10-Q/A 1 tti10qamendjune08vfinal.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended June 30, 2008 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from _______________ to ______________ Commission File Number: 000-10210 TREE TOP INDUSTRIES, INC. ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEVADA 83-0250943 -------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 264 SOUTH LA CIENEGA BOULEVARD, SUITE 1010, BEVERLY HILLS, CALIFORNIA 90211 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (310) 601-4595 -------------------------------------------------------------------------------- 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 proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [__] No [_X_] 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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check One). Large accelerated filer [___] Accelerated filer [___] Non-accelerated filer [___] Smaller reporting company [_X_] (Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [__] No [_X_] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. As of June 30, 2008 the number of shares outstanding of the registrant's class of common stock was 47,328,400.
TABLE OF CONTENTS PAGES PART I. FINANCIAL INFORMATION................................................................................1 Item 1. Financial Statements (Unaudited)...............................................................1 Consolidated Balance Sheet at June 30, 2008 (Unaudited) and December 31, 2007 (audited).............................................................................1 Consolidated Statement of Operation for the Three Months and Six Months Ended June 30, 2008 and from Inception through June 30, 2008 (Unaudited)....................................................................................2 Consolidated Statement of Stockholder's Equity from inception through June 30, 2008 (Unaudited)......................................................................3 Consolidated Statement of Cash Flow for the Six Months Ended June 30, 2008 and from Inception through June 30, 2008 (Unaudited)......................................5 Notes to Consolidated Financial Statements.....................................................7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................................................10 Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................13 Item 4T. Controls and Procedures.......................................................................14 PART II OTHER INFORMATION...................................................................................15 Item 1. Legal Proceedings.............................................................................15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...................................16 Item 3. Defaults Upon Senior Securities...............................................................16 Item 4. Submission of Matters to a Vote of Security Holders..........................................16 Item 5. Other Information.............................................................................16 Item 6. Exhibits......................................................................................16 SIGNATURES......................................................................................................17
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
TREE TOP INDUSTRIES, INC. (A Development Stage Company) Consolidated Balance Sheets ASSETS ------------- June 30, December 31, 2008 2007 ---------------- ---------------- CURRENT ASSETS (unaudited) Cash $ 314,330 $ 435,858 Work-in-process 6,260 - Employee advances 13,469 6,400 ---------------- ---------------- Total Current Assets 334,059 442,258 ---------------- ---------------- PROPERTY AND EQUIPMENT, NET 131,466 71,973 ---------------- ---------------- OTHER ASSETS Security deposit 12,424 12,424 ---------------- ---------------- Total Other Assets 12,424 12,424 ---------------- ---------------- TOTAL ASSETS $ 477,949 $ 526,655 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ---------------------------------------------------- CURRENT LIABILITIES Accounts payable $ 392,172 $ 363,451 Accrued expenses 392,353 344,591 Accrued interest payable 47,292 45,560 Due to officers and directors 12,225 170,367 Notes payable 113,000 113,000 ---------------- ---------------- Total Current Liabilities 957,042 1,036,969 ---------------- ---------------- STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock, $0.001 par value, 50,000 shares authorized, -0- shares issued and outstanding - - Common stock, $0.001 par value, 350,000,000 shares authorized, 48,828,400 and 72,327,791 shares issued and outstanding 4,883 7,233 Additional paid-in capital 6,791,088 5,139,775 Deficit accumulated during the development stage (7,275,064) (5,657,322) ---------------- ---------------- Total Stockholders' Equity (Deficit) (479,093) (510,314) ---------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 477,949 $ 526,655 ================ ================
