 as of 3/31/13 and 125,135,113 shares at 12/31/12 respectively)

 

12,514

 

 

12,514

Additional paid in capital

 

10,568,951

 

 

9,533,095

Deferred compensation

 

(2,938,713)

 

 

(2,980,218)

Accumulated deficit during development stage

$

(10,810,086)

 

$

(17,607,980)

Total stockholders' equity (deficit)

 

(3,167,164)

 

 

(11,042,419)

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficit)

$

1,013,767

 

$

1,205,795

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

1


 

 

BLUE CALYPSO INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2013 (RESTATED) AND 2012 (RESTATED) AND THE PERIOD SEPTEMBER 11, 2009 (DATE OF INCEPTION) TO MARCH 31, 2013 (RESTATED)

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

Three months

ended
March 31,
2013

 

Three months

 ended
March 31,
2012

 

FROM

INCEPTION
SEP 11, 2009 TO

March 31, 2013

 

 

 

 

 

 

 

 

(Restated)

 

 

(Restated)

 

 

(Restated)

REVENUE

$

10,000

 

$

584

 

$

136,211

COST OF REVENUE

 

4,323

 

 

92,707

 

 

270,856

GROSS LOSS

 

5,677

 

 

(92,123)

 

 

(134,645)

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Sales and marketing

 

125,957

 

 

243,425

 

 

1,414,311

General and administrative

 

923,151

 

 

962,626

 

 

6,819,387

Depreciation and Amortization

333,585

55,341

1,266,764

1,382,693

1,261,392

9,500,462

LOSS FROM OPERATIONS

 

(1,377,016)

 

 

(1,353,515)

 

 

(9,635,107)

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

15

Interest expense

 

(41,308)

 

 

(5,700)

 

 

(774,561)

     Change in fair value of derivative liabilities

8,216,218 

 

 

(426,580)

 

 

(400,433)

 

8,174,910

   

(432,280)

   

(1,174,979)

INCOME OR (LOSS) BEFORE INCOME TAX PROVISION

 

6,797,894

 

 

(1,785,795)

 

 

(10,810,086)

 

 

 

 

 

 

 

 

 

INCOME TAX PROVISION

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

NET INCOME OR (LOSS)

 

6,797,894

 

 

(1,785,795)

 

 

(10,810,086)

 

 

 

 

 

 

 

 

 

Income or Loss per share:

 

 

 

 

 

 

 

 

 Basic  

$

0.05

 

$

     (0.01)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding

 

 

 

 

 

 

 

 

Basic

 

130,893,388

 

 

127,003,882

 

 

 

 Income or Loss per share:

 Diluted

$

0.03

$

(0.01)

 Weighted Average Shares Outstanding

 

 

 

 

 Diluted

 

205,355,014

 

127,003,882

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

2



 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

PERIOD FROM SEPTEMBER 11, 2009 (DATE OF INCEPTION) TO MARCH 31, 2013

(UNAUDITED) (RESTATED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

Deficit During

Development

Stage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

Stockholders'

Equity

 (Deficit)

 

Preferred Stock

 

Common Stock

 

Additional

Paid-In

Capital

 

Deferred

Compensation

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance, September 11, 2009

-

 

$

-

 

-

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

Net Loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(23,653)

 

 

(23,653)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, December 31, 2009

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(23,653)

 

 

(23,653)

Shares issued at $.0001 per share-3/10/2010

-

 

 

-

 

65,448,269

 

 

6,545

 

 

(5,525)

 

 

-

 

 

-

 

 

1,020

Affiliate payable converted to equity- 3/31/10

-

 

 

-

 

-

 

 

-

 

 

21,958

 

 

-

 

 

-

 

 

21,958

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(5,296)

 

 

(5,296)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, March 31, 2010

-

 

 

-

 

65,448,269

 

 

6,545

 

 

16,433

 

 

-

 

 

(28,949)

 

 

(5,971)

Restricted shares issued- 6/10/2010

-

 

 

-

 

5,133,198

 

 

513

 

 

(433)

 

 

(80)

 

 

-

 

 

-

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(82,668)

 

 

(82,668)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, June 30, 2010

-

 

 

-

 

70,581,467

 

 

7,058

 

 

16,000

 

 

(80)

 

 

(111,617)

 

 

(88,639)

Restricted shares issued- 9/20/2010

-

 

 

-

 

1,604,124

 

 

160

 

 

(135)

 

 

(25)

 

 

-

 

 

-

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(115,880)

 

 

(115,880)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, September 30, 2010

-

 

 

-

 

72,185,591

 

 

7,219

 

 

15,864

 

 

(105)

 

 

(227,497)

 

 

(204,519)

Restricted shares vested as of 12/31/10

-

 

 

-

 

-

 

 

-

 

 

-

 

 

22

 

 

-

 

 

22

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(185,191)

 

 

(185,191)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, December 31, 2010

-

 

 

-

 

72,185,591

 

 

7,219

 

 

15,864

 

 

(83)

 

 

(412,688)

 

 

(389,688)

Restricted shares issued- 1/10/11

-

 

 

-

 

1,283,299

 

 

128

 

 

(108)

 

 

(20)

 

 

-

 

 

-

Additional Paid-In Capital

-

 

 

-

 

-

 

 

-

 

 

10

 

 

-

 

 

-

 

 

10

Restricted shares vested as of 03/31/11

-

 

 

-

 

-

 

 

-

 

 

-

 

 

12

 

 

-

 

 

12

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(174,767)

 

 

(174,767)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, March 31, 2011

-

 

 

-

 

73,468,891

 

 

7,347

 

 

15,766 

 

 

(91)

 

 

(587,455)

 

 

(564,433)

Restricted shares issued- 4/29/11

-

 

 

-

 

1,283,299

 

 

128

 

 

(108)

 

 

(20)

 

 

-

 

 

-

Restricted shares vested as of 06/30/11

-

 

 

-

 

-

 

 

-

 

 

-

 

 

15

 

 

-

 

 

15

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(235,432)

 

 

(235,432)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, June 30, 2011

-

 

 

-

 

74,752,190

 

 

7,475

 

 

15,658

 

 

(96)

 

 

(822,887)

 

 

(799,850)

Restricted shares cancelled 7/25/11

-

 

 

-

 

(2,887,423)

 

 

(288)

 

 

192

 

 

96

 

 

-

 

 

-

Restricted shares vested as of 09/30/11

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Conversion of Debt 9/1/11

-

 

 

-

 

28,135,234

 

 

2,814

 

 

1,562,274

 

 

-

 

 

-

 

 

1,565,088

Reverse merger shares issued 9/1/11

-

 

 

-

 

24,974,700

 

 

2,497

 

 

(2,497)

 

 

-

 

 

-

 

 

-

Restricted shares issued- 9/8/11

-

 

