Nevada | 26-3439095 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) |
Large accelerated filer | o | Accelerated filer | o | |
Non-accelerated filer | o | Smaller reporting company | x |
Page | |||
Condensed Consolidated Balance Sheets | 1 | ||
2 | |||
3 | |||
4 | |||
5 | |||
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29 | |||
June 30, | December 31, | September 30, | December 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(unaudited) | (audited) | (unaudited) | (audited) | |||||||||||||
Current assets | ||||||||||||||||
Cash | $ | 23,195 | $ | 373,439 | $ | 1,152 | $ | 373,439 | ||||||||
Accounts receivable | 154,978 | 49,215 | 318,919 | 49,215 | ||||||||||||
Other current assets | 43,852 | 68,030 | 52,689 | 68,030 | ||||||||||||
Total current assets | 222,025 | 490,684 | 372,760 | 490,684 | ||||||||||||
Equipment, net | 31,865 | 1,609 | 31,714 | 1,609 | ||||||||||||
Goodwill | 1,996,763 | - | 5,120,712 | - | ||||||||||||
Intangible assets, net | 2,319,240 | - | 2,835,611 | - | ||||||||||||
Other assets | 67,750 | 46,317 | 49,650 | 46,317 | ||||||||||||
TOTAL ASSETS | $ | 4,637,643 | $ | 538,610 | $ | 8,410,447 | $ | 538,610 | ||||||||
Current liabilities | ||||||||||||||||
Accounts payable | $ | 304,088 | $ | 151,943 | $ | 581,392 | $ | 151,943 | ||||||||
Accrued interest | 91,628 | 37,901 | 120,923 | 37,901 | ||||||||||||
Accrued and deferred personnel compensation | 127,802 | 119,641 | 160,763 | 119,641 | ||||||||||||
Deferred revenue and customer deposits | 343,639 | 233,318 | 366,277 | 233,318 | ||||||||||||
Notes payable, net of discount | 1,448,006 | 803,156 | 1,817,275 | 803,156 | ||||||||||||
Cash payment obligation, net of discount | 219,424 | - | 147,414 | - | ||||||||||||
Derivative liabilities | 188,910 | 334,478 | 266,901 | 334,478 | ||||||||||||
Other current liabilities | 98,488 | 69,142 | 143,722 | 69,142 | ||||||||||||
Total current liabilities | 2,821,985 | 1,749,579 | 3,604,667 | 1,749,579 | ||||||||||||
Non-current liabilities | ||||||||||||||||
Notes payable | 31,807 | - | ||||||||||||||
Earn-out payable | 2,664,466 | - | ||||||||||||||
Derivative liabilities | 140,569 | - | 315,542 | - | ||||||||||||
Total non-current liabilities | 172,376 | - | 2,980,008 | - | ||||||||||||
Total liabilities | 2,994,361 | 1,749,579 | 6,584,675 | 1,749,579 | ||||||||||||
Stockholders' equity (deficit) | ||||||||||||||||
Common stock, $0.001 par value; 150,000,000 shares authorized; 21,509,620 and 17,700,000 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively | 21,509 | 17,700 | ||||||||||||||
Common stock, $0.001 par value; 150,000,000 shares authorized; 22,360,793 and 17,700,000 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively | 22,361 | 17,700 | ||||||||||||||
Additional paid-in capital | 10,990,429 | 6,945,584 | 11,947,645 | 6,945,584 | ||||||||||||
Accumulated deficit | (9,368,656 | ) | (8,174,253 | ) | (10,144,234 | ) | (8,174,253 | ) | ||||||||
Total stockholders' equity (deficit) | 1,643,282 | (1,210,969 | ) | 1,825,772 | (1,210,969 | ) | ||||||||||
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) | $ | 4,637,643 | $ | 538,610 | $ | 8,410,447 | $ | 538,610 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues | ||||||||||||||||
Revenues | $ | 842,885 | $ | 254,274 | $ | 1,536,630 | $ | 683,096 | ||||||||
