UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||
For the fiscal year ended December 31, 2008 | |||||||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||
For the transition period from to | |||||||
Commission file number 000-52297 | |||||||
Assure Data, Inc. | |||||||
Nevada |
| 06-1678089 | |||||
State or other jurisdiction of | (I.R.S. Employer | ||||||
incorporation or organization | Identification No.) | ||||||
6680 Yosemite, Dallas, TX | 75214 | ||||||
(Address of principal executive offices) | (Zip code) | ||||||
Registrant’s telephone number, including area code: (214) 823-5383 | |||||||
Securities registered pursuant to Section 12(b) of the Act: | |||||||
Title of each class | Name of each exchange on which registered | ||||||
None | |||||||
Securities registered pursuant to Section 12(g) of the Act: | |||||||
Common Stock, par value $0.001 per share | |||||||
(Title of class) | |||||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | Yes o | No x | |||||
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | Yes o | No x | |||||
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 o |
i
Indicate by check mark if disclosure of delinquent fliers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | |||||||
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | |||||||
Large accelerated filer o | Accelerated filer o | ||||||
Non-accelerated filer o | Smaller reporting company x | ||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x | |||||||
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $354,133 |
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
At March 23, 2009, the registrant had outstanding 1,640,000 shares of common stock, par value $.001
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one): Yes o No x
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TABLE OF CONTENTS
PART I | |||||
ITEM 1. DESCRIPTION OF BUSINESS | 1 | ||||
ITEM 1A. RISK FACTORS | 5 | ||||
ITEM 2. PROPERTIES | 9 | ||||
ITEM 3. LEGAL PROCEEDINGS | 9 | ||||
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 9 | ||||
PART II | 9 | ||||
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS | 9 | ||||
ITEM 6. SELECTED FINANCIAL DATA | 9 | ||||
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION | 9 | ||||
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 12 | ||||
ITEM 8. FINANCIAL STATEMENTS | 12 | ||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 12 | ||||
ITEM 9A (T). CONTROLS AND PROCEDURES | 13 | ||||
ITEM 9B. OTHER INFORMATION | 13 | ||||
PART III | 13 | ||||
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS | 13 | ||||
ITEM 11. EXECUTIVE COMPENSATION | 14 | ||||
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 15 | ||||
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 15 | ||||
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 16 | ||||
ITEM 15. EXHIBITS | 16 |
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Assure Data, Inc. was incorporated under the laws of Nevada, on November 18, 2002, commenced operations in April 2003 and is currently marketing its services. Our general plan is to provide comprehensive automated data backup and retrieval services for small to medium-sized businesses, up to $500 million in annual sales, both in the United States as well as foreign countries. Our service is believed to be unique in that we maintain two separate data backup repositories, one local to the customer and the second in a secure off-site facility. The updates from the local server are transferred from the local backup server to the off-site facility via high speed Internet connectivity. We provide a Personal version of our backup service that does not maintain an on-site repository of the data, a multi-level email virus protection, and ‘SPAM’ filtering process.
Assure Data Remote Backup Services
Enterprise class customers choose the data on their servers and workstations that they wish to have backed up. This is accomplished using a web-browser based ‘client’ provided by Assure Data. This ‘client’ provides a secure connection to both the local Assure Data Remote Backup Server, and the off-site secure server. The automated backup runs at the specified time and creates a copy of any newly created files, and changes to any old files. This backup data is then transmitted via the Internet to the off-site secure facility. Thus, companies have two full data backups available in case of an equipment failure or a disaster to their facilities. The retrieval of the data is also accomplished via the web-based browser ‘client’. End user companies are assured of having all data available to be reviewed by opening the web-based browser and following the data hierarchy and selecting what data is to be restored. Personal version customers have the same functionality, but with only one backup, which is located in the off-site secure facility.
Assure Data Virus and Spam Protection Services
Our virus protection services use the latest available virus detection processes. Assure Data tracks no less than three separate virus checking processes. All in-coming emails and attachments are checked prior to being routed to the customers’ systems. Assure Data charges setup fees based on the services required by the customer, including helping with the data selection, and any special security required by the customer. Once the setup is complete the backup service runs with no human intervention required. Assure Data then changes a monthly fee based on the total amount of data the customer backs up, the amount of data transferred each night, plus a standard base minimum. This creates a continuing revenue stream that does not require direct or daily attention from the Assure Data staff.
The data is backed up and email reports are automatically sent to the customer as well as our staff. If a service fails, additional notification to Assure Data staff via cell phone text messages are sent to alert the staff prior to receiving a call from the customer. When a failure does occur, for whatever reason, including the loss of Internet connectivity, we call the customer to notify it of the failure.
All backed up data is maintained on computer hard disk. This is more reliable than tape or other linear processes. In addition, the retrieving of a single file or small number of files becomes almost effortless. If an Enterprise class client has a file or series of files that require restoring, the data is normally retrieved from the Assure Data Remote Backup Server. This is the server that is directly attached to the customer’s network, and the data is transferred at higher network data transfer rates. The only time the off-site facility is used for data retrieval is when the Assure Data Remote Backup Server is not available. The most likely situation for this is when a system wide disaster has occurred such as a fire or natural disaster. When a Personal class customer has a file or series of files that require restoring, the data is retrieved from the off-site secure location via the internet.
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The Primary Manner In Which We Expect To Conduct Business
Assure Data is re-designing its web site to provide better information about its products and services. Assure Data has contacted a vendor that provides business and contact information that can be selected by various criteria including dollar volume and number of employees. This company will be used to supply that information to a sales staff that will be making direct contact with the companies and offering our backup solutions to the people who are directly responsible or involved in maintaining the business data. These are people who have the responsibility of making sure that the critical business data they have been entrusted with is safe and available in case of disaster including server and workstation failures, as well as equipment or facility losses. These individuals will be asked if they would like to receive emails describing our services and a link to the Assure Data Inc. web site.