 

-

 

320,825

 

 

32

 

 

21,752

 

 

(21,784)

 

 

-

 

 

(0)

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(621,271)

 

 

(621,271)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, September 30, 2011

-

 

 

-

 

125,295,526

 

 

12,530

 

 

1,597,379

 

 

(21,784)

 

 

(1,444,158)

 

 

143,967

Additional paid-In capital-compensation cxpense

-

 

 

-

 

-

 

 

-

 

 

4,239

 

 

-

 

 

-

 

 

4,239

Conversion of debt to pref stock 10/17/11

1,500,000

 

 

150

 

-

 

 

-

 

 

1,499,850

 

 

-

 

 

-

 

 

1,500,000

Restricted shares vested as of 10/1/11

-

 

 

-

 

-

 

 

-

 

 

-

 

 

5,446

 

 

-

 

 

5,446

Restricted shares issued- 12/30/11

-

 

 

-

 

1,550,115

 

 

-

 

 

1,565,461

 

 

(1,565,616)

 

 

-

 

 

-

Allocation of proceeds   from warrants – 12/31/11  

-

-

-

-

(712,828)

-

-

(712,828)

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(11,088,163)

 

 

(11,088,163)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, December 31, 2011

1,500,000

 

$

150

 

126,845,641

 

$

12,685

 

$

3,954,101

 

 

$ (1,581,954)

 

$

(12,532,321)

 

$

(10,147,339)

Purchase of preferred stock

200,000

 

 

-

 

-

 

 

-

 

 

200,000

 

 

-

 

 

-

 

 

200,000

Restricted Shares Issued

-

200,000  

-

-

-

-

-

    Stock options - deferred income

-

    -   -     -     -     763,480     -     763,480

Allocation of proceeds from warrants – 3/31/12

-

-

-

-

(946,049)

-

-

(946,049)

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,785,795)

 

 

(1,785,795)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance, March 31, 2012

1,700,000

 

$

150

 

127,045,641

 

$

12,685

 

$

3,208,052 

 

$

(818,474)

 

$

(14,318,115)

 

$

(11,915,702)

Restricted shares issued

-

 

 

-

 

-

 

 

-

 

 

5,234,337 

 

 

(5,234,337)

 

 

-

 

 

-

Restricted shares cancelled

-

 

 

-

 

(1,700,115)

 

 

(155)

 

 

(1,565,461)

 

 

1,565,616

 

 

-

 

 

-

Restricted shares - unvested

-

 

 

-

 

(290,619)

 

 

(24)

 

 

(16,314)

 

 

16,338

 

 

-

 

 

 

Purchase of common stock - related to private offering

-

 

 

-

 

440,000

 

 

44

 

 

186,479 

 

 

-

 

 

-

 

 

186,523

Release of common stock from shareholder

-

 

 

-

 

(440,000)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

 

Stock options - deferred income

-

 

 

-

 

-

 

 

-

 

 

-

 

 

2,181,627

 

 

-

 

 

2,181,627

Recording of restricted stock - 6/30/12

-

-

-

-

145,398 

-

-

145,398  

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(979,769)

 

 

(979,769)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance June 30, 2012

1,700,000

 

$

150

 

125,054,907

 

$

12,550

 

$

7,192,491

 

$

(2,289,230)

 

$

(15,297,884)

 

$

(10,381,923)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-

Restricted shares - unvested

-

 

 

-

 

80,205

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Purchase of common stock - related to private offering

-

 

 

-

 

450,000

 

 

62

 

 

232,438

 

 

-

 

 

-

 

 

232,500

Release of common stock from shareholder

-

 

 

-

 

(450,000)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Stock options - deferred income

-

 

 

-

 

-

 

 

-

 

 

-

 

 

13,872

 

 

-

 

 

13,872

July 2012 warrant adjustment

-

-

-

-

(29,349)

-

-

(29,349)

Recording of restricted stock

-

-

-

-

436,194 

-

-

436,194 

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(856,619)

 

 

(856,619)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance September 30, 2012

1,700,000

 

$

150

 

125,135,112

 

$

12,612

 

$

7,831,774

 

$

(2,275,358)

 

$

(16,154,503)

 

$

(10,585,325)

Purchase of common stock - via AP settlements

-

 

 

-

 

1,068,105

 

 

107

 

 

354,788

 

 

-

 

 

-

 

 

354,895

Release of common stock from shareholder

-

 

 

-

 

(1,068,105)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Correction to reflect preferred stock amount

-

 

 

20

 

-

 

 

-

 

 

(20)

 

 

-

 

 

-

 

 

-

Purchase of common stock - related to private offering

-

 

 

-

 

10,000

 

 

(17)

 

 

(29,983)

 

 

-

 

 

-

 

 

(30,000)

Release of common stock from shareholder

-

 

 

-

 

(10,000)

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Stock options - deferred income

-

 

 

-

 

-

 

 

-

 

 

-

 

 

(753,254)

 

 

-

 

 

(753,254)

Cumulative correction - common stock

-

 

 

-

 

1

 

 

(188)

 

 

(42,760)

 

 

42,948

 

 

-

 

 

-

Beneficial conversion feature - notes payable

-

 

 

-

 

-

 

 

-

 

 

614,696

 

 

-

 

 

-

 

 

614,696

Value of warrants -note payable

-

 

 

-

 

-

 

 

-

 

 

416,528

 

 

-

 

 

-

 

 

416,528

Restricted shares vested as of 10/1/12

-

 

 

-

 

-

 

 

-

 

 

-

 

 

5,446

 

 

-

 

 

5,446

Recording of restricted stock

-

-

436,193 

-

-

436,193 

11/12 warrants

-

-

(21,755)

-

-

(21,755)

12/12 warrants

-

-

(26,367)

-

-

(26,367)

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,453,477)

 

 

(1,453,477)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance December 31, 2012

1,700,000

 

$

170

 

125,135,113

 

$

12,514

 

$

9,533,095

 

$

(2,980,218)

 

$

(17,607,980)

 

$

(11,042,419)

Purchase of common stock - via AP settlements

-

 

 

-

 

-

 

 

-

 

 

30,000

 

 

-

 

 

-

 

 

30,000

Stock options - deferred income

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

Conversion of Note Payable - Affiliate to Equity

-

 

 

-

 

-

 

 

-

 

 

552,995

 

 

41,505

 

 

-

 

 

594,500

Beneficial conversion feature - notes payable

-

 

 

-

 

-

 

 

-

 

 

16,667

 

 

-

 

 

-

 

 

16,667

Recording of restricted stock

436,194 

-

-

436,194 

Net loss

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

6,797,894 

 

 

6,797,894 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance March 31, 2013

1,700,000

 

$

170

 

125,135,113

 

$

12,514

 

$

 10,568,951

 

