UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2008
OR
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: 333-88480
BBM HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Utah | 13-3709558 | |
| (State or other jurisdiction of incorporation of organization) | (I.R.S. Employer Identification No.) |
1245 Brickyard Road, Suite 590
Salt Lake City, Utah 84106
(Address of principal executive offices)
(801) 433-2000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes [X] No [ ]
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.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]
(Do not check if 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).Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date. 25,247,006 shares of Common Stock outstanding as of February 11, 2009.
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BBM HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of perations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. 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. 15
Item 3. Defaults Upon Senior Securities. 15
Item 4. Submission of Matters to a Vote of Security Holders. 0; 15
Item 5. Other Information 15
Item 6. Exhibits 15
2
| PART I | FINANCIAL INFORMATION |
| Item 1. | Financial Statements. |
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report on Form 10-K filed with the SEC on January 13, 2009. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
TABLE OF CONTENTS PAGE
Balance Sheets as of December 31, 2008 (unaudited) and September 30, 2008 4
Statements of Operations for the three month periods ended
December 31, 2008 and 2007 and for the period from October 1, 2007
(inception of development stage) to December 31, 2008 (unaudited) 5
Statements of Cash Flows for the three month periods ended
December 31, 2008 and 2007 and for the period from October 1, 2007
(inception of development stage) to December 31, 2008 (unaudited) 6
Notes to Unaudited Financial Statements 7
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BBM HOLDINGS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Balance Sheet
(In Thousands)
| ASSETS | |||||||
| December 31, | September 30, | ||||||
| 2008 | 2008 | ||||||
| CURRENT ASSETS | (unaudited) | ||||||
| Cash and cash equivalents | $ | 25 | $ | 96 | |||
| Total Current Assets | 25 | 96 | |||||
| OTHER ASSETS | |||||||
| Security deposits | 85 | 85 | |||||
| Total Other Assets | 85 | 85 | |||||
| TOTAL ASSETS | $ | 110 | $ | 181 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
| CURRENT LIABILITIES | |||||||
| Accounts payable | $ | 53 | $ | 56 | |||
| Accrued expenses | 90 | 92 | |||||
| Total Current Liabilities | 143 | 148 | |||||
| LONG-TERM LIABILITIES | - | - | |||||
| TOTAL LIABILITIES | 143 | 148 | |||||
| STOCKHOLDERS' EQUITY (DEFICIT) | |||||||
| Preferred stock, Series A; 10,000,000 shares authorized, | |||||||
| at no par value, no shares | |||||||
| issued and outstanding | - | - | |||||
| Common stock; 50,000,000 shares authorized, | |||||||
| at no par value, 25,247,006 | |||||||
| shares issued and outstanding, respectively | 21,637 | 21,637 | |||||
| Accumulated deficit | (20,975) | (20,975) | |||||
| Deficit accumulated during the development stage | (695) | (629) | |||||
| Total Stockholders' Equity (Deficit) | (33) | 33 | |||||
| TOTAL LIABILITIES AND | |||||||
| STOCKHOLDERS' EQUITY (DEFICIT) | $ | 110 | $ | 181 | |||
| The accompanying notes are an integral part of these financial statements. | |||||||
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BBM HOLDINGS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Statements of Operations
(In Thousands)
(Unaudited)
| From Inception of | |||||||||||
| For the Three Months Ended | Development Stage | ||||||||||
| December 31, | on October 1, 2007 | ||||||||||
| 2008 | 2007 | Through December 31, 2008 | |||||||||
| REVENUES | $ | - | $ | - | $ | - | |||||
| COST OF SALES | - | - | - | ||||||||
| GROSS PROFIT | - | - | - | ||||||||
| OPERATING EXPENSES | |||||||||||
| General and administrative | 66 | 243 | 706 | ||||||||
| Total Operating Expenses | 66 | 243 | 706 | ||||||||
| OPERATING LOSS | (66) | (243) | (706) | ||||||||