The accompanying notes are an integral part of these consolidated financial statements. -1-
TREE TOP INDUSTRIES, INC. (A Development Stage Company) Consolidated Statements of Operations (unaudited) From Inception For the Three For the Six on August 1, Months Ended Months Ended 2007 through June 30, June 30, June 30, 2008 2008 2008 --------------- --------------- ---------------- REVENUES, net $ - $ - $ - COST OF SALES, net - - - --------------- --------------- ---------------- GROSS PROFIT - - - --------------- --------------- ---------------- OPERATING EXPENSES General and administrative 273,925 498,554 3,119,650 Officer compensation 62,500 313,491 2,841,201 Professional fees 45,329 795,234 1,301,372 Depreciation 4,053 8,238 9,847 --------------- --------------- ---------------- Total Operating Expenses 385,807 1,615,517 7,272,070 --------------- --------------- ---------------- OPERATING LOSS (385,807) (1,615,517) (7,272,070) --------------- --------------- ---------------- OTHER INCOME (EXPENSES) Interest expense (149) (2,225) (2,994) --------------- --------------- ---------------- Total Other Income (Expenses) (149) (2,225) (2,994) --------------- --------------- ---------------- LOSS BEFORE INCOME TAXES (385,956) (1,617,742) (7,275,064) INCOME TAX EXPENSE - - - --------------- --------------- ---------------- NET LOSS $ (385,956) $ (1,617,742) $ (7,275,064) =============== =============== ================ BASIC LOSS PER SHARE $ (0.01) $ (0.02) =============== =============== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 59,371,257 65,976,202 =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. -2-
TREE TOP INDUSTRIES, INC. (A Development Stage Company) Consolidated Statements of Stockholders' Equity (Deficit) (unaudited) Preferred Stock Common Stock Additional ------------------ ------------------------ Paid-In Accumulated Shares Amount Shares Amount Capital Deficit Total ------ --------- ---------- ---------- ------------ ------------- ---------- Balance, August 1, 2007 (inception) - $ - - $ - $ - $ - $ - Issuance of founder shares at inception at $0.007 per share - - 68,000,000 68,000 432,000 - 500,000 Shares issued in recapitalization - - 987,791 988 (988) - - Stock options issued for services at $0.74 per share - - - - 1,494,298 - 1,494,298 Stock options issued for cash at $0.10 per share - - - - 200,000 - 200,000 Stock options issued for services at $0.85 per share - - - - 126,210 - 126,210 Exercise of stock options at $0.25 per share - - 500,000 500 124,500 - 125,000 Shares issued for services at $0.85 per share - - 2,590,000 2,590 2,198,910 - 2,201,500 Shares issued for services at $2.00 per share - - 250,000 250 499,750 - 500,000
-3-
TREE TOP INDUSTRIES, INC. (A Development Stage Company) Consolidated Statements of Stockholders' Equity (Deficit) (unaudited) Preferred Stock Common Stock Additional ------------------ -------------------------- Paid-In Accumulated Shares Amount Shares Amount Capital Deficit Total ------ --------- ------------ ------------ -------------- --------------- ---------- Change in par value to $0.001 - - - (65,095) 65,095 - - Net loss for the year ended December 31, 2007 - - - - - (5,657,322) (5,657,322) ------ -------- ------------ ------------ ------------ -------------- ----------- Balance, December 31, 2007 - - 72,327,791 7,233 5,139,775 (5,657,322) (510,314) Fractional shares - - 609 - - - - Exercise of stock options at $0.25 per share - - 1,100,000 110 724,890 - 725,000 Common stock cancelled - - (24,600,000) (2,460) 2,460 - - Stock options issued for services - - - - 923,963 - 923,963 Net loss for the six months ended June 30, 2008 - - - - - (1,617,742) (1,617,742) ---------- -------- ----------- -------------- ----------- -------------- ----------- Balance, June 30, 2008 - - 48,828,400 $ 4,883 $6,791,088 $ (7,275,064) $ (479,093) ========== ======== =========== ============== =========== ============== ===========
The accompanying notes are an integral part of these financial statements. -4-
TREE TOP INDUSTRIES, INC. (A Development Stage Company) Consolidated Statements of Cash Flows (unaudited) From Inception For the Six on August 1, Months Ended 2007 through June 30, June 30, 2008 2008 ------------- ---------------- OPERATING ACTIVITIES Net loss $ (1,617,742) $ (7,275,064) Adjustments to reconcile net loss to net used by operating activities: Depreciation and amortization 8,238 9,847 Stock options and warrants granted for services rendered 923,963 2,544,471 Common stock issued for services rendered - 2,701,500 Changes in operating assets and liabilities (Increase) decrease in work-in-process (6,260) (6,260) (Increase) decrease in employee advances (7,069) (13,469) (Increase) decrease in security deposits - (12,424) Increase (decrease) in accounts payable and accrued expenses 75,318 730,055 -------------- ---------------- Net Cash Used in Operating Activities (623,552) (1,321,344) -------------- ---------------- INVESTING ACTIVITIES Cash received in acquisition - 44,303 Cash paid for fixed assets (67,731) (141,313) -------------- ---------------- Net Cash Used in Investing Activities (67,731) (97,010) -------------- ---------------- FINIANCING ACTIVITIES Repayment of related party loans (193,365) (253,120) Cash received from issuance of common stock 725,000 1,550,000 Cash received from related party loans 38,120 435,804 -------------- ---------------- Net Cash Provided by Financing Activities 569,755 1,732,684 -------------- ---------------- NET DECREASE IN CASH (121,528) 314,330 CASH AT BEGINNING OF PERIOD 435,858 - -------------- ---------------- CASH AT END OF PERIOD $ 314,330 $ 314,330 ============== ================