$

(2,938,713)

 

$

(10,810,086)

 

$

(3,167,164)

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

3


 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) (RESTATED)

 

 

 

 

 

 

 

 

 

 

Three months

ended

March 31,

2013
(Restated)

 

Three months

ended

March 31,

2012

(Restated)

 

FROM INCEPTION

SEP 11, 2009 TO

March 31, 2013

(Restated)

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net Income (loss)

$

6,797,894 

 

$

(1,785,795)

 

$

(10,810,086)

Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

 

 

used in operating activities:

 

 

 

 

 

 

 

-

Depreciation and amortization expense

 

68,229

 

 

55,341

 

 

995,941

Amortization of vested restricted stock and options and Deferred compensation

 

743,055

 

 

763,481

 

 

3,977,479

     Change in fair value of derivative liability

(8,216,218)

 

 

426,580  

 

400,433  

      Amortization of deferred debt discount

11,930  

 

 

-  

 

 

622,937  

(Increase) decrease in assets:

 

 

 

 

 

 

 

-

Accounts receivable

 

43,868

 

 

32,200

 

 

(0)

Prepaid expenses and other current assets

 

(15,936)

 

 

(2,841)

 

 

(18,988)

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

-

Accounts payable

 

(9,312)

 

 

46,003

 

 

75,635

Accounts payable-affiliate

 

-

 

 

(196,695)

 

 

21,958

Accrued expenses

 

253,587

 

 

(58,947)

 

 

443,682

Deferred revenue

 

(10,000)

 

 

(3,284)

 

 

-

Cash used in operating activities

 

(332,903)

 

 

(723,957)

 

 

(4,291,009)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Cash paid for software development

 

(58,338)

 

 

(176,973)

 

 

(1,232,763)

Cash paid for purchases of fixed assets

 

-

 

 

-

 

 

(23,781)

Cash used in investing activities

 

(58,338)

 

 

(176,973)

 

 

(1,256,544)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Contributed capital received

 

-

 

 

(155)

 

 

1,170

Increase in notes payable

 

207,036

 

 

350,693

 

 

1,667,995

Purchase of common stock

 

 

 

 

 

 

 

388,873

Purchase of preferred stock

 

-

 

 

-

 

 

200,000

Conversion of Notes Payable to equity

 

 

 

 

200,155

 

 

200,000

Conversion of AP to equity

 

30,000

 

 

 

 

 

3,154,108

Cash provided by financing activities

 

237,036

 

 

550,693

 

 

5,612,146

 

 

 

 

 

 

 

 

 

Net increase in cash

 

(154,205)

 

 

(350,237)

 

 

64,593

Cash at beginning of year

 

218,798

 

 

371,392

 

 

-

Cash at end of year

$

64,593

 

$

21,155

 

$

64,593

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

$

  -

 

$

-

 

$

-

Cash paid for taxes

$

-

 

$

-

 

$

-

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Conversion of notes payable and accounts payable -former affiliate to common stock

$

-

 

$

-

 

$

421,958

 Former affiliate payable converted to note payable

$

-

 

$

-

 

$

545,958

Conversion of notes payable to common and preferred stock

$

-

 

$

-

 

$

2,769,214

 Fair value of warrants issued in connection with preferred, common stock and notes payable

$

-

$

1,470,037

$

15,889,449

 Fair value of conversion option issued in connection with notes payable

$

-

$

-

$

787,192

 Fair value of warrants issued in settlement of accounts payable

$

-

$

-

$

45,206

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements


 

 

 


 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

1.      Organization and Nature of Business

 

Blue Calypso Holdings, Inc. (a development stage company) a Texas corporation (“BCHI”), was formed in February 2010 as an investment entity to hold a 100% single-member ownership interest in Blue Calypso, LLC, a Texas Limited Liability Company formed on September 11, 2009.  The companies are under common control and in February 2010 were merged for strategic operating purposes.

  

On September 1, 2011, BCHI executed a share exchange agreement and merged with a public shell company Blue Calypso Acquisition, Corp., a wholly-owned subsidiary of Blue Calypso, Inc. (formerly known as “JJ&R Ventures, Inc.”).  The Merger was accounted for as a reverse-merger and recapitalization in accordance with the generally accepted accounting principles in the United States.  BCHI is the acquirer for financial reporting purposes and Blue Calypso, Inc. is the acquired company.  Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the Merger will be those of BCHI and will be recorded at its historical cost basis. The operations after completion of the Merger include those of BCHI and Blue Calypso Inc.  Common stock and corresponding capital amounts of BCHI pre-merger have been retroactively restated as capital stock shares reflecting the exchange ratio in the Merger.  On December 16, 2011 Blue Calypso Holdings, Inc. was merged into its 100% sole-owner, Blue Calypso, Inc.

 

The Company is a mobile and social media marketing company that activates and measures branded word of mouth campaigns through consumers’ personal texts, posts and tweets between friends. The Company activates a friend to friend distribution of branded marketing campaigns by motivating brand loyalists to personally endorse and share these campaigns with their digital social streams. The Company compensates them for their reach with cash, prizes and VIP perks. Marketers enjoy the power of measured personal endorsements that generate buzz, ignite conversation, drive purchase intent, increase loyalty and attract new customers by leveraging the power of social influence.

 

2.  Restatement of Previously Issued  Financial  Statements

On August 26, 2013, after consulting with the Company’s Audit Committee, management changed its accounting for certain of the Company’s warrants previously issued in connection with preferred stock and common stock and conversion features related to previously issued convertible notes which were recorded in periods prior to the engagement of Marcum LLP in order to comply with US GAAP. Such warrants and the embedded conversion options should have been reflected as liabilities on the consolidated balance sheets included in the Original 10-Q, rather than as a component of equity.

Specifically, the change in treatment of the warrants and the conversion feature embedded in certain convertible notes resulted in a change to the equity and liability portions of the consolidated balance sheets as of March 31, 2013 and resulted in a loss on the fair value of the derivative liabilities which impacted our results of operations and earnings (loss) per share as reported in our Original 10-Q.