| OTHER INCOME AND EXPENSE | |||||||||||
| Other income and expense | - | 1 | 11 | ||||||||
| LOSS FROM CONTINUING OPERATIONS | |||||||||||
| BEFORE INCOME TAXES | (66) | (242) | (695) | ||||||||
| PROVISION FOR INCOME TAXES | - | - | - | ||||||||
| LOSS FROM CONTINUING OPERATIONS | (66) | (242) | (695) | ||||||||
| DISCONTINUED OPERATIONS | |||||||||||
| Income (loss) from discontinued | |||||||||||
| operations (including gain on | |||||||||||
| disposal of $606) | - | 629 | 654 | ||||||||
| Income tax benefit | - | - | - | ||||||||
| INCOME (LOSS) FROM | |||||||||||
| DISCONTINUED OPERATIONS | - | 629 | - | ||||||||
| NET INCOME (LOSS) | $ | (66) | $ | 387 | $ | (41) | |||||
| BASIC INCOME (LOSS) PER SHARE | |||||||||||
| Continuing operations | $ | (0.00) | $ | (0.01) | |||||||
| Discontinued operations | 0.00 | 0.02 | |||||||||
| $ | (0.00) | $ | 0.02 | ||||||||
| DILUTED INCOME (LOSS) PER SHARE | |||||||||||
| Continuing operations | $ | (0.00) | $ | (0.01) | |||||||
| Discontinued operations | 0.00 | 0.02 | |||||||||
| $ | (0.00) | $ | 0.01 | ||||||||
| WEIGHTED AVERAGE NUMBER | |||||||||||
| OF SHARES OUTSTANDING: | |||||||||||
| BASIC | 25,247 | 25,247 | |||||||||
| DILUTED | 25,247 | 30,858 | |||||||||
| The accompanying notes are an integral part of these financial statements | |||||||||||
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BBM HOLDINGS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Statements of Cash Flows
(In Thousands)
(Unaudited)
| From Inception | |||||||||||
| of the Development | |||||||||||
| Stage on October | |||||||||||
| For the Three Months Ended | 1, 2007 Through | ||||||||||
| December 31, | December 31, | ||||||||||
| OPERATING ACTIVITIES | 2008 | 2007 | 2008 | ||||||||
| Net income (loss) | $ | (66) | $ | 387 | $ | (41) | |||||
| Adjustments to reconcile net loss to net cash | |||||||||||
| used by operating activities: | |||||||||||
| Discontinued operations | - | (473) | (684) | ||||||||
| Fair value of warrant issued for services | - | - | 271 | ||||||||
| Changes in operating assets and liabilities | |||||||||||
| Change in deposits | - | - | 2 | ||||||||
| Change in accounts payable | (3) | (57) | (95) | ||||||||
| Change in accrued expenses | (2) | (41) | (43) | ||||||||
| Net Cash Used in Operating Activities | (71) | (184) | (590) | ||||||||
| INVESTING ACTIVITIES | |||||||||||
| Discontinued operations | - | 460 | 418 | ||||||||
| Net Cash Provided by Investing Activities | - | 460 | 418 | ||||||||
| FINANCING ACTIVITIES | |||||||||||
| Discontinued operations | - | - | - | ||||||||
| Net Cash Provided by Financing Activities | - | - | - | ||||||||
| NET DECREASE IN CASH | (71) | 276 | (172) | ||||||||
| CASH AT BEGINNING OF PERIOD | 96 | 197 | 197 | ||||||||
| CASH AT END OF PERIOD | $ | 25 | $ | 473 | $ | 25 | |||||
| SUPPLEMENTAL DISCLOSURES OF | |||||||||||
| CASH FLOW INFORMATION | |||||||||||
| NON CASH FINANCING ACTIVITIES: | |||||||||||
| Transfer of investment for dividends payable | $ | - | $ | - | $ | 186 | |||||
| The accompanying notes are an integral part of these financial statements. | |||||||||||
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BBM Holdings, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Sale of Assets
On October 16, 2007, BBM Holdings, Inc. and Subsidiaries (the “Company” or “BBM”) agreed to sell substantially all of its assets (primarily intellectual property and technology) relating to broadband services to ships to private investors for $460,000 pursuant to an asset purchase agreement (the “Asset Purchase Agreement”). The Company completed the transaction November 1, 2007, after obtaining required stockholders’ approval under Utah corporate law. In conjunction with the completion of the sale of assets, a major customer of BBM agreed to release the Company of its obligation for accrued commissions of $45,000 as well as agreeing to withdraw its claim of $420,000; for which BBM had accrued a reserve equal to $180,000. In the nine months ended June 30, 2008, the Company recognized a gain on the transaction of approximately $606,000, including the reversal of $225,000 of accrued liabilities.