The accompanying notes are an integral part of these financial statements. -5- TREE TOP INDUSTRIES, INC. (A Development Stage Company) Consolidated Statements of Cash Flows (Continued) (unaudited) From Inception For the Three on August 1, Months Ended 2007 through June 30, June 30, 2008 2008 ------------- -------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID FOR: Interest $ 567 $ 567 Income Taxes $ - $ - NON-CASH TRANSACTIONS Common stock issued for services $ - $ 2,701,500 The accompanying notes are an integral part of these financial statements. -6- TREE TOP INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. INTERIM PRESENTATION The December 31, 2007 balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, the accompanying unaudited financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of the Company as of June 30, 2008, its results of operations for the three months and six months ended June 30, 2008 and its cash flows for the six months ended June 30, 2008. The statements of operations for the three months and six months ended June 30, 2008 are not necessarily indicative of the results for the full year. While the Company believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the financial statements and accompanying notes included in the Company's annual Report on Form 10-KSB for the year ended December 31, 2007. 2. GOING CONCERN The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred accumulated losses totaling $7,275,064, has a working capital deficit of $622,983 and is in default on several notes payable (see Note 5). Since inception (August 1, 2007) through June 30, 2008, the Company has not generated any significant business. Through the date of these financial statements viable operations have not been achieved and the Company has been unsuccessful in raising all the capital that it requires. Revenues have been minimal and the Company continues to require substantial financing. Most of the financing has been provided by David Reichman, the present Chief Executive Officer, Chairman and President. The Company is dependent upon his ability and willingness to continue to provide such financing which is required to meet reporting and filing requirements of a public company. In order for the Company to remain a going concern, it will need to continue to receive funds from the exercise of outstanding warrants and options or through other equity or debt financing. There can be no assurance that the Company will continue to receive any proceeds from the exercise of warrants or options or that the Company will be able to obtain the necessary funds to finance its operations. These conditions raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 3. SIGNIFICANT ACCOUNTING POLICIES Please refer to the Company's Form 10-KSB for the year ended December 31, 2007 for its significant accounting policies. -7- TREE TOP INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) 4. EARNINGS (LOSS) PER SHARE The Company computes earnings or loss per share in accordance with Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earning Per Share". Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if securities or other agreements to issue common stock were exercised or converted into common stock. Diluted earnings per share is computed based upon the weighted average number of common shares and dilutive common equivalent shares outstanding, which includes convertible debentures, stock options and warrants. The calculation of basic and diluted income (loss) per share for the three months and six months is as follows:
Three Months Ended Six Months Ended June 30, 2008 2008 ----------------- ----------------- Net income (loss) $ (385,956) $ (1,617,742) ================= ================= Weighted average shares outstanding - basic 59,371,257 65,976,202 ================= ================= Net income (loss) - per share - basic $ (0.02) $ (0.02) ================= ================= Weighted average shares outstanding - basic Dilutive options 0 0 ----------------- ----------------- Weighted average shares outstanding - diluted 59,371,257 65,976,202 ================= ================= Net income (loss) - per share - diluted $ (0.02) $ (0.02) ================= =================