Cost of revenues | 311,717 | 109,865 | 570,605 | 337,357 | ||||||||||||
Gross margin | 531,168 | 144,409 | 966,025 | 345,739 | ||||||||||||
Operating expenses | ||||||||||||||||
General & administrative | 523,513 | 250,528 | 1,448,955 | 640,038 | ||||||||||||
Sales & marketing | 245,810 | 79,566 | 497,936 | 238,527 | ||||||||||||
Engineering, research, & development | 156,851 | 108,473 | 445,267 | 297,505 | ||||||||||||
Depreciation & amortization | 191,783 | 1,569 | 318,560 | 4,907 | ||||||||||||
Total operating expenses | 1,117,957 | 440,136 | 2,710,718 | 1,180,977 | ||||||||||||
Loss from operations | (586,789 | ) | (295,727 | ) | (1,744,693 | ) | (835,238 | ) | ||||||||
Other income/(expense) | ||||||||||||||||
Interest income | - | - | - | - | ||||||||||||
Interest expense | (133,055 | ) | (18,396 | ) | (376,548 | ) | (51,901 | ) | ||||||||
Change in fair market value of derivative liabilities | (54,134 | ) | - | 152,822 | - | |||||||||||
Gain on debt extinguishment | - | 775 | - | 115,326 | ||||||||||||
Total other income/(expense) | (187,189 | ) | (17,621 | ) | (223,726 | ) | 63,425 | |||||||||
Loss before income taxes | (773,978 | ) | (313,348 | ) | (1,968,419 | ) | (771,813 | ) | ||||||||
Income tax expense | (1,600 | ) | - | (1,562 | ) | - | ||||||||||
Net loss | $ | (775,578 | ) | $ | (313,348 | ) | $ | (1,969,981 | ) | $ | (771,813 | ) | ||||
Net loss per share - basic and diluted | $ | (0.04 | ) | $ | (0.04 | ) | $ | (0.10 | ) | $ | (0.11 | ) | ||||
Weighted average number of shares during the period - basic and diluted | 22,048,802 | 7,110,567 | 20,381,533 | 7,214,928 |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues | ||||||||||||||||
Revenues | $ | 553,108 | $ | 205,099 | $ | 693,745 | $ | 428,822 | ||||||||
Cost of revenues | 179,051 | 103,439 | 258,888 | 227,492 | ||||||||||||
Gross margin | 374,057 | 101,660 | 434,857 | 201,330 | ||||||||||||
Operating expenses | ||||||||||||||||
General & administrative | 374,448 | 214,521 | 920,443 | 388,678 | ||||||||||||
Sales & marketing | 200,822 | 101,447 | 255,679 | 159,760 | ||||||||||||
Engineering, research, & development | 161,291 | 97,543 | 289,862 | 189,065 | ||||||||||||
Depreciation & amortization | 124,741 | 1,669 | 126,778 | 3,338 | ||||||||||||
Total operating expenses | 861,302 | 415,180 | 1,592,762 | 740,841 | ||||||||||||
Loss from operations | (487,245 | ) | (313,520 | ) | (1,157,905 | ) | (539,511 | ) | ||||||||
Other income/(expense) | ||||||||||||||||
Interest income | 16 | - | 174 | - | ||||||||||||
Interest expense | (138,258 | ) | (16,851 | ) | (243,666 | ) | (33,504 | ) | ||||||||
Change in fair market value of derivative liabilities | 159,263 | - | 206,956 | - | ||||||||||||
Gain on debt extinguishment | - | - | - | 114,551 | ||||||||||||
Total other income/(expense) | 21,021 | (16,851 | ) | (36,536 | ) | 81,047 | ||||||||||
Loss before income taxes | (466,224 | ) | (330,371 | ) | (1,194,441 | ) | (458,464 | ) | ||||||||
Income tax benefit/(expense) | 38 | - | 38 | - | ||||||||||||
Net loss | $ | (466,186 | ) | $ | (330,371 | ) | $ | (1,194,403 | ) | $ | (458,464 | ) | ||||
Net loss per share - basic and diluted | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.06 | ) | ||||
Weighted average number of shares during the period - basic and diluted | 21,336,579 | 7,267,972 | 19,534,081 | 7,267,972 |