 

 

The effects of the revision on the accompanying balance sheet as of December 31, 2012 and March 31, 2013 is summarized below:

 

Condensed Consolidated Balance Sheet

December 31, 2012

 

 

 

 

 

 

 

 

 

As previously reported

 

Adjustment

 

Reference

 

As Restated

Assets

 $  1,205,795

 

 $               -  

 

 

 

 $  1,205,795

Current liabilities:
  Conversion option liability

                  -  

 

 109,802

 

(a)

 

109,802

  Warrant liabilities

                  -  

 

   10,854,204

 

(a)

 

   10,854,204

  Other current liabilities

1,047,708

 

0

 

 

 

     1,047,708

    Total current liabilities

1,047,708

 

10,964,006

 

 

 

12,011,714

Long term debt:

236,500

 

0

 

 

 

        236,500

    Total liabilities

1,284,208

 

10,964,006

 

 

 

12,248,214

Stockholders' deficiency
  Series A convertible preferred stock

               170

 

                  -  

 

 

 

               170

  Common stock

          12,514

 

                  -  

 

 

 

          12,514

  Additional paid in capital

   10,251,657

 

       (718,562)

 

 (a) 

 

     9,533,095

  Additional paid in capital - deferred compensation

    (2,980,218)

 

                  -  

 

 (a) 

 

    (2,980,218)

  Deficit accumulated during the development stage

    (7,362,536)

 

  (10,245,444)

 

 (a) 

 

  (17,607,980)

    Total stockholders’ deficiency

         (78,413)

 

  (10,964,006)

 

 

 

  (11,042,419)

            -  
Total liabilities and stockholders' deficiency

 $  1,205,795

 

 $               -  

 

 

 

 $  1,205,795

(a)     Reclassify cumulative effect of reclassifying warrants and conversion options with reset provisions as a liability and adjustment for accretion of stock based compensation.

 

Condensed Consolidated Balance Sheet

March 31, 2013

 

 

 

 

 

 

 

 

 

As previously reported

 

Adjustment

 

Reference

 

As Restated

Assets

 $  1,013,767

 

 $               -  

 

 

 

 $  1,013,767

Current liabilities:
  Conversion option liability

                  -  

 

        120,841

 

(a)

 

120,841

  Warrant liabilities

                  -  

 

     2,638,876

 

(a)

 

     2,638,876

  Other current liabilities

515,730

 

0

 

 

 

        515,730

    Total current liabilities

515,730

 

2,759,717

 

 

 

3,275,447

Long term debt:

905,484

 

0

 

 

 

        905,484

    Total liabilities

1,421,214

 

2,759,717

 

 

 

4,180,931

Stockholders' deficiency
  Series A convertible preferred stock

               170

 

                  -  

 

 

 

               170

  Common stock

          12,514

 

                  -  

 

 

 

          12,514

  Additional paid in capital

   10,851,318

 

       (282,367)

 

 (a) 

 

   10,568,951

  Additional paid in capital - deferred compensation

    (2,938,713)

 

                  -  

 

 (a) 

 

    (2,938,713)

  Deficit accumulated during the development stage

    (8,332,736)

 

    (2,477,350)

 

 (a) 

 

  (10,810,086)

    Total stockholders’ deficiency

       (407,447)

 

    (2,759,717)

 

 

 

    (3,167,164)

            

Total liabilities and stockholders' deficiency

 $  1,013,767

 

 $               -  

 

 

 

 $  1,013,767

(a)     Reclassify cumulative effect of reclassifying warrants and conversion options with reset provisions as a liability and adjustment for accretion of stock based compensation.

  


 

5


 

 

 

 


BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

2.  Restatement of Previously Issued Financial Statements, continued

 

The effects of the above described adjustments resulted in a change in the net gain or loss for the three months ended March 31, 2012 and March 31, 2013  and the period for the  inception to date through March  31, 2013.

 

Three 

 

Three 

 

Inception

 

Months 

 

Months 

 

to

 

Ended

 

Ended

 

Date

 

Mar 31, 2012

 

Mar 31, 2013

 

Mar 31, 2013

Net Loss  (as originally presented)

 $       (1,359,215)

 

 $         (970,200)

 

 $         (8,332,736)

Change in operating expenses

                           -  

 

            (436,194)

 

            (1,453,980)

Change in fair value of derivative liabilities

              (426,580)

 

          8,216,218

 

                (400,433)

Increase in interest expense related to derivative liabilities

                           -  

 

              (11,930)

 

                (622,937)

Net gain or loss (as restated)

 $       (1,785,795)

 

 $       6,797,894

 

 $       (10,810,086)

Net loss per share - basic and diluted (as restated)

 $                 (0.01)

 

 $                 0.05

Net loss per share - diluted (as restated)

 $                 (0.01)

 

 $                 0.03

Weighted average shares outstanding - basic

127,003,882

 

130,893,388

Weighted average shares outstanding diluted

127,003,882

 

204,722,215

 

3.      Summary of Significant Accounting Policies

 

Development Stage Company

 

The Company is a development stage company as defined by ASC 915 Development Stage Entities and is still devoting substantial efforts on establishing the business. Its principal operations have commenced but there has been no significant revenue thus far. All losses accumulated since inception, have been considered as part of the Company’s development stage activities.

 

Basis of Presentation  

 

The financial statements are stated in U.S. dollars and include the accounts of Blue Calypso, Inc. and BCHI which were merged effective December 16, 2011. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

 

Segments

The Company operates in a single segment.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the realization of capitalized software and the realization of deferred tax assets. Actual results may differ from these estimates.

 

Revenue Recognition 

 

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605 “Revenue Recognition”, when persuasive evidence of an arrangement exists, the fee is fixed or determinable, delivery of the product has occurred or services have been rendered and  collectability is reasonably assured. Revenue includes fees received from customers for advertising and marketing services provided by the Company and is recognized as earned when brand loyalists personally endorse and share the advertising campaigns with others in their digital social stream.

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist of cash held in bank demand deposits.  The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

 

Property and Equipment and Long-Lived Assets

 

Property and equipment consists of office equipment and is recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which for office equipment is three to five years. Expenditures for major renewals and betterments that extend the useful lives of the property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

 

Intangible Assets

 

Software development costs are accounted for in accordance with FASB ASC 350-40, Intangibles – Goodwill and Other: Internal Use Software. According to ASC 350-40 capitalization of costs shall begin when both of the following occur: a) preliminary project stage is completed,  b) management, with the relevant authority, implicitly or explicitly authorizes and commits to funding a computer software project and it is probable that the project will be completed and the software will be used to perform the function intended. The costs capitalized include fees paid to third parties for services provided to develop the software during the application development stage, payroll and payroll-related costs such as costs of employee benefits for employees who are directly associated with and who devote time to the internal-use computer software project on activities that include coding and testing during the application development stage and interest costs incurred while developing internal-use computer software (in accordance with ASC 835-20).  Once the software is ready for its intended use, the costs are amortized using straight-line method over the estimated useful life of up to five years. The unamortized capitalized cost of the software is compared annually to the net realizable value. The amount by which the unamortized capitalized costs of the internal use software exceed the net realizable value of that asset is written off.

 

6


 

 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

3.  Summary of Significant Accounting Policies, continued

 

Impairment of Long-lived Tangible Assets and Definite-Lived Intangible Assets

 

Long-lived tangible assets and definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable.  Recoverability of assets held and used is generally measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by that asset.  If it is determined that the carrying amount of an asset may not be recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Income Taxes

Income taxes are accounted for using the asset and liability method pursuant to the authoritative guidance on Accounting for Income Taxes.  Deferred taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement and carrying amounts and the tax bases of existing assets and liabilities.  The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date.  The Company recognizes future tax benefits to the extent that realization of such benefits is more likely than not.