Consulting services are being expanded as out customer base has continued to request these services.
We currently have one domain name registered, www.assuredata.com. This site describes our services and provides contact information. The web site is being re-designed to provide additional information to potential customers.
As of December 31, 2008, we had nine customers using our Enterprise class data backup process. Revenues from such accounts range from $100 - $1000 per month, and thus no one customer is dominant. Charges are made based upon a $70 - $75 per month base charge, and a charge for off-site storage based upon a sliding scale for gigabyte storage consumed. All contracts for service are terminable upon 30 days notice by either party.
Data Backup Industry In General
The data backup industry is comprised of many companies that use various backup methodologies. The most common method is some form of magnetic tape as the backup media. Tape backup comes in many different forms and has advanced over the years in its capacity and speed in backing up data. We believe that the restore process for tape has improved little in comparison, and that the inherent problems with tape failures have not been solved. Tape backup is a manual process involving loading and replacing tapes, and storing them in some safe environment. Tape is linear, and the process to verify that the data has been correctly backed up can take as much time as the backup itself.
The total amount of data that small and medium businesses maintain has grown substantially over the last 10 years. Companies have gigabytes of information that needs to be backed up. Larger tape capacity tapes have been developed, but the cost for those solutions has increased as well.
Hard disk backup has become a viable alternative to tape, as the price of hard disc storage has dropped. There are solutions available based on using external large capacity hard drives attached directly to a network. In many cases a copy of the data is made, and in case of a failure of the main storage occurs, the data is available on the external hard drive. This process has the advantage of being a faster and potentially more accurate backup process. It does not however protect a company if the main computer location, room or building is damaged.
Software Solutions Using Off-Site Storage Of Data
There are software solutions that track changes to data and upload that information via the Internet to a system in a facility in another physical location. This method keeps a current backup in a secondary location that can be retrieved if the main storage is unavailable due to system failure. The problem with this process is that bandwidth usage of a company’s Internet connection is in constant use and frequently unavailable for storing data. Some companies have the minimum bandwidth required for use during the work day. This additional usage can have a large effect on other Internet usage, slowing down users during normal business hours. Also, the software running on each server and workstation that monitors the data being changed and transmitted it to the off-site location can place a significant load on the computer and slow its processing of the normal work being performed.
Our founders have over 41 years of computer industry related experience. Dealing with daily data backup, recovery and retrieval issues has been a large part of their experience. As consultants to companies, and as data processing managers for companies, they made recommendations on how a company should back up their critical data.
With the advent of more reasonably priced high-speed Internet connectivity, and the dramatic increase of hard disk capacity, and decreased relative cost, a different overall methodology developed to take advantage of the following technologies.
o | Hard disk is more reliable than tape. It constantly self checks, and redundant data checks are automatically performed when any data is written to the disk. Hard disk is not linear, and therefore random data retrieval for testing purposes can be accomplished more quickly and easily. | |||||||
o | The use of high-speed Internet connections in small business has become commonplace. Most companies have DSL or T1 connections with even greater bandwidth available, which is not in use during non standard business hours. | |||||||
o | The use of the Internet has made most computer users comfortable using a ‘browser’ such as Internet Explorer or Netscape. | |||||||
o | Computer software algorithms that allow data compression and soft data pointers that can mark changes in a data file at a very low level have been developed. | |||||||
o | Open source operating systems, such as Linux, are available at almost no cost, and can be configured to be virtually hack proof and virus proof. | |||||||
o | Custom computer configurations can be created, reducing the cost of a single computer system. | |||||||
o | Backup services are but one service that the backup server can perform. | |||||||
o | Large secure site facilities for co-location are available in most major cities. These facilities have redundant power supplies, emergency power generators and multiple connections directly to the Internet Back Bone infrastructure. | |||||||
o | Individuals now have large amounts of personal data on home PC’s that although is not critical in nature, is very valuable, such as digital family photos, or emails and word processing documents. |
Based on the above technologies, we developed the Assure Data Remote Backup Service. We believe our advantages are as follows.
o | For Enterprise class clients we maintain two sets of backed up data, with up to 30 days of information. We use compression and soft pointers to reduce the total amount of data that needs to be stored and transferred. This reduces the total cost of maintaining multiple copies of the data. | |||||||
o | The local copy is maintained on a ‘Locked Down’ Linux based system. This system is directly connected to the local network. It performs the initial daily backup of all selected computers, directories and files. Then it transfers, via an encrypted transmission over the Internet, the backed up data to a secure server in a secure facility. This insures that a complete second copy of the backed up data is available in case of damage to the original facility. Our secure server is located in a shared-use facility in Dallas, Texas dedicated to off-site computer applications, which we rent for $249 per month. | |||||||
o | The process is totally automated. No human intervention is required. Our system is self-monitoring, and emails for success and failures are sent to both the Assure Data staff, and selected individuals of the client company. This insures that if a failure does occur, immediate action is taken to insure that the problem is resolved, and the data is backed up as soon as possible. |
o | If a complete local failure occurs, due to a facility loss, such as fire or a natural disaster, we can load a complete copy of the client’s data onto a new backup server and ship it overnight to the facility the company will be using for its new computer location. We then help them restore the lost data to the new hardware. | ||||||||||
o | If the loss of data is only on a single computer, and our local backup system is functioning normally, the customer can retrieve the data directly from the local backup system, without having to transfer large amounts of data across the Internet. If a customer needs to retrieve a single file or directory from any time in the last 30 days, the customer uses the web based ‘Assure Data Client Interface’ and restores the correct data from the local unit. At any time the customer can access the data on the Remote Secure Server, via the Internet, to restore data for testing or any other reason they may have. | ||||||||||
o | The pricing is based on the actual storage used. This makes the service available and cost effective for varying clients that need to backup different amounts of data. | ||||||||||
o | The system can be managed from any location where a connection to the Internet is available. This includes the customer selection of data to be backed up as well and the restoration of the data. Our staff can manage the entire process remotely, including our on-site local backup systems located on the customer site, and the secure server located in the secure facility located in Dallas, Texas. | ||||||||||
o | Spirus eMessage Security is a multilayered anti-spam, anti-virus and anti-phishing managed service. It provides multiple layers of proprietary and 3rd party tools to protect our client’s corporate networks. The main features are: | ||||||||||
o | Uses proprietary heuristic predictive technology to identify spam patterns in emails | ||||||||||
o | Uses Bayes based spam token identification technology | ||||||||||
o | Incorporates 3 commercial Anti-virus scanning engines with 15 minute updates | ||||||||||
o | Incorporates several of the top public block lists to identify spam | ||||||||||
o | Provides blocked and approved user configurable lists | ||||||||||
o | Complete Web Management Portal for configuration and monitoring |
Marketing Our Services
Our marketing plan will use four main concepts.