Additional Paid-In | Accumulated Deficit | Total Stockholders' | |||||||||||||||||||||||||||||||
Common Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders'Equity | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||||
Balance, December 31, 2010 | 17,700,000 | $ | 17,700 | $ | 6,945,584 | $ | (8,174,253) | $ | (1,210,969) | 17,700,000 | $ | 17,700 | $ | 6,945,584 | $ | (8,174,253 | ) | $ | (1,210,969 | ) | |||||||||||||
Issuance of common stock and warrants for cash | 370,334 | 370 | 354,529 | - | 354,899 | 688,669 | 689 | 632,882 | - | 633,571 | |||||||||||||||||||||||
Issuance of common stock for acquisitions | 3,425,000 | 3,425 | 3,421,575 | - | 3,425,000 | 3,944,540 | 3,945 | 3,992,549 | - | 3,996,494 | |||||||||||||||||||||||
Issuance of common stock for patent rights | 14,286 | 14 | 17,843 | - | 17,857 | 14,286 | 14 | 17,843 | - | 17,857 | |||||||||||||||||||||||
Stock-based compensation | - | - | 272,698 | - | 272,698 | 13,298 | 13 | 380,587 | - | 380,600 | |||||||||||||||||||||||
Equity offering costs | - | - | (21,800) | - | (21,800) | - | - | (21,800 | ) | - | (21,000 | ) | |||||||||||||||||||||
Net loss | - | - | - | (1,194,403) | (1,194,403) | - | - | - | (1,969,981 | ) | (1,969,981 | ) | |||||||||||||||||||||
Balance, June 30, 2011 | 21,509,620 | $ | 21,509 | $ | 10,990,429 | $ | (9,368,656) | $ | 1,643,282 | ||||||||||||||||||||||||
Balance, September 30, 2011 | 22,360,793 | $ | 22,361 | $ | 11,947,645 | $ | (10,144,234 | ) | $ | 1,825,772 |
Nine months ended September 30, | ||||||
2011 | 2010 | |||||
OPERATING ACTIVITIES | ||||||
Net loss | $ | (1,969,981) | $ | (771,813) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Gain on debt extinguishment | - | (115,326) | ||||
Bad debt expense | - | 3,246 | ||||
Stock-based compensation | 380,600 | 106,788 | ||||
Depreciation and amortization expense | 318,560 | 4,907 | ||||
Change in fair market value of derivative liabilities | (152,822) | - | ||||
Amortization of deferred financing costs | 30,000 | - | ||||
Amortization of note discounts | 248,412 | - | ||||
Increase (decrease) in cash resulting from changes in: | ||||||
Accounts receivable | (269,704) | (9,032) | ||||
Other current assets | 28,525 | 1,851 | ||||
Other assets | (33,333) | (10,000) | ||||
Accounts payable | 314,920 | 374,633 | ||||
Accrued interest | 83,022 | 50,901 | ||||
Accrued and deferred personnel compensation | 41,122 | 156,106 | ||||
Deferred revenue and customer deposits | 112,639 | (79,177) | ||||
Other liabilities | 74,580 | 585 | ||||
Net cash used in operating activities | (793,460) | (286,331) | ||||
INVESTING ACTIVITIES | ||||||
Purchases of equipment | (12,189) | - | ||||
Acquisition of intangible assets | (77,000) | - | ||||
Cash paid for acquisitions | (209,833) | - | ||||
Acquisition of other assets | - | (1,605) | ||||
Net cash used in investing activities | (299,022) | (1,605) | ||||
FINANCING ACTIVITIES | ||||||
Proceeds from capital contributions by former parent | - | 249,897 | ||||
Proceeds from issuance of notes payable | 10,000 | 53,614 | ||||
Payments on notes payable | (201,008) | - | ||||
Payments on cash payment obligation | (100,000) | - | ||||
Proceeds from issuance of common stock and warrants | 1,033,003 | - | ||||
Equity offering costs | (21,800) | - | ||||
Net cash provided by financing activities | 720,195 | 303,511 | ||||