 

The Company follows the authoritative guidance prescribing comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return.  This guidance requires that a company recognize in its financial statements the impact of tax positions that meet a “more likely than not” threshold, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.  

 

Loss per Share

We have presented basic loss per share, computed on the basis of the weighted average number of common shares outstanding during the year, and diluted loss per share, computed on the basis of the weighted average number of common shares and all potentially dilutive common shares outstanding during the year. Potential common shares result from stock options, vesting of restricted stock grants and convertible notes. However, for the years presented, all outstanding stock options, restricted stock grants and convertible notes are anti-dilutive due to the losses incurred. Anti-dilutive common stock equivalents of 57,059,903 shares were excluded from the loss per share computation for three months ended March 31, 2012.

 

Preferred Stock

Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. The Company classifies conditionally redeemable preferred shares, which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ deficiency. As of March 31, 2013, the Company does not have any preferred shares subject to mandatory redemption outstanding.

 Convertible Instruments

GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable GAAP.

When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.

 Common Stock Warrants and Other Derivative Financial Instruments

The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

The Company’s free standing derivatives consist of warrants to purchase common stock that were issued in connection with its private placement transactions (see Note 7) and embedded conversion options with convertible notes. The Company evaluated these derivatives to assess their proper classification in the condensed consolidated balance sheets as of March 31, 2012 and December 31, 2012 using the applicable classification criteria enumerated under GAAP. The Company determined that certain common stock purchase warrants and the embedded conversion features do not contain fixed settlement provisions.  The exercise price of such warrants is subject to adjustment in the event that the Company subsequently issues equity securities or equity linked securities with exercise prices lower than the exercise price in these warrants. The convertible notes contained a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.

 

As such, the Company was required to record the warrants and debt derivative which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period.   

 

The Company has adopted a sequencing policy that reclassifies contracts (from equity to assets or liabilities) with the most recent inception date first. Thus any available shares are allocated first to contracts with the most recent inception dates.

Stock-Based Compensation

The Company granted stock options and restricted stock as compensation to employees and directors.  Compensation expense is measured in accordance with FASB ASC 718 (formerly SFAS No. 123R), Compensation - Stock Compensation.  Compensation expense is recognized over the requisite service period for awards of equity instruments to employees based on the grant date fair value of those awards expected to ultimately vest.  Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates.

 

Concentrations of Credit Risk

Significant concentrations of credit risk may arise from the Company’s cash maintained in the bank.  The Company maintains cash in quality financial institution, however, at times, cash balance may exceed the federal deposit insurance limits (FDIC limits).  As of March 31, 2013 and 2012, the cash balance with the bank did not exceed the $250,000 FDIC limit.

 

Advertising and Marketing

The Company's advertising and marketing costs, which consist primarily of marketing and trade show costs, business development and printed promotional and sales presentation materials, are charged to expense when incurred.  The advertising and marketing expense was $19,470 and $4,535 for the three months ended March 31, 2013 and 2012, respectively.

 

Recent Accounting Pronouncements

In July 2011, the Financial Accounting Standards Board (FASB) issued ASU 2012-06-Other Expenses (Topic 720): Fees Paid to the Federal Government by Health Insurers (a consensus of the FASB Emerging Issues Task Force). This ASU is effective for periods ending after December 31, 2013.  We do not expect this ASU 2012-06 to apply to the Company or to have a material effect on the financial position, results of operations or cash flows.

 

In December 2011, the Financial Accounting Standards Board (FASB) issued ASU 2012-10-Property, Plant, and Equipment (Topic 360): De-recognition of in Substance Real Estate—a Scope Clarification (a consensus of the FASB Emerging Issues Task Force). This ASU is effective for periods after June 15, 2012.  We do not expect this ASU 2012-10 to apply to the Company or to have a material effect on the financial position, results of operations or cash flows.

 

 

7


 

 

 

 


BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

4.   Fair Value of Financial Instruments

 

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about 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 (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

 

ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable based on an entity’s own assumptions, as there is little, if any, related market activity. (for example, cash flow modeling inputs based on assumptions)

 

Financial liabilities as of March 31, 2013 and December 31, 2012 measured at fair value on a recurring basis are summarized below:

 

 

March 31, 
2013

 

Quoted Prices 
in Active
 
Markets for
 
Identical Assets
(Level 1)

 

Significant 
Other
 
Observable
 
Inputs
 
(Level 2)

 

Significant 
Unobservable
 
Inputs
 
(Level 3)

Derivative liabilities (as restated - see note 2)

$

2,759,717

 

$

--

 

$

--

 

$

2,759,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 
2012

 

Quoted Prices 
in Active
 
Markets for
 
Identical Assets
(Level 1)

 

Significant 
Other
 
Observable
 
Inputs
 
(Level 2)

 

Significant 
Unobservable
 
Inputs
 
(Level 3)

Derivative liabilities (as restated - see note 2)

$

10,964,005

 

$

--

 

$

--

 

$

10,964,005

 

The Company determined that the warrants issued in connection with certain financing transactions and certain conversion options related to convertible notes did not have fixed settlement provisions and are deemed to be derivative financial instruments, since the exercise prices were subject to adjustment based on certain subsequent equity issuances. Accordingly, the Company was required to record the warrants and conversion option as liabilities and mark all such derivatives to fair value each reporting period. Such instruments were classified within Level 3 of the valuation hierarchy.

 

The fair value of the warrants and the conversion options was calculated using a binomial lattice formula with the following weighted average assumptions during the three months ended  March 31, 2013:

 

Dividend Yield

0.00%

Volatility

85.43% - 85.99%

Risk-free Interest Rate

.11% - .77%

Term

1.7 – 4.0 years

 

The risk-free interest rate is the United States Treasury rate on the measurement date having a term equal to the remaining contractual life of the warrant. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate. Since the Company’s common stock has not been publicly traded for a long period of time, an average of the historical volatility of comparative companies was used. The dividend yield is 0% as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future.

 

 

Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the warrant liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial Officer, who reports to the Chief Executive Officer, determine its valuation policies and procedures.

 

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer.

 

 

8


 

 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

4.   Fair Value of Financial Instruments, continued

 

Level 3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

 

Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and are classified within Level 3 of the valuation hierarchy. An increase or decrease in volatility or interest free rate, in isolation, can significantly increase or decrease the fair value of the warrant. Changes in the values of the derivative liabilities are recorded as a component of other income (expense) on the Company’s condensed consolidated statements of operations.