Note 2. Continuation of Company as Inactive Public Entity and Going Concern Uncertainty
Continuation of Company as Inactive Public Entity – After the cessation of operations on June 5, 2007 and the sale of substantially all of the Company’s assets on November 1, 2007, BBM continues as an inactive public company seeking various merger, acquisition or other reorganization possibilities. BBM can give no assurance that it will be successful in such efforts or that its limited capital will be adequate to continue the Company as an inactive public company, nor will there be an assurance of any additional funding being available to the Company.
Going Concern Uncertainty – The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. At December 31, 2008, the Company had cash and cash equivalents of $25,000, an accumulated deficit of approximately $21,670,000 and negative working capital of approximately $118,000. For the three months ended December 31, 2008, the Company had no revenues and utilized cash in operating activities of approximately $71,000. The Company’s plan includes settling its remaining outstanding liabilities. Thereafter, the Company will have limited capital to pay for ongoing public reporting and minimal operating expense. In addition, not all obligations of the Company have been settled and it is possible that the Company may incur other financial obligations. Since the sale of the Company’s assets, the Company is essentially a “shell company” in that it will not have any active business purpose or active business assets. Management of the Company, through the Board of Directors, on a time available basis, will continue to search for, review and complete due diligence on various potential merger or acquisition proposals for which management would deem that the Company would be a suitable acquisition candidate. To the date of this report, no such acquisition or merger proposal has been identified.
The Company has no present avenues of financing and no present plans to obtain interim financing while continuing its search for a suitable merger or acquisition candidate. Should there come a point in time when the Company has exhausted its reserve funds and must seek additional funding to maintain itself as a public reporting company engaged in searching for merger and acquisition opportunities, it may be necessary to seek private capital through the sale of additional restricted stock or borrowing either from principal shareholders or private parties. It is highly unlikely that the Company would be able to obtain financing from any commercial lending source, as it is presently constituted. As a result of the foregoing, the future liquidity of the Company and funding sources must be considered as tentative and very limited and pose a substantial risk factor to the ongoing viability of the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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BBM Holdings, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3. Basis of Presentation
The accompanying interim condensed consolidated financial statements and notes have been prepared, in accordance with the instructions for Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), but have not been audited. Therefore such financial statements and notes do not include all information and notes normally provided in the annual consolidated financial statements. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the fiscal year ended September 30, 2008, which are presented in the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008 filed January 13, 2009. These statements reflect all adjustments which are of a normal recurring nature and which, in the opinion of management, are necessary for a fair presentation of the results for the three months ended December 31, 2008 and 2007. The results of operations for the three months ended December 31, 2008 and 2007 are not necessarily indicative of the results for the full year.
Certain amounts in the prior year financial statements have been reclassified to conform to the presentation in the current financial statements. The Company has been reclassified as a development stage enterprise as of October 1, 2007.
Note 4. Net Income (Loss) Per Common Share
The Company complies with Statement of Financial Accounting Standards (“SFAS”) No. 128 “Earnings per Share.” Under SFAS No. 128, basic income (loss) per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted income per common share incorporates the dilutive effect of common stock equivalents during the period using the treasury stock method. The calculation of diluted loss per common share excludes potential common stock equivalents if the effect is anti-dilutive. As of December 31, 2008, the Company had the following common stock equivalents outstanding:
| Warrants | 13,075,935 |
| Total | 13,075,935 |
Note 5. Recently Issued Accounting Pronouncements
In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have material effect on our consolidated financial position and results of operations if adopted.
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BBM Holdings, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5. Recently Issued Accounting Pronouncements (continued)
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.