o | Internet marketing using Google Smart Pages and other Internet search engines. We are currently getting several hundred hits per month and have developed customers from these leads. As we progress we expect to develop an online demo of our product. | |||||||
o | We can aquire access to lists of companies and contacts that have sufficient dollar sales volumes and number of employees that they probably have computer networks with critical business data that must be protected against loss. We are developing a new sales concept and staff of contract sales people to make direct calls to the people overseeing a companies’ network and data safety. These people understand the need for insuring the safety of their companies’ data. | |||||||
o | Currently we have no strategic marketing partners, but are reviewing possible options. We are developing specific commission-based programs for other consultants that could be potentially interested in re-marketing our services. | |||||||
o | Our officers have contacts and have developed those into customers. In addition, referrals from current customers have resulted in leads to other possible customers. |
Expected Employee Requirements
Mr. Kipness is a full time employee. Mr. Lisle is working as a consultant to Assure Data. Additional support is provided by consultants as required. As the company expands, and additional customers are added, Mr. Lisle will eventually become employed on a full-time basis. We added a second full time employee during 2006, due primarily to an increase in consulting services requested by our customers. Additional employees will be added as required. Our process is totally automated, but we need to insure that if a customer requires help, or just wants to talk to a live Assure Data representative, they will be able to do so quickly. The new sales model will initially use contract sales staff.
Our competition will come from data storage companies that use software, hardware or a combination of both. In our review of the industry, we located via the Internet approximately 40 companies that supply some type of backup service. The largest of these companies has just over 7,200 customers worldwide. They use a software only solution, and the process runs on a customer’s server and transmits changes to a secure location on a continuous basis. Other providers we reviewed had as few as 25 customers online. Our research was limited in scope, but indicated that many of these companies did not provide a complete solution to what we believe customers need to properly secure and retrieve their critical data. The other major competition comes from companies that supply secure co-location facilities and have now started providing back up services. These companies have had a significant impact on the backup industry, as they already have secure facilities, and access to the internet and bandwidth at very low cost. This latest entry into the backup industry may force many companies, including Assure Data, to change their business model. Assure Data is monitoring the industry continuously and if necessary will make adjustments as deemed necessary.
Based upon our research through publicly available information available from a company that provides mailing lists of business in the United States and Canada, there are more than 2.2 million companies in the United States with gross sales of more than $500,000 or that have ten or more employees. We researched Info USA’s web site, www.infoUSA.com, where anyone can select the options, to get counts of businesses in the United States using a number of criteria for which Info USA maintains information that is available to the public free of charge. By selecting the options for business with $500,000 in gross sales or that have ten or more employees, the latest count from Info USA was available to us. We may in the future use a mailing list from Info USA, but at this time, this count information was used as a method of determining what the total market for our service is. The only criteria we used were that a company must have either $500,000 in annual sales, or have ten or more employees.
We believe that businesses with revenues of more than $500,000 or that have more than ten employees use personal computers or networks, to maintain business records and correspondence, send and receive email and have the need to maintain backups of this critical data. As their use of computer storage increases due to growth of activity and the accumulation of data over time, their needs for data storage separate from their internal equipment will grow. Therefore, we believe our potential market can include all businesses in this group, especially those that deal in larger volumes of recordkeeping and data. Based upon our knowledge of the industry, we believe that there is no single large company with a significant share of the market. There will therefore be intense competition for these customers.
Our Enterprise Class backup process uses a different standard approach. We supply dual backups on all of our sites to provide quick restoration of even large amounts of data, without the need to transfer that information across the Internet. This dual location concept also protects in case of any single location being destroyed, including the secure server location. The customer does not purchase any equipment, or supplies. The equipment installation is a simple connection to their network, and then the setup is accomplished remotely, with Assure Data personnel assisting the customer to correctly choose the data to be saved. The pricing is modest, based upon the actual amount of data to be saved. The backups are totally automated, and require no human interaction.
We believe we will be able to compete on the basis of a wide-open market that is not being adequately served, and the price and effectiveness of our unique dual backup service.
ITEM 1A. RISK FACTORS
A person interested in the Company should consider carefully, in addition to the other information contained in this Report, the following risk factors relating to the Company.
We have a limited operating history, and our business is unproven.