 

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis for the three months ended March 31, 2013:

 

 

 

Balance - Beginning of period (as restated - see note 2)

$

10,964,005 

Aggregate fair value of derivative instruments issued

 

11,930

 

Change in fair value of derivative liabilities

 

(8,216,218)

 

 

 

Balance - End of period

$

2,759,717

 

5.  Property and Equipment

 

Property and equipment consist of the following at March 31, 2013 and December 31, 2012:

 

 

 

3/31/2013

 

12/31/2012

Office Equipment

$

23,781

 

$

23,781

Less: Accumulated depreciation

 

(8,417)

 

 

(7,153)

Net property and equipment

$

15,364

 

$

16,628

 

Depreciation expense was $1,264 and $1,189 for the three months ended March 31, 2013 and 2012, respectively.

 

6.  Intangibles

 

Intangible assets consist of the following at March 31, 2013 and December 31, 2012:

 

 

3/31/2013

 

12/31/2012

Capitalized Software Development Costs

$

1,334,745

 

$

1,276,406

Less: Accumulated amortization

 

(419,923)

 

 

(352,957)

Net capitalized development costs

$

914,822

 

$

923,449

 

 

The capitalized software development costs include $-0- interest capitalized for the three months ended March 31, 2013 and 2012, respectively.  The amortization expense relating to the capitalized development costs was $66,965 and $54,152 for the three months ended March 31, 2013 and 2012, respectively.  Amortization for the next five years is estimated to be as follows:

 

2013

$

264,952

2014

 

262,063

2015

 

221,762

2016

 

126,813

2017

 

36,862

Thereafter

 

2,370

Total

$

914,822


7.  Income Tax Provision

 

The company’s income taxes are recorded in accordance with ASC 740 “Income Taxes”. The tax effects of the Company’s temporary differences that give rise to significant portions of the deferred tax assets as of March 31, 2013 and 2012 consisted of net operating losses from inception to March 31, 2013 and 2012 of $10,810,086 and $14,318,115, respectively, which were fully reserved. Deferred tax assets and liabilities are computed by applying the effective U.S. federal and state income tax rate to the gross amounts of temporary differences and other tax attributes.

 

9


 

 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

7.  Income Tax Provision, continued

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At March 31, 2013 and 2012, the Company believed it was more likely than not that future tax benefits from net operating loss carry-forwards and other deferred tax assets would not be realizable through generation of future taxable income and accordingly deferred tax assets are fully reserved.

 

8.  Long Term Debt - Notes Payable

 

On November 9, 2012, the Company entered into the exchange agreement with Aztec, pursuant to which the Company and Aztec agreed to exchange the Note and the Company's  existing accounts payable to Aztec for an 8% Convertible Note in the original principal amount of $545,958. The 8% Convertible Note is due on March 31, 2013. Pursuant to the exchange agreement, the Company agreed to register the shares of Common Stock issuable upon conversion of the 8% Convertible Note and an aggregate of 3,733,428 shares of Common Stock currently held by Aztec on or before December 31, 2012. The 8% Convertible Note is convertible into shares of the Company's Common Stock at a conversion price equal to the greater of: (i) $0.15 per share or (ii) the price per share at which Common Stock is sold in a subsequent financing. Upon effectiveness of the registration statement covering the resale of such shares, the 8% Convertible Note automatically convert into shares of the Company's Common Stock at the applicable conversion price.  Per the above agreement, the note converted to equity on February 12, 2013.

 

The note was determined to have an embedded beneficial conversion feature (“BCF”) under the provisions of FAS ASC 470-20, “Debt with Conversion and Other Options” based on the issue date market value of $0.40 per share and the exercise price of $0.15 per share.  In accordance with ASC 470-20, an embedded beneficial conversion feature shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid capital.  A discount of $341,224 was recorded at issuance and amortization expense of $96,519 was recognized for the year ended December 31, 2012.   The note balance was $301,253 net of discount of $244,705 at December 31, 2012.  Amortization of the balance of the discount, $244,205 was recognized for the three months ended March 31, 2013.

 

On April 19, 2012, the Company entered into a securities purchase agreement with an existing stockholder (the “Buyer”), pursuant to which the Company issued (i) a senior secured 8% convertible debenture convertible into shares of the Company at $0.10 per share in the original aggregate principal amount of $35,000 and (ii) a warrant to purchase 6,500,000 shares of common stock at $0.10 per share, and the Buyer covenanted to purchase up to an additional $465,000 of senior secured convertible debentures in a series of four closings at such times as may be designated by the Company in its sole discretion through November 30,  2012.  The convertible debentures matured on November 30, 2012 and bear interest at a rate of 8%.   A discount of $416,528 was recorded for the warrant fair market value and amortization expense was fully recognized in the amounts of $416,528 and $0 for the three months ended December 31, 2012, and 2011, respectively.  The unamortized discount balance was $0 as of December 31, 2012 and December 31, 2011, respectively.  The outstanding principal of the convertible debentures was $465,000 as of December 31, 2012.  The debentures were determined to have an embedded beneficial conversion feature (“BCF”) under the provisions of FAS ASC 470-20, “Debt with Conversion and Other Options” based on the issue date market value of $0.71 per share and the exercise price of $0.10 per share. 

 

 

10


 

 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

8.  Long Term Debt - Notes Payable, continued

 

In accordance with ASC 470-20, an embedded beneficial conversion feature shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid capital.  A discount of $48,472 was recorded at issuance and amortization expense of $48,472 was recognized for the year ended December 31, 2012.  An additional $50,000 was loaned as part of this agreement during the three months ended March 31, 2012.  The note balance was $515,000 net of discount of $0 at March 31, 2013.  

 

On November 15, 2012, the Company commenced a private offering of up to $3,000,000 of units at a purchase price of $50,000 per unit pursuant to the Securities Purchase Agreement dated November 15, 2012 (the “Purchase Agreement”). Each Unit consists of a 10% Convertible Debenture in the principal amount of $50,000 (the “Debenture”) and 12,500 shares of the Company’s common stock. The Debenture bears interest at a rate of 10% per annum, is due two years from the issuance date and is convertible into shares of the Company’s common stock at a conversion price of $0.20 per share. As of December 31, 2012, we have issued and sold an aggregate of 9 units totaling $450,000.  The debentures were determined to have an embedded beneficial conversion feature (“BCF”) under the provisions of FAS ASC 470-20, “Debt with Conversion and Other Options” based on the issue date market value of $0.40 per share and the exercise price of $0.20 per share.  In accordance with ASC 470-20, an embedded beneficial conversion feature shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid capital.  A discount of $225,000 was recorded at issuance and amortization expense of $11,500 was recognized for the year ended December 31, 2012.  For the quarter ended March 31, 2013 an additional $150,000 of debentures were issued and a discount of $16,667 was recorded.  Additionally, amortization of $29,632 was recorded.  The note balance was $399,465 net of discount of $200,535 at March 31, 2013.