Net change in cash | (372,287) | 15,575 | ||||
Cash at beginning of period | 373,439 | 11,003 | ||||
Cash at end of period | $ | 1,152 | $ | 26,578 | ||
Supplemental disclosures: | ||||||
Cash paid during period for : | ||||||
Interest | $ | 15,289 | $ | - | ||
Income Taxes | $ | - | $ | - | ||
Non cash investing and financing activities: | ||||||
Common stock issued for patents and trademarks | $ | 17,857 | $ | - | ||
Fair value of assets acquired in acquisitions | $ | 44,414 | $ | - | ||
Customer contracts | 1,026,000 | - | ||||
Customer relationships | 1,406,000 | - | ||||
Trade name | 140,000 | - | ||||
Technology / IP | 458,000 | - | ||||
Non-compete | 16,000 | - | ||||
Goodwill | 5,120,712 | - | ||||
Assumed liabilities - deferred revenue | (134,849) | - | ||||
Subordinated secured note payable | (781,064) | - | ||||
Subordinated note payable | (182,460) | - | ||||
Cash payment obligation | (241,960) | - | ||||
Earn-out payable | (2,664,466) | - | ||||
Common stock issued for acquisitions | (3,996,494) | - | ||||
Cash paid for acquisitions | $ | 209,833 | $ | - |
Six months ended June 30, | ||||||||
2011 | 2010 | |||||||
OPERATING ACTIVITIES | ||||||||
Net loss | $ | (1,194,403 | ) | $ | (458,464 | ) | ||
Adjustments to reconcile net loss to net cash used for operating activities: | ||||||||
Gain on debt extinguishment | - | (114,551 | ) | |||||
Bad debt expense | 6,203 | - | ||||||
Stock-based compensation | 272,698 | 68,651 | ||||||
Depreciation and amortization expense | 126,778 | 3,338 | ||||||
Change in fair market value of derivative liabilities | (206,956 | ) | - | |||||
Amortization of deferred financing costs | 20,000 | - | ||||||
Amortization of note discounts | 161,565 | - | ||||||
Increase (decrease) in cash resulting from changes in: | ||||||||
Accounts receivable | (111,966 | ) | (365 | ) | ||||
Other current assets | 34,362 | 3,005 | ||||||
Other assets | (41,433 | ) | - | |||||
Accounts payable | 152,145 | 172,525 | ||||||
Accrued interest | 53,727 | 33,505 | ||||||
Accrued and deferred personnel compensation | 8,161 | 88,400 | ||||||
Deferred revenue and customer deposits | 90,321 | (40,432 | ) | |||||
Other liabilities | 29,346 | 390 | ||||||
Net cash used for operating activities | (599,452 | ) | (243,998 | ) | ||||
INVESTING ACTIVITIES | ||||||||
Purchases of equipment | (6,186 | ) | - | |||||
Acquisition of intangible assets | (75,001 | ) | - | |||||
Cash paid for acquisitions | (91,153 | ) | - | |||||
Acquisition of other assets | - | (1,605 | ) | |||||
Net cash used by investing activities | (172,340 | ) | (1,605 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from capital contributions by former parent | - | 249,897 | ||||||
Proceeds from issuance of notes payable | 10,000 | - | ||||||
Payments on notes payable | (97,153 | ) | - | |||||
Payments on cash payment obligation | (25,000 | ) | - | |||||
Proceeds from issuance of common stock and warrants | 555,501 | - | ||||||
Equity offering costs | (21,800 | ) | - | |||||
Net cash provided by financing activities | 421,548 | 249,897 | ||||||
Net change in cash | (350,244 | ) | 4,294 | |||||
Cash at beginning of period | 373,439 | 11,003 | ||||||
Cash at end of period | $ | 23,195 | $ | 15,297 | ||||
Supplemental disclosures: | ||||||||
Cash paid during period for : | ||||||||
Interest | $ | 3,113 | $ | - | ||||