Our accumulated deficit though December 31, 2008, is $434,547. We were incorporated on November 18, 2002, commenced operations in April 2003 and are a five year old company with very little operating history or revenues. We have never achieved a profitable level of operations.
We will require additional capital.
We will likely need to obtain additional equity or debt funding to realize our full potential. We are an extremely small company. Because we will have so little money, any negative financial event could totally deplete any reserve we had hoped to have.
We may not continue as a going concern.
Our independent certified public accountants have included a paragraph in their opinion that notes that we have generated little revenue and have an accumulated deficit. And as such, our ability to continue as a going concern is dependent upon obtaining additional capital and aggressive marketing of the Company’s products and services.
Our process could fail due to a software defect, and we might be held liable for a customer’s loss.
Our process is running live and has been tested for over three years. Tests are run daily to make sure that the process is working correctly. But even with a high level of testing and continued monitoring our system could fail, and a customer could bring legal action against us. Our contracts do not guarantee that a customer will never lose their data, but that may not stop a customer who has incurred a loss from trying to recover the costs related to the loss of their data.
We must maintain our key managers.
Our success will depend greatly upon our President and Vice-President. Robert Lisle serves as President, Treasurer and Director. Max Kipness serves as Vice-President, Secretary and Director. The loss of either of their services would hamper our ability to implement our business plan, and could cause our stock to become worthless. We will be heavily dependent upon Mr. Lisle’s entrepreneurial skills and experience to implement our business plan and Mr. Kipness’ technical expertise to continue the development of the services we provide. At present, Mr. Kipness is a full time employee. We do not have an employment agreement with Robert Lisle and there is no assurance that he will continue to manage our affairs in the future. We could lose the services of either or both parties, and the services of either Robert Lisle or Max Kipness would be difficult to replace.
Three shareholders effectively control the company and will continue to do so.
Robert Lisle and Max Kipness, our principal executive officers, hold 533,334 restricted shares for which the one-year holding period expired on May 30, 2004, and are available for resale under Rule 144. Patricia Gunter currently holds 416,666 shares of restricted shares for which the one year holding period expired in 2004. These three individuals control the company and possess the voting power to elect the board of directors. An additional 200,000 restricted shares had a one-year holding period that expired on September 30, 2004. In addition, all of our other shares of common stock will also be eligible to use Rule 144 after expiration of their respective holding periods. A sale of shares by such security holders, whether pursuant to Rule 144 or otherwise, may have a depressing effect upon the price of our common stock in any market that might develop.
We depend on short-term customer contracts, the loss of which will adversely affect our business.
We currently provide services to nine customers under contracts that are terminable upon 30 days’ notice. Our customer base must increase substantially in order to provide increased revenues and a stable base of customers, so that the loss of one or more will be absorbed across the entire base. It is not feasible to require customers to commit to longer term agreements, and our success will depend upon providing service that creates a high level of customer satisfaction.
We face significant competition in our industry, which may threaten our future.
Competition in the remote data backup services business is intense, and we may not be able to compete effectively and survive. New or different technologies may come into existence and be brought to market by companies larger and more able to market their services. We expect the competition in this business to increase. If we fail to attract and retain a customer base, we will not develop significant revenues or market share. Companies that already have a large customer base for some other computer based products or services would have a very large advantage over us should they decide to enter this market. Our market is likely to witness consolidation of smaller providers with large, well-financed competitors. In addition, the entrance of Co-Location providers into the market has added an additional level of competition.
We will have to create a market for our products by educating our potential customers.
This is a new market, and most potential customers do not know that these types of data storage services exist. Marketing will be a large factor in our success, and we may not obtain the funding needed to conduct effective marketing. A large company with greater resources will have an advantage.
Rapid technology changes could occur, and with our limited resources we may not be able to adapt.
Backup products, services, and technologies are constantly changing. We are bringing a new remote backup concept to the market. If the technologies that we use in providing our remote backup services should suddenly change, we could find ourselves unable to adapt. If a totally new concept were to be brought to market by some other company, our process may be viewed as “old technology,” and we could lose our customer base, as well as be unable to attract new customers.
Our process uses technologies that are considered to be in the public domain, and therefore we are unable to obtain meaningful protection for our intellectual property.
Our process uses technologies, such as the Internet, encryption and the Linux operating system, which are used by the general public and, are, to our best knowledge, considered in the public domain. We are therefore unable to obtain patent or copyright protection for our products. In addition, it is possible that a competitor could decide to claim a specific concept or process as their intellectual property. They could demand compensation of some type or amount for the use of that intellectual property. We have no agreements that give us specific rights to use any specific technology or intellectual property.
Changes in the regulation of the Internet could undermine the basis of our business world.
We rely on the Internet for transmission of data from our customers to our off-site servers. In general, existing laws and regulations apply to transactions and other activity on the Internet; however, the precise applicability of these laws and regulations to the Internet is sometimes uncertain. The vast majority of such laws were adopted prior to the advent of the Internet and, as a result do not deal with the unique issues of the Internet or electronic commerce. Nevertheless, numerous federal and state government agencies have already demonstrated significant activity in promoting consumer protection and enforcing other regulatory and disclosure statutes on the Internet.
Due to the increasing use of the Internet as a medium for commerce and communication, it is possible that new laws and regulations may be enacted with respect to the Internet and electronic commerce covering issues such as user privacy, freedom of expression, advertising, pricing, content and quality of products and services, taxation, intellectual property rights and information security. The adoption of such laws or regulations and the applicability of existing laws and regulations to the Internet may impair the growth of Internet use and result in a decline in our sales.