 

9.   Warrant Derivative Liabilities

 

The Company issued warrants in conjunction with the issuance of convertible debentures and the sale of Series A Convertible Preferred and Common Stock.  These warrants contain certain reset provisions. Therefore, in accordance with ASC 815-40, the Company classified the fair value of the warrant as a liability at the date of issuance.  Subsequent to the initial issuance date, the Company is required to adjust the warrant to fair value as an adjustment to current period operations.


The Company recorded a gain (loss) on change in fair value of derivative liabilities of $8,216,218 and $(426,580) for the three months ended March 31, 2013 and 2012, respectively.

 

10.  Stockholders’ Equity (Deficit)

 

On June 13, 2012, the Company commenced a private placement of up to $10,000,000 of Units, at a purchase price of $1.00 per Unit. Each Unit consists of: (i) two shares of Common Stock and (ii) a warrant to purchase one share of the Company’s Common Stock (the “Warrant”). The Warrant is exercisable for a term of two years at an exercise price of $0.75 per share. As of October 14, 2012, the termination date of the offering, we issued and sold an aggregate of 445,000 Units in consideration of gross proceeds of $445,000. As a result, the Company issued an aggregate of 890,000 shares of common stock and warrants to purchase an aggregate of 890,000 shares of Common Stock.  WFG Investments, Inc. (“WFG”) acted as placement agent in connection with the Private Placement and received a commission equal to 10% of any subscriptions received and warrants to purchase 3% of the number of shares of common stock included in the Units sold in the Private Placement. As December 31, 2012, WFG received a cash fee of $44,500 and warrants to purchase 26,700 shares of common stock.  

11


 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

10.  Stockholders’ Equity (Deficit), continued

 

In April 2012, the Company entered into a stockholder’s agreement with Andrew Levi, our Chief Technology Officer, whereby Mr. Levi agreed to place 25,000,000 shares of Common Stock held by him in escrow for a period of one year. In the event that the Company issues shares of Common Stock in a financing transaction or in connection with the hiring or retention of senior management or directors during such period of time, the corresponding number of escrowed shares will be cancelled and returned to the Company’s treasury.

 

On September 1, 2011 and as part of the reverse merger, the Company issued convertible promissory notes (the “Promissory Notes”) to two accredited investors in a private placement transaction (the “Private Placement”) pursuant to a Securities Purchase Agreement (the “Securities Purchase Agreement”) in the aggregate principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) and five-year warrants (the “Warrants”) to purchase up to 22,091,311 shares of the Company’s common stock at an exercise price of $0.10 per share. The notes are due December 1, 2012 and accrue no interest. The Promissory Notes are automatically convertible at $1 into One Million Five Hundred Thousand (1,500,000) shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred”) immediately upon the creation of the Series A Preferred by the Company. The Series A Preferred stock was approved October 17, 2011 and the notes were immediately converted into 1,500,000 preferred shares. The Series A Preferred shares are convertible into shares of the Company’s common stock at a conversion rate of $0.0679 per share or 22,091,311 common shares. The conversion of preferred into common stock is limited to the extent that the beneficial owners own greater that 4.99% of the Company’s common stock.

 

During the three months ended March 31, 2012, the investor completed the purchase of the additional 200,000 shares of Series A Preferred and warrants to purchase an additional 2,945,509 shares of common stock.  The conversion of Series A Preferred into common stock and exercise of warrants is limited to the extent that the beneficial owners own greater that 4.99% of the Company’s common stock.

 

Blue Calypso, Inc. is authorized to issue 685,000,000 shares of capital stock: 680,000,000 shares of common stock with voting rights at a par value of $.0001 and 5,000,000 shares of Series A Convertible Preferred Stock, also at $.0001 par value per share.  There were 125,135,112 shares of common stock issued and outstanding as of March 31, 2013.  There were 1,700,000 shares of preferred stock were issued and outstanding as of March 31, 2013.  The Company did not make or declare any distributions to shareholders during the quarters ended March 31, 2013 or March 31, 2012.

 

Long-Term Incentive Plan   

 

The stockholders approved the Blue Calypso, Inc. 2011 Long-Term Incentive Plan (the “Plan”) on September 9, 2011.  The Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards which may be granted singly, in combination, or in tandem, and which may be paid in cash or shares of common stock.  Subject to certain adjustments, the maximum number of shares of common stock that may be delivered pursuant to awards under the Plan is 35,000,000 shares.

 

12


 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

 

10.  Stockholders’ Equity (Deficit), continued

 

Stock Options   

 

During the three months ended March 31, 2013, the Company granted options to purchase 5,218,530 shares of the Company’s common stock to employees, non-employee board members and other consultants under the Plan.

 

During 2012 the Company granted options to purchase 9,873,543 shares of the Company’s common stock to employees, non-employee board members and other consultants under the Plan

 

The options vest under a number of different vesting schedules.  The fair value for the Company’s options were estimated at the date of grant using the Black-Scholes option pricing model with the weighted average assumptions as noted in the following table.  The Black-Scholes option valuation model incorporate ranges of assumptions for inputs, and those ranges are disclosed below.  Expected volatilities are based on similar industry-sector indices.

 

The expected life of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate assumption is based on market yield on U.S. Treasury securities at 5-year constant maturity,  quoted on investment basis determined at the date of grant.

 

 

Assumptions used for employee stock options:

 

 

Risk-free interest rate

 

.77 to .86%

Dividend yield

 

0%

Stock price volatility

 

20% - 37%

Expected life

 

5.75 years

 

Using the valuation assumptions noted above, the Company estimated the value of stock options granted to be $549,926 and $1,953,072  for the three months ended March 31, 2013 and 2012, respectively.  The 4,578,530 of the March 31, 2013 options were granted February 21, 2013 when the stock price was at $0.24 per share.  The value of these options is being amortized to stock-based compensation expense annually over their three year vesting period. The stock-based compensation expense recorded was $41,506 and $763,480 during the three months ended March 31, 2013 and 2012, respectively.      The following table summarizes the stock option activity as of March 31, 2013:

 

 

 

Outstanding

Options

 

Weighted

Average

Exercise

Price

 

 

Balance, December 31, 2012

9,460,543

 

$

0.2498

Granted

5,218,530

 

 

0.2383

Exercised

0

 

 

0

Cancelled

0

 

 

0

Balance, March 31, 2013

14,679,073

 

$

0.2457

Exercisable at 3/31/13

7,546,659

 

$

0.1982

 

 

 

 

 

Non-vested at 3/31/13

7,132,414

 

$

0.2960

 

13


 

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

Restricted Stock

 

The restricted stock granted prior to the reverse merger transaction, have been retroactively restated as capital stock shares reflecting the exchange ratio in the Merger.