Note 6. Related Party Transactions
As of March 2, 2008 the Company declared a dividend of the Lightspace Units equal to 0.03997 Units per share on its outstanding shares of Series A Preferred Stock payable on the close of business on March 27, 2008 pending certificate printing and any other regulatory approvals. The dividend was distributed to all Series A Preferred Stockholders on June 23, 2008 and the under the terms of the Series A Preferred Stock the shares were simultaneously cancelled.
Note 7. Accrued Expenses
Accrued expenses consist of the following at December 31, 2008:
| Rent | $69,749 |
| Other | 20,362 |
| $90,111 | |
The Company has sub-let its offices and recorded the present value of future lease payments to be made net of the lease payments to be received. The Company has used a discount rate of 10%.
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our discussion and analysis of the business and subsequent discussion of financial conditions may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical in nature, including statements about beliefs and expectations, are forward-looking statements. Words such as “may,” “will,” “should,” “estimates,” “predicts,” “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying such statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties as described in greater detail in our “Risk Factors” on page 15 to this Quarterly Report, many of which are beyond our control. You are cautioned that these forward-looking statements reflect management’s estimates only as of the date hereof, and we assume no obligation to update these statements, even if new information becomes available or other events occur in the future. Although we believe the expectations reflected in these forward-looking statements are reasonable, such expectations cannot guarantee future results, levels of activity, performance or achievements. Actual future results, events and trends may differ materially from those expressed in or implied by such statements depending on a variety of factors, including, but not limited to those set forth in our filings with the SEC. Specifically, and not in limitation of these factors, we may alter our plans, strategies, objectives or business.
We are a reporting company and file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information that we file at the SEC’s public reference room at 100 F Street N.E., Room 1580, Washington, D.C., 20549. You can also request copies of these documents by writing to the SEC and paying a fee for the copying costs. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room. Our public filings with the SEC are also available on the web site maintained by the SEC at http://www.sec.gov.
Summary
BBM Holdings, Inc. (formerly Prime Resource, Inc.) (“BBM”, the “Company” or the “Registrant”) is a Utah corporation that was organized on March 29, 2002 as a successor entity to Prime, LLC, a Utah limited liability company. BBM is currently a “shell company” and does not have any active business operation or active business assets.
On April 30, 2006, Prime Resource, Inc. transferred substantially all of its assets, essentially becoming a “shell company” without any active business purpose or active business assets. On March 22, 2007, the Registrant changed its name to “BBM Holdings, Inc.” On March 30, 2007 (the "Effective Date"), Prime Acquisition, Inc., a wholly-owned subsidiary of the Registrant, merged with and into Broadband Maritime, Inc. (“Broadband”), a company providing broadband internet service and international telephone service for the maritime industry. On June 5, 2007, the Registrant announced that it ceased operations and reduced employment to a small residual force. Effective October 1, 2007 the Company considers itself to have re-entered the development stage.
Discontinued Operations and Divestment of Assets
On June 5, 2007, BBM announced that it had ceased operations and reduced employment to a small residual force. The Company committed to this action following a meeting of the Board of Directors on May 31, 2007. The Company received notification of the cancellation of two customer contracts on May 22, 2007 and May 28, 2007. In addition, the Company’s largest customer announced that it would suspend further installations of systems on its vessels for a four-month period. The Company also received notification of the cancellation of a third customer contract on June 1, 2007.
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Based on the cancellations and suspension of installations, the Board assessed that the Company’s installation schedule was severely jeopardized and the ability to raise additional required funds would be greatly impaired. The Board directed management to cease operations immediately in order to conserve cash and maximize the value of the Company.
On October 16, 2007, BBM Holdings, Inc. agreed to sell substantially all of its assets (primarily intellectual property and technology) relating to broadband services to ships to private investors for $460,000, pursuant to an asset purchase agreement (the “Asset Purchase Agreement”). The Company completed the transaction November 1, 2007, after required stockholders’ approval under Utah corporate law. In conjunction with the completion of the asset sale, BBM’s major customer agreed to release the Company of its obligation to accrued commissions of $45,000 and agreed to withdraw its claim of $420,000, for which BBM had accrued a reserve equal to $180,000.
The detailed terms of such sale are more fully described in the Company’s Current Report on Form 8-K filed on October 16, 2007, to which was attached a complete copy of the definitive Asset Purchase Agreement, together with the exhibits and schedules to the agreement.