A number of legislative proposals have been made at the federal, state and local level, and by foreign governments, that would impose additional taxes on the sale of goods and services over the Internet, and certain states have taken measures to tax Internet-related activities. Although Congress placed a moratorium on new state and local taxes on Internet access or on discriminatory taxes on electronic commerce, existing state or local laws were expressly exempted from this moratorium. Further, once this moratorium is lifted, some type of federal and/or state taxes may be imposed upon Internet commerce. Such legislation or other attempts at regulating commerce over the Internet may substantially impair the growth of commerce on the Internet and, as a result, adversely affect our opportunity to derive financial benefit from such activities.
Selling shares of our stock could be difficult, making your investment in the company illiquid.
There is no active public market for our shares, and an investment in the company should be considered an illiquid investment. There is no assurance that a public market for such securities will develop or be sustained if developed. As such, investors may not be able to readily dispose of any shares purchased hereby.
We may not remain a reporting company, and your access to information about the company would be limited.
We are required to file disclosure reports with the Securities and Exchange Commission for a period of one year. At the end of one year, we may discontinue such reports if there are not 300 stockholders of record. If the company is not successful in executing its business plan, we may choose to discontinue SEC reporting if there are fewer than 300 stockholders as a measure to cut costs, in which case investors will have little or no current information on which to make investment decisions, our securities would be excluded from the OTCBB, and much of SEC Rule 144 would cease to be available.
Our stock will be subject to the penny stock regulations, which will further degrade the market for one stock.
Because our stock will be subject to the penny stock regulations and may be more difficult to sell than other registered stock. Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. As our shares immediately following this offering will be subject to these penny stock rules, investors in this offering will in all likelihood find it more difficult to sell their securities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Business”, and elsewhere in this Report constitute forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
ITEM 2. PROPERTIES
Our current office address is at Robert Lisle’s home office. Max Kipness also works from his computer at home. Our off-site storage server is in a rack at a secure, shared-use facility in Dallas, Texas. Such space is provided to us on a month-to-month basis for $249 per month in rent. Other such sites are readily available if we need to move for any reason. No other office space or facilities are required at this time, and we do not expect to require them in the near future. Administrative offices will be established when we have full-time employees that cannot work from a remote location. However, we will continue to use secure co-location facilities available across the country and in Europe, rather than create our own facilities. Using these co-location facilities is far more cost effective, and allows us to put customer’s data in locations that make logical sense from the prospective of the customer.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON STOCK AND DIVIDEND POLICY
Market Information
Our common stock is traded in the over-the-counter market on the NASDAQ OTC Bulletin Board under the symbol ASDI. To our knowledge, there are no active market makers in our stock. The 52 week high was $1.25 and the 52 week low was $.32
Holders
As of December 31, 2008, 1,640,000 common shares of the Company’s common stock are held by seven holders of record.
Dividends
We have never paid any dividends, and we do not anticipate any stock or cash dividends on our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
None.
ITEM 6. SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Assure Data began operations in 2003 offering the data backup services described under “Business.” We obtained $100,000 of initial funding from a private placement in mid-2003, and $300,000 from a limited public offering in 2005. We obtained $20,000 of additional funding in a sale of 40,000 shares of stock at $.50 in a private placement in March 2006.
Summary Operating Data
Year | Year | |||||||
---|---|---|---|---|---|---|---|---|
ended | ended | |||||||
December 31, 2007 | December 31, 2008 | |||||||
Revenues | $ | 83,398 | $ | 159,665 | ||||
Expenses | 154,750 | 146,940 | ||||||
Net income (loss) | (103,546 | ) | (23,667 | ) | ||||
Basic and diluted loss per share | (0.06 | ) | (0.01 | ) |
Balance Sheet Data
December 31, 2008 | |||||
---|---|---|---|---|---|
Current assets | $ | 5,407 | |||
Accounts payable and accrued expenses | 63,107 | ||||
Total liabilities | 63,107 | ||||
Stockholders’ Deficit | (57,700 | ) |
Results of Operations
Year ended December 31, 2008
For the year ended December 31, 2008, we had revenues of $159,665 as compared to $83,398 of revenues for the year ending in 2007. A part of the increase is due to additional consulting services requested by our customers. Our cost of revenues were $36,392 during 2008, resulting in a gross profit of $123,237 which was offset by general and administrative expenses of $146,940. The decrease of the general and administrative expenses was due to a decrease in professional fees. The cost of goods sold increased from $32,194 in 2007 to $36,392 in 2008. This is related to a increase in costs and services performed in regards to revenue and services.
As of December 31, 2008 we had cash of $ 3,369 and $2,038 in receivables net of allowance for doubtful accounts of $0. Our current liabilities as of the same date are $63,107.
Including payroll for our two employees, related taxes, reporting fees, and professional legal and accounting services we believe that, even though our auditors have expressed substantial doubt about our ability to continue as a going concern, we have sufficient financial resources to continue as a going concern. We believe we have sufficient resources to meet our obligations for at least the next 12 months and beyond.
Assuming that we do not increase our current capacity to provide services, our primary cash requirements would be those associated with maintaining our current customer base, payroll for our two employees and maintaining our status as a reporting entity. We believe that on an annual basis those costs would not exceed an average of $11,000 per month. In addition, we currently have the capacity to add 30 more customers with an average monthly service charge of $350 without increasing our current monthly expenses. If all 30 customers were added this would increase our monthly revenues by $10,500 per month and allow continued growth.
We obtained $300,000 in funding from our public offering, and $20,000 from a sale of 40,000 shares at $.50 in a private placement in March 2006. Our focus has been to update our client software to add additional functionality, and create a more user friendly interface. We have also developed a Personal version of the backup software that is being marketed to home PC users.
Our challenge in 2009 will be to develop a sales staff to expand our customer base.