5. NOTES PAYABLE Notes payable consist of various notes bearing interest at rates from 5% to 7%, all with original due dates between August 2000 and September 2002. All of the notes are unpaid to date and are in default. At June 30, 2008, notes payable amounted to $113,000. The notes payable were assumed in the acquisition of Tree Top. At June 30, 2008, accrued interest on the notes was $47,292. Interest expense on the notes amounted to $2,225 for the six months ended June 30, 2008. 6. RELATED PARTY TRANSACTIONS Due to officers and directors consists of advances primarily from David Reichman, CEO, President and Chairman of the Company. The advances are due on demand and do not bear interest. During the six months Mr. Reichman advanced the Company $38,120 and was repaid $193,365, resulting in a balance owing to him of $12,225 at June 30, 2008. -8- TREE TOP INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) 7. STOCKHOLDERS' EQUITY On December 26, 2007, the Company's Board of Directors approved for issuance 250,000 stock options to each of its four directors, to be issued effective January 1, 2008, with an exercise price of $4.50 per share, expiring in 2018. The options vest 1/24th upon grant and then 1/24th each subsequent month. The fair value of the options as calculated under the Black-Scholes model totaled $1,993,000. For the six months ended June 30, 2008, the Company recognized $249,125 of compensation expense related to these options. The fair value of these options was determined using the following assumptions: risk free rate of 3.39%, no dividend yield, an expected life of five years and a volatility factor of 271.7%. During the six months ended June 30, 2008, the Company recorded the value of 1,000,000 stock options issued to a shareholder with an at an exercise price of $1.00 per share, expiring in 2018. The fair value of the options as calculated under the Black-Scholes model totaled $548,628 which was recorded as compensation expense. The fair value of these options was determined using the following assumptions: risk free rate of 4.33%, no dividend yield, an expected life of five years and a volatility factor of 275.6%. The Company also recorded $126,210 of compensation expense relating to the amortization of the October 1, 2007 options issued to David Reichman under his employment contract. During the six months ended June 30, 2008, 1,100,000 shares of the Company's common stock were issued in exchange for the exercise of stock options: DATE OPTIONS EXERCISED PROCEEDS ---------------- ----------------- -------- January 16, 2008 250,000 $ 62,500 March 26, 2008 250,000 62,500 March 26, 2008 600,000 600,000 ----------------- -------- Total 1,100,000 $725,000 ================= ======== 8. RECENT PRONOUNCEMENT In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities--an amendment of FASB Statement No. 133." SFAS No. 161 requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not completed its evaluation of SFAS No. 161 to determine the impact that adoption will have on our consolidated financial condition or results of operations. -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENTS This Form 10-Q/A may contain "forward-looking statements," as that term is used in federal securities laws, about Tree Top Industries, Inc.'s financial condition, results of operations and business. These statements include, among others: o statements concerning the potential benefits that Tree Top Industries, Inc. ("TTI" or the "Company") may experience from its business activities and certain transactions it contemplates or has completed; and o statements of TTI's expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q/A. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," "opines," or similar expressions used in this Form 10-Q/A. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause TTI's actual results to be materially different from any future results expressed or implied by TTI in those statements. The most important facts that could prevent TTI from achieving its stated goals include, but are not limited to, the following: (a) volatility or decline of TTI's stock price; (b) potential fluctuation of quarterly results; (c) failure of TTI to earn revenues or profits; (d) inadequate capital to continue or expand its business, and inability to raise additional capital or financing to implement its business plans; (e) failure to commercialize TTI's technology or to make sales; (f) decline in demand for TTI's products and services; (g) rapid adverse changes in markets; (h) litigation with or legal claims and allegations by outside parties against TTI, including but not limited to challenges to TTI's intellectual property rights; (i) insufficient revenues to cover operating costs; (j) failure of NetThruster.com(R) to acquire or develop and profitably operate a new business to replace its old content delivery business model, which is no longer being implemented, and (k) competition from other businesses and technologies that materially adversely impacts TTI's operations, financial condition and business performance. -10- There is no assurance that TTI will be profitable, TTI may not be able to successfully develop, manage or market its products and services, TTI may not be able to attract or retain qualified executives and technology personnel, TTI may not be able to obtain customers for its products or services, TTI's products and services may become obsolete, government regulation may hinder TTI's business, additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options, and other risks inherent in TTI's businesses. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. TTI cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q/A. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that TTI or persons acting on its behalf may issue. TTI does not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q/A, or to reflect the occurrence of unanticipated events. CURRENT OVERVIEW NetThruster Inc. (formerly known as Ludicrous, Inc.) is in the process of reevaluating and reorienting its business. It has successfully broadcast live streaming video of events for its customers pursuant to event based contracts resulting in minimal revenue to date. This capability may be used by another TTII subsidiary, MLN, Inc., in the operation of that Company's new Internet website. NetThruster also has worked out the necessary hardware equipment designs to support the Internet background logistics of the My Lord's Network Internet website to be established by MLN. NetThruster may be employed to implement and maintain the website's operational equipment. The primary business of MLN, Inc., a Delaware corporation and a wholly-owned subsidiary of TTII (MLN), is the operation of the My Lord's Network(TM) website. MLN has completed the research and planning necessary to create the website and its supporting business. The focus of the website is the worldwide Christian community but with the initial enrollment emphasis on Christians in the United States. The website is designed to facilitate interaction between enrolled individual members and, in addition, provide information about Christian churches, both their location and events. MLN plans to contract for creation of the initial website and expects to make its revenues through the ongoing operation of the website (through subscriptions fees and advertising). My Lord's Network will be designed to bring together members of the Christian community in an arena that provides an opportunity for online social networking and information about church activities across the community. It will strive to provide up-to-date information from its church and ministry members to the individual members. It plans to offer Christian-oriented contemporary news as well. The primary business model is a content-based Internet website. Individual members will join for free and receive the basic website services. Individual members may enroll with optional yearly fees for additional premium website services. Individual churches will pay a yearly membership fee for services that will enable a church to upload and update church information including a current event schedule and, for an additional amount, weekly videos of the pastor's sermon. There are several sources for the site's actual content. Some sources are simple information pages plus there may be on-demand video downloads. The website plans to have three basic kinds of information pages: each enrolled individual will have his/her own page; each enrolled church will have its own page; and each enrolled ministry will have its own page. The information contained on each type of page is unique. If a sufficient number of -11- people have joined, it will become profitable to sell advertising since a guaranteed audience will exist. Advertising may be either nationwide (or even worldwide) or local since the website will have geographical information about its members and can target advertising based upon that information. My Lord's Network also plans to offer live streaming video of selected events of particular interest to Christians. Another TTII subsidiary, NetThruster, Inc., has already demonstrated the capability to capture and broadcast live streaming video at high-definition standards. Because of the costs associated with this feature, these broadcasts will be available either only to those members who have paid a nominal yearly membership fee or perhaps for a one-time special charge. There are both products and services that will be provided as well as marketed on the site. Each church page will have location and activity information for that church. Each church has the ability to continually update its activity or event schedule so that when its page is visited, the information will be topical. Each enrolled church will be able to continuously update the church's web page with topical information. The ministry pages will be customized for each ministry and feature information unique to each particular ministry. Many ministries sell products such as books and videos on their own websites and My Lord's Network plans to offer these same products on its site. Advertising revenues can be realized once a sufficient number of individuals have joined the site and provided their demographic information. CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. Certain of our accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require us to apply significant judgment in their application. As a result, these policies are subject to an inherent degree of uncertainty. In applying these policies, we use our judgment in making certain assumption and estimates. Our critical accounting policies are described in our Annual Report on Form 10-KSB for the year ended December 31, 2007. There have been no material changes to our critical accounting policies as of June 30, 2008 and for the six months then ended. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 We had revenue in the first six months of 2008 of $ 0. The lack of revenue is due the Company becoming a software development company for which no revenue has yet been generated. Our operating expenses were $1,615,517 in 2008, primarily due to stock based compensation expense to officers, directors and a shareholder aggregating $923,963, and the ramp up of the Company's software development business and associated general and administrative expenses. Our net loss was $1,617,742 in the first six months of 2008. -12- LIQUIDITY AND CAPITAL RESOURCES The Company's cash position was $314,330 at June 30, 2008 compared to $435,858 at December 31, 2007. The decrease in cash is attributable to cash proceeds from the exercise of stock options of $725,000, offset by repayments of officer's loans and cash utilized in operating activities. As of June 30, 2008, the Company had current assets of $334,059 and current liabilities of $957,042. Net cash used in operating activities amounted to $778,797 for the six month period ended June 30, 2008. The primary reason for the utilization of cash in 2008 was to fund the new software development business of the Company. Net cash provided by financing activities amounted to a $725,000 for the six months ended June 30, 2008. The increase in 2008 resulted from the exercise of stock options. The Company had repayments of officers' loans of $155,245. The Company does not have sufficient capital to meet its current cash needs, which include the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended. The Company intends to seek additional capital and long-term debt financing to attempt to overcome its working capital deficit. The Company will need between $150,000 to $200,000 annually to maintain its reporting obligations. Financing options may be available to the Company either via a private placement or through the public sale of stock. The Company will seek to raise sufficient capital to market NetThruster.com and to sustain monthly operations. There is no assurance, however, that the available funds will be available or adequate. Its need for additional financing is likely to persist. GOING CONCERN QUALIFICATION The Company has incurred significant losses from operations, and such losses are expected to continue. The Company's auditors have included a "Going Concern Qualification" in their report for the year ended December 31, 2007. In addition, the Company has limited working capital. The foregoing raises substantial doubt about the Company's ability to continue as a going concern. Management's plans include seeking additional capital and/or debt financing. There is no guarantee that additional capital and/or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The "Going Concern Qualification" may make it substantially more difficult to raise capital. OFF-BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable. -13- ITEM 4T. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon his evaluation as of the end of the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are not effective to ensure that information required to be included in the Company's periodic filings with the Securities and Exchange Commission are recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, due to certain weaknesses in the internal control over our financial reporting. INTERNAL CONTROL OVER FINANCIAL REPORTING The Company's Chief Executive Officer and Principal Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. At the end of 2007, Section 404 of the Sarbanes-Oxley Act required our management to provide an assessment of the effectiveness of our internal control over financial reporting, and at the end of 2009, our independent registered public accountants will be required to audit management's assessment. We completed our assessment for the fiscal year ended December 31, 2007 and identified the following material weaknesses which continued to exist at the end of our second fiscal quarter ending June 30, 2008: o We have been deficient in our interpretation of generally accepted accounting principles ("GAAP") and in verifying our interpretations by conferring with additional qualified outside consultants, as well as our independent certified public accountants. In particular, we were deficit in our interpretation of the application of GAAP to our business combination with Ludicrous, Inc. (now NetThruster, Inc.), our wholly owned subsidiary, and the effect of our voting trust agreements on the manner in which we would report that business combination under GAAP. -14- Because of the material weaknesses noted above, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2007, based on INTERNAL CONTROL OVER