Following is a brief summary description of certain essential terms of the sale, but which does not purport or intend to be a complete or exhaustive listing of all detailed terms or provisions.
The principal transaction involves the sale by BBM of substantially all of its assets (primarily intellectual property and technology) of its sole subsidiary Broadband.
Upon completion of the sale, BBM will continue on as an inactive public company seeking various merger, acquisition or other reorganization possibilities.
Upon closing of the asset sale, Mary Ellen Kramer resigned her position as CEO and President of BBM Holdings, and Andrew Limpert, a Director since April 2002, was appointed CEO and President to serve on an interim basis.
Mr. Limpert, age 39, has been an investment advisor associated with the Salt Lake based firm of Belsen Getty, LLC since 1998. Since April 2006, Mr. Limpert has primarily been engaged in maintaining the Company and attempting to find reorganization candidates. Mr. Limpert holds a B.S. degree in finance from the University of Utah in Salt Lake City granted in 1995 and an M.B.A. from Westminster College of Salt Lake City, Utah granted in 1998. Mr. Limpert is not providing his services to the Company on a full-time basis and is assisting BBM on a limited as-needed basis.
Following the sale of substantially all of the Company’s assets, BBM essentially became a “shell company” in that it no longer has any active business operations or active business assets. Management of the Company through the Board of Directors, on a time available basis, will continue to search for, review and complete due diligence on various potential merger or acquisition proposals for which management would deem that the Company would be a suitable acquisition candidate. As of the date of this report, no such acquisition or merger proposal has been identified.
Products and Markets
With the sale of its active business assets, BBM currently has no active business products or markets. At the present time, management is engaged on a best-efforts, time available basis, in searching out a potential merger and acquisition candidate that would yield additional value to public shareholders in the entity. No warranty or assurance, however, of future results can be made or is implied by these efforts.
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The Company will continue to incur ongoing operating losses, which are expected to be greatly reduced due to the substantially inactive nature of the Company’s business. However, losses will be incurred in paying ongoing reporting expenses, including legal and accounting expenses, as necessary to maintain the Company as a public entity, as well as ongoing costs, while searching for merger and acquisition candidates. The Company is also obligated for its office facilities under non-cancellable operating leases, which expire on July 31, 2010.
Liquidity and Sources of Capital
The liquidity of the Company is extremely limited at the present time in terms of its ability to pay for ongoing reporting and minimal operating expenses as previously described. In addition, not all obligations of the Company have been settled, and it is possible that the Company may incur other financial obligations.
As of December 31, 2008, BBM had cash of approximately $25,000 and a security deposit of $85,000 held by the landlord of BBM’s office lease.
BBM has no present avenues of financing and no present plans to obtain interim financing while continuing its search for a suitable merger or acquisition candidate or arrangements. Should there come a point in time when the Company has exhausted its reserve funds and must seek additional funding to maintain itself as a public reporting company engaged in searching for merger and acquisition opportunities, it may be necessary to seek private capital through the sale of additional restricted stock or borrowing either from principal shareholders or private parties. It does not appear probable that BBM would be able to attain financing from any commercial lending source, as it is presently constituted.
As a result of the foregoing, the future liquidity of the Company and funding sources must be considered as tentative and very limited and pose a substantial risk factor to the ongoing viability of BBM. At present, the Company has no known or fixed means of alternative or subsequent financing.
Risk Factors
BBM has employed this section to discuss what it considers present and actual risk factors to the ongoing viability of BBM.