As our business grows, we will have to acquire additional servers to accommodate the growing disk storage capacity. Our current equipment can handle the needs of 40 - 50 customers. A new server will be required for each additional 40 - 50 group of customers. We believe we will be able to add such equipment and finance it from customer charges and will not require debt or equity financing for our anticipated capital expenditures.
Accounting Policies
Revenue Recognition
The Company charges its customers an initial set-up fee, which is refundable for a 30 day period. The revenues from set-up fees are deferred and, upon expiration of the refund period, recognized over the expected period of performance, which management has estimated to be three years. In the event a customer contract is cancelled, any remaining deferred set-up fee revenue is recognized in the period of cancellation.
The Company charges its customers monthly fees for its services based on the provisions of each customer's contract. The monthly fees consist of a base fee, a volume based data transfer fee and a volume based data storage fee. Revenues are recognized in the month the services are provided.
The revenues from set-up fees and monthly fees are recognized based on the Company's determination that the criteria provided in SEC Staff Accounting Bulletin 104 - Revenue Recognition have been met. These criteria include that persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price to the buyer is fixed or determinable and collectibility is reasonably assured. The Company determines that these criteria have been met by entering into written contracts with its customers that specifically state the fees for set-up and monthly services. Set-up fees are invoiced after the actual set-up has been performed. Monthly fees are invoiced based on the actual usage during a particular month. Collectibility of revenues has not been an issue as of December 31, 2007. However, if the set-up fees have not been paid, monthly service would not be initiated. If the monthly service fees were not paid, the monthly service would be discontinued.
Stock-Based Compensation
The Company adopted SFAS No. 123R, “Share Based Payments.” SFAS No. 123R requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.
In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. Applying SFAS No. 123R had no impact on the financial statements for the year ended December 31, 2008 and 2007.
We have no indebtedness or other continuing financial commitments.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting issuers
ITEM 8. FINANCIAL STATEMENTS
The financial statements required by this item begin at Page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A (T). CONTROLS AND PROCEDURES
The management of Assure Data, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance, based on an appropriate cost-benefit analysis, regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
The company’s management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2008. In making this assessment, it used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
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. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by Generally Accepted Accounting Principles (GAAP). Based on this evaluation, our management concluded that, as of December 31, 2008, our internal control over financial reporting was not effective based on those criteria.
The following material weaknesses were identified from our evaluation:
Due to the small size and limited financial resources, the Company's CEO is the only individual involved in the accounting and financial reporting. As a result, there is no segregation of duties within the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of the same individual, the CEO. Usually, this lack of segregation of duties represents a material weakness; however, to remedy the matter, the Company plans to use an outside accountant to review their procedures. The CEO (who also comprises the Board of Directors) examines and approves all cash transactions. We will continue to periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications considered necessary or desirable.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
(b) Changes in Internal Control over Financial Reporting. There were no other changes in our internal control over financial reporting that occurred during the last fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
Mr. Robert Lisle, age 60, is our President, Treasurer and a Director and functions as our chief executive officer and chief financial and accounting officer. Mr. Lisle has 29 years’ of experience in the computer and computer consulting fields. He has been the President of Information Technology Systems Inc. and Lisle & Associates for the past 27 years. Previous to that, he spent three years as a systems analyst and programmer for Century 21 Real Estate in Irvine, California and the Data Processing Manger for JSH Electronics in Culver City, California.
Mr. Max Kipness, age 40, is our Vice President, Secretary, and a Director. Mr. Kipness is a Certified Microsoft Engineer as well as a Cisco Certified Engineer. He has been the ITM manager for a large manufacturing company with offices and manufacturing plants across the country. Previous to that, he spent six years as a senior network consultant with a large network consulting firm in Dallas, Texas. For the year prior to that, he was in the sales department of a national computer and peripheral distribution company. Prior to working in direct sales, he was a partner for five years in a retail computer sales and repair operation in Dallas, Texas. During the last eight years, Mr. Kipness has consulted on network and infrastructure operation for small and medium companies. Mr. Kipness is serving as the Chief Technology Officer of the Company.
We presently expect to conduct our first annual meeting of stockholders and directors in June 2009, at which time directors will be elected. All directors will serve for a period of one year unless removed in accordance with our bylaws.
Officers are appointed by and serve at the will of the Board of Directors. There are no family relationships between or among any of the directors or executive officers of the Company.
Governance
Compliance with Section 16(a)
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more that 10% of a registered class of our equity securities, to file with the SEC initial statements of beneficial ownership on Form 3, reports of changes in ownership on Form 4 and annual reports concerning their ownership on Form 5. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To the best of our knowledge, our executive officers, directors and greater than 10% beneficial owners of our common stock, have complied with the Section 16(a) filing requirements applicable to them during the fiscal year ended December 31, 2007.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
The following table sets forth the compensation earned by the Company’s Chief Executive Officer for the year ended December 31, 2008, in consulting fees for services rendered in all capacities to the Company for the fiscal years ended December 31, 2003 through 2008.