Income Taxes | $ | - | $ | - | ||||
Non cash investing and financing activities: | ||||||||
Common stock issued for patents and trademarks | $ | 17,857 | $ | - | ||||
Fair value of assets acquired in acquisitions | $ | 41,414 | $ | - | ||||
Customer contracts | 1,026,000 | - | ||||||
Customer relationships | 814,000 | - | ||||||
Trade name | 101,000 | - | ||||||
Technology / IP | 399,000 | - | ||||||
Non-compete | 6,000 | - | ||||||
Goodwill | 1,996,763 | - | ||||||
Assumed liabilities - deferred revenue | (20,000 | ) | - | |||||
Subordinated secured note payable | (606,064 | ) | - | |||||
Cash payment obligation | (241,960 | ) | - | |||||
Common stock issued for acquisitions | (3,425,000 | ) | - | |||||
Cash paid for acquisitions | $ | 91,153 | $ | - |
Current assets | $ | 10,184 | ||
Equipment | 31,230 | |||
Customer contracts | 1,026,000 | |||
Trade name | 36,000 | |||
Technology / IP | 182,000 | |||
Non-compete | 1,000 | |||
Goodwill | 1,426,730 | |||
Assumed liabilities - deferred revenue | (20,000 | ) | ||
Total purchase price | $ | 2,693,144 |
Cash | $ | 26,184 | ||
Present value of scheduled cash payments | 241,960 | |||
Common stock | 2,425,000 | |||
Total purchase price | $ | 2,693,144 |
Customer relationships | $ | 814,000 | ||
Trade name | 65,000 | |||
Technology / IP | 217,000 | |||
Non-compete | 5,000 | |||
Goodwill | 570,033 | |||
Total purchase price | $ | 1,671,033 |
Cash | $ | 64,969 | ||
Subordinated secured note payable | 606,064 | |||
Common stock | 1,000,000 | |||
Total purchase price | $ | 1,671,033 |
Useful Lives (Years) | ||||||||
Txtstation | Mobivity | |||||||
Customer contracts | 5 | n/a | ||||||
Customer relationships | n/a | 5 | ||||||
Trade name | 5 | 5 | ||||||
Technology / IP | 5 | 5 | ||||||
Non-compete | 2 | 2.5 | ||||||
Goodwill | n/a | n/a |
Prepaid Assets | $ | 3,000 | ||
Customer relationships | 592,000 | |||
Trade name | 39,000 | |||
Technology/IP | 59,000 | |||
Non-compete | 10,000 | |||
Goodwill | 3,125,783 | |||
Total purchase price | $ | 3,828,783 |
Cash | $ | 120,514 | ||
Subordinated secured promissory note | 175,000 | |||
Unsecured subordinated promissory note | 182,460 | |||
Common stock | 571,494 | |||
Earn-out payable | 2,664,466 | |||
Liabilities assumed | 114,849 | |||
Total purchase price | $ | 3,828,783 |
Useful Lives (Years) | ||||||||||||
Txtstation | Mobivity | Boomtext | ||||||||||
Customer contracts | 5 | n/a | n/a | |||||||||
Customer relationships | n/a | 5 | 2 | |||||||||
Trade name | 5 | 5 | 1 | |||||||||
Technology / IP | 5 | 5 | 2 | |||||||||
Non-compete | 2 | 2.5 | 2 | |||||||||
Goodwill | n/a | n/a | n/a |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Proforma revenue | $ | 553,108 | $ | 512,113 | $ | 1,122,516 | $ | 1,142,207 | ||||||||
Proforma net loss | $ | (466,186 | ) | $ | (488,108 | ) | $ | (1,274,881 | ) | $ | (701,895 | ) |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Proforma revenue | $ | 948,543 | $ | 867,480 | $ | 2,691,328 | $ | 2,425,519 | ||||||||
Proforma net loss | $ | (792,807 | ) | $ | (449,014 | ) | $ | (2,203,092 | ) | $ | (1,245,890 | ) |
June 30, 2011 | December 31, 2010 | |||||||
Bridge notes payable | $ | 1,010,000 | $ | 1,000,000 | ||||
Less unamortized discounts: | ||||||||
Variable maturity discount | (650 | ) | (1,569 | ) | ||||
Warrant discount | (110,432 | ) | (267,259 | ) | ||||