FINANCIAL REPORTING - GUIDANCE FOR SMALLER PUBLIC COMPANIES issued by ("COSO"). Accordingly, the Company has restated its financial statements for the fiscal quarter ending June 30, 2008, as contained in this Amended Quarterly Report. We are in the process of implementing remediation efforts with respect to the material weaknesses which include: o We have established a system of external verification of our interpretations of GAAP with respect to all of our financial reporting obligations, by retaining and conferring with our private certified public accountant, who is now an outside consultant to the Company, in conjunction with ongoing consultation with our independent certified public accounting firm that performs the audit of our financial statements. We believe the foregoing efforts will enable us to improve our internal control over financial reporting. Management is committed to continuing efforts aimed at improving the design adequacy and operational effectiveness of its system of internal controls. The remediation efforts noted above will be subject to our internal control assessment, testing and evaluation process. In connection with the filing of this second amended Quarterly Report on Form 10-Q/A, we have modified our internal controls over financial reporting to establish a verification procedure, including conferring with qualified outside professional consultants, to verify our ongoing interpretation of GAAP to our financial reporting requirements. CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There have been no changes in our internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonable likely to materially affect, our internal controls over financial reporting. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In recent weeks, one of the TTII's shareholders has harassed the Company both in private and in public, as well as its officers and the officers of one of the Company's subsidiaries, in an apparent attempt to civilly extort money from the Company. To address the allegedly libelous claims made by the shareholder, TTII has filed suit in United States District Court. The suit seeks redress in the form of enjoining the shareholder from any further harassment and in the form of damages from the shareholder and others who have allegedly abetted the shareholder's actions. TTII is confident of prevailing in this suit although there is no assurance regarding the results of litigation. -15- ITEM 1A.-RISK FACTORS WE DID NOT TIMELY FILE WITH THE SEC OUR FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007. AS A RESULT OF THIS DELAYED FILING, WE ARE CURRENTLY INELIGIBLE TO USE FORM S-3 TO REGISTER SECURITIES WITH THE SEC IN CAPITAL-RAISING TRANSACTIONS, WHICH MAY ADVERSELY AFFECT OUR COST OF FUTURE CAPITAL. We did not timely file with the SEC our Form 10-KSB for the fiscal year ended December 31, 2007. Although the filing of this Quarterly Report on Form 10-Q/A will bring us current in our filings with the SEC, because our Form 10-KSB was not filed within the deadline promulgated by the SEC, the filing was not timely under applicable SEC rules. As a result of the delayed filing of our Form 10-KSB, we are ineligible to use a "short form" registration statement on Form S-3 to register securities for sale by us or for resale by other security holders, in capital raising transactions, until we have timely filed all periodic reports under the Securities Exchange Act of 1934 for at least 12 calendar months. In the meantime, for capital raising transactions, we would need to use Form S-1 to register securities with the SEC, or issue such securities in a private placement, which could increase the time and resources required to raise capital during this period. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. ITEM 5. OTHER INFORMATION Not Applicable. ITEM 6. EXHIBITS (a) Exhibits EXHIBIT NO. DESCRIPTION ----------- ---------------------------------------------------- 31.1 Section 302 Certification of Chief Executive Officer 31.2 Section 302 Certification of Chief Financial Officer 32.1 Section 906 Certification of Chief Executive Officer 32.2 Section 906 Certification of Chief Financial Officer (b) The following is a list of Current Reports on Form 8-K filed by the Company during and subsequent to the quarter for which this report is filed. None. -16- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: December 3, 2008 TREE TOP INDUSTRIES, INC. By: \s\ David Reichman ------------------------------------------ David Reichman, Chief Executive Officer and Chairman (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ David Reichman Dated: December 3, 2008 -------------------------------------------- David Reichman, Chief Executive Officer and Chairman (Principal Executive Officer) By: /s/ David Reichman Dated: December 3, 2008 -------------------------------------------- David Reichman, Director, President and Chief Operating Officer By: /s/ David Reichman Dated: December 3, 2008 -------------------------------------------- David Reichman, Chief Financial Officer, (Principal Financial/Accounting Officer) -17-