| 1. | There is no assurance that the Company can continue as an inactive public reporting entity. BBM will not be able to sustain itself and pay the required accounting, auditing or other reporting costs necessary to continue as a public entity for the indefinite future. Further, there is no assurance or warranty that additional interim funding can be obtained to maintain the company as a public entity after its reserve funds are exhausted. |
| 2. | Future regulations by various state or federal securities agencies, such as the State of Utah, Division of Securities or the SEC could make it difficult or impossible for the Company to continue as an inactive public Company through adoption of various administrative regulations and filing requirements which make it impossible or very difficult for the Company to continue as a non-operating public company. |
| 3. | Only minimal management, time and expertise is being devoted to the operation of the Company now that it is inactive. Initial reviews of merger and acquisition opportunities are being completed by the Board, who have committed to devote their best efforts to search out and attempt to locate various merger or acquisition candidates or proposals for the Company. There is no assurance that the Board will be successful in ongoing efforts to find a merger or acquisition candidate. |
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| 4. | Any completion of a merger or acquisition agreement would be approved by the existing controlling shareholders. Further, it is likely that existing shareholders will incur a significant dilution to their aggregate shareholder percentages. |
| 5. | Any completed merger or acquisition may result in new management being appointed to control the Company and a new business activity being selected over which the existing shareholders would essentially have no control or meaningful voice, other than the potential exercise of dissenting shareholder rights under Utah law under certain circumstances but even then not under all merger or acquisition structures. |
| 6. | The Company will have no ongoing revenues or income to support it during this interim period. |
Results of Operations
Three months ended December 31, 2008 (“2008”) compared to the three months ended December 31, 2007 (“2007”).
Results of operations for the three months ended December 31, 2008 reflect the following changes from the prior period.
| 2008 | 2007 | Increase (Decrease) | |
| Net Revenues | - | - | - |
| Cost of Revenues | - | - | - |
| Selling, General & Administrative Expense | 66,000 | 243,000 | (177,000) |
| Other Income | - | 1,000 | (1,000) |
| Income (Loss) from Operations | (66,000) | (242,000) | (176,000) |
| Discontinued Operations | - | 629,000 | 629,000 |
| Net Income (Loss) | (66,000) | 387,000 | (453,000) |
The Company had no net revenues from continuing operations in the three months ended December 31, 2008 as it had ceased operations in October 2007 .
The Company also had no cost of revenue from continuing operations in the three months ended December 31, 2008 as it has ceased operations in October 2007.
Selling, general and administrative expenses from continuing operations declined from $243,000 in 2007 to $66,000 in 2008 as the Company had re-entered the development stage effective October 1, 2007. Included in expenses from continuing operations during the three months ended December 31, 2008 were professional fees of almost $58,000 and insurance expense of approximately $7,000.
For the three months ended December 31, 2008, BBM recognized net loss of $66,000 from continuing operations compared to a loss of $242,000 for the same period in 2007.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss arising from adverse changes in interest rates and foreign exchange rates. Since cessation of operations, the Company does not have any material exposure to interest rate or exchange rate risk.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer (who are the same person), have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, such officer has concluded that the disclosure controls and procedures are not effective as of December 31, 2008 as discussed more fully below.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting in connection with the evaluation required under paragraph (d) of Rule 13a-15 of the Exchange Act that occurred during the fiscal quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Inherent Limitations on Effectiveness of Internal Controls
The Company’s management, including the Chief Executive Officer and Chief Financial Officer (who are the same person), do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud that could occur. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Material Weaknesses and Changes in Internal Controls. During the review of our consolidated financial statements for the fiscal quarter ended December 31, 2008, our management has identified material weaknesses in our internal controls over financial reporting connected primarily with lack of segregation of duties. The identified material weaknesses are due, in large part, to our lack of accounting and financial resources. As defined by the Public Company Accounting Oversight Board Auditing Standard No. 5, a material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. On a going-forward basis, management will continue to evaluate our disclosure controls and procedures.
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| PART II | OTHER INFORMATION |
| Item 1. | Legal Proceedings |
Our management is not aware of any significant litigation, pending or threatened, that would have a significant adverse effect on our financial position or results of operations.
None.
| Item 3. | Defaults Upon Senior Securities. |
None.
| Item 4. | Submission of Matters to a Vote of Security Holders. |
None.
| Item 5. | Other Information |
None.
| Item 6. | Exhibits |
Exhibit Number
| 1. | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a–14 of the Securities Exchange Act. * |
| 2. | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. * |
*Filed herewith.
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BBM HOLDINGS, INC. | ||||
| Dated: | February 11, 2009 | By: | /s/ Andrew Limpert | |
| Andrew Limpert | ||||
| Pesident and Chief Executive Officer | ||||
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