Bridge notes payable, net of discounts | $ | 898,918 | $ | 731,172 |
September 30, 2011 | December 31, 2010 | |||||||
Bridge notes payable | $ | 1,010,000 | $ | 1,000,000 | ||||
Less unamortized discounts: | ||||||||
Variable maturity discount | (176 | ) | (1,569 | ) | ||||
Warrant discount | (29,794 | ) | (267,259 | ) | ||||
Bridge notes payable, net of discounts | $ | 980,030 | $ | 731,172 |
Notes Payable | Accrued Interest | |||||||||||||||
6/30/2011 | 12/31/2010 | 6/30/2011 | 12/31/2010 | |||||||||||||
Bridge notes, net, as discussed above | $ | 898,918 | $ | 731,172 | $ | 65,658 | $ | 15,792 | ||||||||
Mobivity note, as discussed above | 508,911 | - | - | |||||||||||||
Unsecured (as amended) note payable due to our Company’s former Chief Executive Officer, interest accrues at the rate of 9% compounded annually, all amounts due and payable December 31, 2008 | 20,000 | 20,000 | 9,506 | 8,223 | ||||||||||||
Note payable due to a trust, interest accrues at the rate of 10% per annum, all amounts due and payable December 31, 2006. The Company is negotiating the terms of this note. | 51,984 | 51,984 | 16,464 | 13,886 | ||||||||||||
$ | 1,479,813 | $ | 803,156 | $ | 91,628 | $ | 37,901 |
Notes Payable | Accrued Interest | |||||||||||||||
9/30/2011 | 12/31/2010 | 9/30/2011 | 12/31/2010 | |||||||||||||
Bridge notes, net, as discussed above | $ | 980,030 | $ | 731,172 | $ | 91,115 | $ | 15,792 | ||||||||
Mobivity note, as discussed above | 410,300 | - | - | - | ||||||||||||
Unsecured (as amended) note payable due to our Company’s former Chief Executive Officer, interest accrues at the rate of 9% compounded annually, all amounts due and payable December 31, 2008, See Note 12 | 20,000 | 20,000 | 10,181 | 8,223 | ||||||||||||
Note payable due to a trust, interest accrues at the rate of 10% per annum, all amounts due and payable December 31, 2006. The Company is negotiating the terms of this note. | 51,984 | 51,984 | 17,774 | 13,886 | ||||||||||||
Digimark, LLC secured subordinated promissory note, as discussed above | 175,000 | - | 1,853 | - | ||||||||||||
Digimark, LLC subordinated promissory note, as discussed above | 179,961 | - | - | - | ||||||||||||
$ | 1,817,275 | $ | 803,156 | $ | 120,923 | $ | 37,901 |
Weighted - | ||||||||||||||||||||||||
Weighted - | Average | |||||||||||||||||||||||
Average | Remaining | |||||||||||||||||||||||
Number | Weighted - Average | Weighted - Average | Number | Exercise Price | Contractual | |||||||||||||||||||
Outstanding | Per Share | Life (Years) | Outstanding | Per Share | Life (Years) | |||||||||||||||||||
Outstanding at January 1, 2011 | 1,808,750 | $ | 0.32 | 4.73 | 1,808,750 | $ | 0.32 | 4.73 | ||||||||||||||||
Granted | 575,000 | 1.45 | 7.38 | 750,000 | 1.52 | 7.92 | ||||||||||||||||||
Exercised | - | - | - | - | - | - | ||||||||||||||||||
Canceled/forfeited/expired | - | - | - | (143,750 | ) | 1.60 | 4.29 | |||||||||||||||||
Outstanding at June 30, 2011 | 2,383,750 | $ | 0.59 | 5.19 | ||||||||||||||||||||
Outstanding at September 30, 2011 | 2,415,000 | $ | 0.62 | 5.38 | ||||||||||||||||||||
Options vested and exercisable at June 30, 2011 | 309,372 | $ | 0.32 | 4.49 | ||||||||||||||||||||
Options vested and exercisable at September 30, 2011 | 306,247 | $ | 0.32 | 4.24 |
June 30, 2011 | September 30, 2011 | Nine months ended September 30, 2011 | ||||||||||||||||||||