Annual Compensation | Long-Term Compensation | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Securities | ||||||||||||||||||
Underlying | ||||||||||||||||||
Name/Principal | Other Annual | Options or | All Other | |||||||||||||||
Position | Year | Salary | Bonus | Compensation | Warrants | Compensation | ||||||||||||
Robert Lisle, CEO(1) | 2008 | $ | 0 | 0 | $ | 0 | 0 | 0 | ||||||||||
2007 | 4000 | 0 | 0 | 0 | 0 | |||||||||||||
2006 | 51,286 | 0 | 0 | 0 | 0 | |||||||||||||
2005 | 36,000 | 0 | 0 | 0 | 0 | |||||||||||||
2004 | 16,355 | 0 | 0 | 0 | 0 | |||||||||||||
2003 | 63,785 | 0 | 0 | 0 | 0 | |||||||||||||
Max Kipness(2) | 2008 | 97,179 | 0 | 0 | 0 | 0 | ||||||||||||
2007 | 81,140 | 0 | 0 | 0 | 0 | |||||||||||||
2006 | 69,333 | 0 | 0 | 0 | 0 | |||||||||||||
2005 | 13,333 | 0 | 0 | 0 | 0 | |||||||||||||
2004 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
2003 | 1,960 | 0 | 0 | 0 | 0 |
Even though Mr. Lisle is an officer of Assure Data, he is not employed by Assure Data. Nevada does not require officers of Nevada corporations to be employees.
(1) Mr. Lisle has been compensated by Information Technology Systems Inc. which has invoiced Assure Data for his services, during 2003, 2004, 2005, 2006, 2007 and 2008. See Item 12.
(2) Mr. Kipness was reimbursed for direct expenses, services, as well as supplies and equipment purchased on behalf of Assure Data for this amount during 2003.
Stock Options | Number of Securities Underlying Unexercised Options at Fiscal Year End | Value of Unexercised Fiscal Year End | ||||
Name | Number of Shares Acquired or Exercised | Realized Value | Exercisable | Unexercisable | Exercisable | Unexercisable |
None |
Long-term Incentive Plans | Estimated Future Payments Under | ||||
Name | Number of Other Rights # | Performance or Other Period Until Maturation or Payout | Threshold | Target | Maximum |
None |
No stock has been issued to any officer, employee or director of the company except in their capacity as investors. Although we have no current plan in existence, we may adopt a plan to pay or accrue cash compensation to our officers and directors for services rendered. We currently do not have a stock incentive plan for the benefit of officers, directors or employees, but our Board of Directors may recommend the adoption of such programs in the future.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 2008, the Company has issued and outstanding 1,640,000 shares of Common Stock. There is no other class of voting security of the Company issued or outstanding. The following table sets forth the number of shares of Common Stock beneficially owned as of December 31, 2007, by (i) each director, (ii) each executive officer named in the Summary Compensation Table and (iii) each person known to own beneficially more than 5% of our stock and (iv) all directors, named executive officers and other executive officers as a group. We calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act as of that date.
Beneficial ownership generally includes voting and investment power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned.
Shares of Common Stock | ||
Name | Number of Shares Owned | % Total Outstanding Shares |
Robert Lisle | 266,667 | 16.26 |
Max Kipness | 266,667 | 16.26 |
Patricia Gunter | 416,666 | 25.40 |
All officers and directors as a group (2 persons) | 533,334 | 32.52 |
The Company is not aware of any arrangement which might result in a change in control in the future.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid consulting fees to a company (the “Affiliate”) controlled by Robert Lisle of approximately $0 and $4,000 during 2008 and 2007, respectively. The $0 and $4,000 was included in general and administrative expenses in the year 2008 and 2007 respectively.
Mr. Lisle is the president of, and performed consulting services on behalf of Assure Data through ITS. All related fees were invoiced by and paid to ITS. There is no relationship between Assure Data and ITS, other than the advances described above and for ITS to provide Mr. Lisle to perform consulting services to Assure Data.
Promoters
Mr. Lisle and Mr. Kipness developed the processes and services provided by Assure Data. They each purchased 266,667 shares of stock at $.001 per share. In addition, all rights to the processes developed have been granted to Assure Data. The processes granted to Assure Data, took in excess of one year to develop, and were operating fully at the time of incorporation. No specific value was set on the intellectual property provided by Mr. Lisle and Mr. Kipness. The rights were granted with the full intent that Mr. Lisle and Mr. Kipness would be major stock holders in the company and use this technology to build the company into a large and highly profitable company.
Patricia Gunter also provided $75,267 of initial seed capital to the Company in exchange for 416,666 shares of common stock and may be considered a promoter of the Company. She provided no other services to the Company.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
For 2008 and 2007, Sherb & Co LLP has billed the Company for the services described below:
2008- Audit and 10Q review fees. $29,000
2007- Audit and 10Q review fees. $29,000
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. | Financial Statements: The financial statements filed as part of this report are listed in the “Index to Financial Statements” on Page F-1 hereof. | |||||||
2. | Exhibits required to be filed by Item 601 of Regulation S-B: |
(1) 1.1 Subscription Agreement
(1) 2.1 Secretary of State Certificate
(1) 3.1 Articles of Incorporation
(1) 3.2 Bylaws
(1) 10.1 Form of Data Protection Agreement
(1) 10.2 Agreement to cover offering costs
(2) 31.1 Certification of the Chief Executive Officer under Section 302 of the
Sarbanes-Oxley Act of 2002
(2) 32.1 Certification of the Chief Executive Officer under U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
------------------------
(1) Previously filed as exhibits to Form SB-2, file no. 333-141347
(2) Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on April 3, 2009.
ASSURE DATA, INC.
By: /S/ Bob Lisle
Bob Lisle, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons in the capacities and on the dates indicated.
Name | Office | Date | ||||||
/s/ Bob Lisle | President, Chief Executive | April 3, 2009 | ||||||
Bob Lisle | Officer and Director | |||||||
(Principal Executive Officer and Principal | ||||||||
Financial and Accounting Officer) | ||||||||
/s/ Max Kipness | Vice President, Secretary and Director | April 3, 2009 | ||||||
Max Kipness |
ASSURE DATA, INC.
TABLE OF CONTENTS
Financial Statements of Assure Data, Inc.