 

The following table summarizes the restricted stock activity for the three months ended March 31, 2013:

 

 

 

 

 

 

Restricted Shares Activity:

 

 

 

Restricted shares issued as of December 31, 2012

 

13,456,667 

 

Granted during three months ended March 31, 2013

 

 

 

 

 

 

Forfeited during three months ended March 31, 2013

 

 

Total Restricted Shares Issued at March 31, 2013

 

13,456,667 

 

Vested at March 31, 2013

 

(160,412)

 

Unvested restricted shares as of March 31, 2013

 

13,296,255 

 

A total of 13,285,842 shares were granted in 2012 and will vest 1/3 in the first year following the grant and the balance over the following 8 calendar quarters. The share based compensation expense was $436,194 and $0  for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013, the unamortized stock based compensation related to restricted stock is $3,940,039 and will be amortized on the remaining period of approximately 2 years. 

11.  Related Party Transactions

 

Aztec Systems, Inc. (“Aztec”) was an affiliate of the Company that provided administrative and technical support services to the Company.  The majority owner of Aztec was also the majority stockholder of the Company until the date of sale of Aztec on June 15, 2012.

 

On November 9, 2012, the Company entered into an exchange agreement with Aztec, pursuant to which the Company and Aztec agreed to exchange its note payable to Aztec and the Company's  existing accounts payable to Aztec for an 8% Convertible Note in the original principal amount of $545,958. The 8% Convertible Note was due on March 31, 2013. Pursuant to the exchange agreement, the  Company agreed to register the shares of Common Stock issuable upon conversion of the 8% Convertible Note and an aggregate of 3,686,634 shares of Common Stock currently held by Aztec on or before December 31, 2012. The 8% Convertible Note was convertible into shares of the Company's Common Stock at a conversion price equal to the greater of: (i) $0.15 per share or (ii) the price per share at which Common Stock is sold in a subsequent financing. Upon effectiveness of the registration statement covering the resale of such shares, the 8% Convertible Note automatically converted into shares of the Company's Common Stock at the applicable conversion price. As per the above agreement, the 8% Convertible Note was converted to Common Stock on February 12, 2013 upon effectiveness of the Company's Registration Statement on Form S-1.

 

 

BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

12.  Liquidity-Going Concern

These financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the Company will need additional financing to continue to operate and fully implement its business plan.    Management believes that the current cash and revenue should fund the Company’s expected burn rate into the second quarter of 2013.  The Company will require additional funds to continue operations.

The Company completed a private placement on May 6, 2013 resulting in gross proceeds to the Company of $2,400,000; refer to the subsequent event Note 14.  

The Company has accumulated losses from September 11, 2009 (inception) through March 31, 2013 of $8,296,537. 

13.  Commitments and Contingencies

 

The Company leases office space under a month to month operating lease with no minimum future rental payments.  The operating lease does not involve contingent liabilities. Rental expense under the operating lease totaled $9,978 and $0 for the three months ended March 31, 2013 and 2012, respectively.

.

From time to time, the Company is involved in various legal matters in the ordinary course of business. In the opinion of management the ultimate liability, if any resulting from such legal matters will not have a material effect on the Company’s financial position or results of operations.

 

14.  Subsequent Events

 

The Company evaluated events or transactions occurring after March 31, 2013, the balance sheet date, through May 15, 2013, and October 9, 2013 from footnote 2, the date the financial statements were available to be issued, and determined any events or transactions which could impact the financial statements as of and for the three months ended March 31, 2013. 

On May 6, 2013, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which it issued and sold a 10% Convertible Debenture in the principal amount of $2,400,000 (the “Debenture”) and 1,200,000 shares of common stock in consideration of gross proceeds to the Company of $2,400,000. The Debenture bears interest at a rate of 10% per annum, is due two years from the issuance date and is convertible into shares of the Company’s common stock at a conversion price of $0.25 per share.

 

On April 29, 2013, the Company entered into a series of agreements with the LMD, the holder of its 8% Senior Secured Convertible Debentures The Debentures were due on November 30, 2012. As of April 29, 2013, the aggregate amount outstanding under the Debentures, including all accrued and unpaid interest and fees, was $600,000. Pursuant to Amendment No. 1 to 8% Senior Secured Convertible Debentures, the conversion price of the Debentures was amended such that the aggregate amount outstanding under the Debentures will be convertible into an aggregate of 20,000,000 shares of the Company’s common stock. The issuance of the Conversion Shares will not result in any dilution to the existing stockholders of the Company as the Company’s Founder and Chief Technology Officer, Andrew Levi, has agreed to cancel and return to treasury 20,000,000 shares of common stock currently held by him in connection with this transaction. LMD also agreed to immediately terminate the Security Agreement dated April 19, 2012 by and between the Company, the Company’s subsidiaries and the LMD, the Intellectual Property Security Agreement dated April 19, 2012 by and between the Company, the Company’s subsidiaries and the LMD, and the Subsidiary Guarantee executed by the Company’s subsidiary, Blue Calypso, LLC, and all of the security interests created thereby. The maturity dates of the Debentures were extended to June 30, 2013.

 

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BLUE CALYPSO, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2013

(unaudited) (restated)

 

14.  Subsequent Events, continued

 

In connection with the Amendment to 8% Debentures, the Company and the LMD also agreed to amend the terms of certain warrants currently held by LMD. The Company agreed to extend the maturity date of the warrants originally issued to LMD in September 2011 to April 30, 2018 and to extend the anti-dilution protection of such warrants for the life of the warrants. Pursuant to Amendment to the Common Stock Purchase Warrant, the Company agreed to extend the maturity date of the warrants originally issued to the LMD in April 2012 to April 30, 2018 and to extend the anti-dilution protection of such warrants for the life of the warrants.

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ITEM 2. 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Cautionary Statement Regarding Forward-Looking Statements

This report contains  "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").  All statements other than statements of historical facts included or incorporated by reference in this quarterly report on Form 10-Q, including without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objective of management for future operations, are forward-looking statements.  In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expects," "intends," "plans," "projects," "estimates," "anticipates," or "believes" or the negative thereof or any variation thereon or similar terminology or expressions.

 

We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to:  

 

·    

our ability to raise additional capital;

·    

the absence of any operating history or revenue; 

·    

our ability to attract and retain qualified personnel; 

·    

market acceptance of our platform;

·    

our limited experience in a relatively new industry;

·    

   regulatory and competitive developments;

·    

intense competition with larger companies;

·    

general economic conditions

·   

failure to adequately protect our intellectual property;

·   

technological obsolescence of our products and services;  

·   

technical problems with our products and services; and 

·   

loss or retirement of key executives, and

·   

other factors set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission.

 

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing.  Except as required by law, we assume no duty to update or revise our forward-looking statements.

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