Employee Options | Non-Employee Options | Employee Options | Non-Employee Options | Employee Options | Non-Employee Options | |||||||||||||||||
Expected volatility | 60 | % | 60 | % | 60% to 61.6% | 61.6% | 60% to 61.6% | 60% to 61.6% | ||||||||||||||
Risk-free interest rate | 1.47% to 2.31 | % | 1.76% to 2.24 | % | 0.91% to 2.31% | 0.96% | 0.91% to 2.31% | 0.96% to 2.24% | ||||||||||||||
Forfeiture rate | 0 | % | 0 | % | 0.0% | 0.0% | 0.0% | 0.0% | ||||||||||||||
Expected dividend rate | 0 | % | 0 | % | 0.0% | 0.0% | 0.0% | 0.0% | ||||||||||||||
Expected life (yrs) | 3.00 to 6.00 | 4.00 to 5.00 | 3.00 to 6.00 | 4.00 to 5.00 | 3.00 to 6.00 | 4.00 to 5.00 |
Variable maturity conversion liability | Additional security issuance derivative | Down round liability - shares | Down round liability - warrants | Total | Variable maturity conversion liability | Additional security issuance derivative | Down round liability - shares | Down round liability - warrants | Total | |||||||||||||||||||||||||||||||
Beginning balance January 1, 2011 | $ | 1,208 | $ | 333,270 | $ | - | $ | - | $ | 334,478 | $ | 1,208 | $ | 333,270 | $ | - | $ | - | $ | 334,478 | ||||||||||||||||||||
Issuances | 11 | 1,341 | $ | 56,333 | 144,272 | 201,957 | 11 | 1,341 | 109,636 | 289,799 | 400,787 | |||||||||||||||||||||||||||||
Change in fair market value of derivative liabilities | (321 | ) | (181,061 | ) | (21,871 | ) | (3,703 | ) | (206,956 | ) | (1,000 | ) | (123,104 | ) | (54,461 | ) | 25,743 | (152,822 | ) | |||||||||||||||||||||
Ending balance June 30, 2011 | $ | 898 | $ | 153,550 | $ | 34,462 | $ | 140,569 | $ | 329,479 | ||||||||||||||||||||||||||||||
Ending balance September 30, 2011 | $ | 219 | $ | 211,507 | $ | 55,175 | $ | 315,542 | $ | 582,443 |
Balance at | Balance at | |||||||||||||||
December 31, 2010 | Additions | Amortization | September 30, 2011 | |||||||||||||
Patents and trademarks | $ | - | $ | 94,857 | $ | (3,496 | ) | $ | 91,361 | |||||||
Customer contracts | - | 1,026,000 | (102,600 | ) | 923,400 | |||||||||||
Customer relationships | - | 1,406,000 | (130,734 | ) | 1,275,266 | |||||||||||
Trade name | - | 140,000 | (16,600 | ) | 123,400 | |||||||||||
Technology / IP | - | 458,000 | (49,733 | ) | 408,267 | |||||||||||
Non-compete | - | 16,000 | (2,083 | ) | 13,917 | |||||||||||
$ | - | $ | 3,140,857 | $ | (305,246 | ) | $ | 2,835,611 |
Balance at December 31, 2010 | Additions | Amortization | Balance at June 30, 2011 | |||||||||||||
Patents and trademarks | $ | - | $ | 92,858 | $ | (1,993 | ) | $ | 90,865 | |||||||
Customer contracts | - | 1,026,000 | (51,300 | ) | 974,700 | |||||||||||
Customer relationships | - | 814,000 | (40,700 | ) | 773,300 | |||||||||||
Trade name | - | 101,000 | (5,050 | ) | 95,950 | |||||||||||
Technology / IP | - | 399,000 | (19,950 | ) | 379,050 | |||||||||||
Non-compete | - | 6,000 | (625 | ) | 5,375 | |||||||||||
$ | - | $ | 2,438,858 | $ | (119,618 | ) | $ | 2,319,240 |
2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||||||||
Amortization expense | $ | (211,504 | ) | $ | (829,765 | ) | $ | (668,432 | ) | $ | (474,015 | ) | $ | (474,015 | ) |
2011 | 2012 | 2013 | 2014 | 2015 | ||
Amortization expense | $ 238,208 | $ 476,415 | $ 475,540 | $ 473,915 | $ 473,915 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
(1) | inadequate segregation of duties and effective risk assessment; and | |
(2) | insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both generally accepted accounting principles in the United States and guidelines of the Securities and Exchange Commission. |
Item 1. | Legal |
Item 1A. | Risk Factors. |
· | market acceptance of our mobile marketing and advertising services; |
· | the need to adapt to changing technologies and technical requirements; |
· | the need to adapt to changing regulations requiring changes to our processes or platform; and |
· | the existence and cost of opportunities for expansion through internal growth and acquisitions. |
· | Potentially dilutive issuances of our securities, the incurrence of debt and contingent liabilities and amortization expenses related to intangible assets, which could adversely affect our results of operations and financial condition; |
· | The possibility that staff or customers of the acquired company might not accept new ownership and may transition to different technologies or attempt to renegotiate contract terms or relationships; |
· | The possibility that the due diligence process in any such acquisition may not completely identify material issues associated with product and service quality, intellectual property issues, key personnel issues or legal and financial contingencies; and |
· | Difficulty in integrating acquired operations due to technology constraints or geographical distance. |
· |
locate additional office space in various countries; and |
· | maintain close coordination among our engineering, operations, legal, finance, sales and marketing and customer service and support organizations. |
· | dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in connection with future acquisitions or capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies; |
· | announcements of new acquisitions or other business initiatives by our competitors; |
· | our ability to take advantage of new acquisitions or other business initiatives; |
· | changes in the valuation of similarly situated companies, both in our industry and in other industries; |
· | changes in analysts’ estimates affecting us, our competitors and/or our industry; |
· | changes in the accounting methods used in or otherwise affecting our industry; |
· | additions and departures of key personnel; |
· | announcements by relevant governments pertaining to additional quota restrictions; and |
· | fluctuations in interest rates and the availability of capital in the capital markets. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Item 3. | Defaults Upon Senior Securities. |
Item 4. | Removed and Reserved. |
Item 5. | Other Information. |
Item 6. | Exhibits. |
CommerceTel Corporation | ||||
Date: | By: | /s/Dennis Becker | ||
Dennis Becker | ||||
Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
Exhibit Number | Description | |||
31.1 | Certification of Dennis Becker, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
Certification of Dennis Becker, Chief Executive Officer, and Matthew Szot, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE | XBRL Instance Document* XBRL Taxonomy Extension Schema* XBRL Taxonomy Extension Calculation Linkbase* XBRL Taxonomy Extension Definition Linkbase* XBRL Taxonomy Extension Label Linkbase* XBRL Taxonomy Extension Presentation Linkbase* |