Page | |||||
Report of Independent Registered Public Accounting Firm | F-2 | ||||
Financial Statements: | |||||
Balance Sheet - December 31, 2008 and 2007 | F-3 | ||||
Statements of Operations - Years Ended | |||||
December 31, 2008 and 2007 | F-4 | ||||
Statements of Stockholders’ Equity and Other Comprehensive Loss - | |||||
Years Ended December 31, 2008 and 2007 | F-5 | ||||
Statements of Cash Flows - Years Ended | |||||
December 31, 2008 and 2007 | F-6 | ||||
Notes to Financial Statements | F-7 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- Board of Directors and Shareholders
- Assure Data, Inc.
We have audited the accompanying balances sheets of Assure Data, Inc. for the year ended December 31, 2008 and 2007 and the related statements of operations, stockholders’ deficit and cash flows for the years ended December 31, 2008 and 2007. These financial statements are the responsibility of Assure Data, Inc.’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Assure Data, Inc. as of December 31, 2008 and 2007 and the results of its operations and its cash flows for the years ended December 31, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2 to the financial statements, the Company has generated minimal revenues and has an accumulated deficit of $434,547 through December 31, 2008. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in note 2. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
/s/ Sherb & Co., LLP
Sherb & Co., LLP
New York, New York
March 31, 2009
ASSURE DATA, INC.
BALANCE SHEETS
December 31, | December 31, | |||||||
---|---|---|---|---|---|---|---|---|
2008 | 2007 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 3,369 | $ | - | ||||
Accounts recievable, net of allowance for doubtful accounts of $0 and $6,816 | 2,038 | 5,589 | ||||||
TOTAL CURRENT ASSETS | 5,407 | 5,589 | ||||||
$ | 5,407 | $ | 5,589 | |||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Bank overdraft | $ | - | $ | 795 | ||||
Accounts payable and accrued expenses | 12,500 | 11,012 | ||||||
Payroll tax liabilities | 2,646 | 20,788 | ||||||
Due to related party | 47,961 | 6,961 | ||||||
Deferred revenue | -- | 66 | ||||||
TOTAL CURRENT LIABILITIES | 63,107 | 39,622 | ||||||
STOCKHOLDERS' DEFICIT: | ||||||||
Preferred stock, $.001 par value, authorized 100,000,000 shares, | ||||||||
issued and outstanding 0 shares, and 0 shares | -- | -- | ||||||
Common stock, $.001 par value, authorized 100,000,000 shares, | ||||||||
issued and outstanding 1,640,000 shares and 1,640,000 shares | 1,640 | 1,640 | ||||||
Additional paid-in capital | 375,207 | 375,207 | ||||||
Accumulated deficit | (434,547 | ) | (410,880 | ) | ||||
TOTAL STOCKHOLDERS' DEFICIT | (57,700 | ) | (34,033 | ) | ||||
$ | 5,407 | $ | 5,589 |
See notes to financial statements
ASSURE DATA, INC.
STATEMENT OF OPERATIONS
For the year | For the year | |||||||
---|---|---|---|---|---|---|---|---|
ended | ended | |||||||
December 31, 2008 | December 31, 2007 | |||||||
Revenues | $ | 159,665 | $ | 83,398 | ||||
Cost of goods sold | 36,392 | 32,194 | ||||||
Gross profit | 123,273 | 51,204 | ||||||
General and administrative | 146,940 | 154,750 | ||||||
Total expenses | 146,940 | 154,750 | ||||||
Loss from operations | (23,667 | ) | (103,546 | ) | ||||
Interest income | -- | 150 | ||||||
Net loss | $ | (23,667 | ) | $ | (103,396 | ) | ||
Loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.06 | ) | ||
Weighted average number of shares outstanding - | ||||||||
basic and diluted | 1,640,000 | 1,640,000 |
See notes to financial statements
ASSURE DATA, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Additional | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Common stock | paid-in | Accumulated | |||||||||||||||
Shares | Amount | capital | deficit | Total | |||||||||||||
Balance at December 31, 2006 | 1,640,000 | $ | 1,640 | $ | 375,207 | $ | (307,484 | ) | $ | 69,363 | |||||||
Net loss | -- | -- | -- | (103,396 | ) | (103,396 | ) | ||||||||||
Balance at December 31, 2007 | 1,640,000 | 1,640 | 375,207 | (410,880 | ) | (34,033 | ) | ||||||||||
Net loss | -- | -- | -- | (23,667 | ) | (23,667 | ) | ||||||||||
Balance at December 31, 2008 | 1,640,000 | $ | 1,640 | $ | 375,207 | $ | (434,547 | ) | $ | (57,700 | ) |
See notes to financial statements
ASSURE DATA, INC.
STATEMENT OF CASH FLOWS
For the year | For the year | |||||||
---|---|---|---|---|---|---|---|---|
ended | ended | |||||||
December 31, 2008 | December 31, 2007 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (23,667 | ) | $ | (103,396 | ) | ||
Adjustments to reconcile net loss to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation | -- | 3,052 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 3,551 | 27,373 | ||||||
Payroll tax liabilities | (18,142 | ) | 20,788 | |||||
Accounts payable and accrued expenses | 1,488 | (3,767 | ) | |||||
Deferred revenue | (66 | ) | (615 | ) | ||||
Total adjustments | (13,169 | ) | 46,831 | |||||
NET CASH USED IN OPERATING ACTIVITIES | (36,836 | ) | (56,565 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from due to related party | 41,000 | 6,000 | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 41,000 | 6,000 | ||||||
NET INCREASE (DECREASE) IN CASH | 4,164 | (50,565 | ) | |||||
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | (795 | ) | 49,770 | |||||
CASH AND CASH EQUIVALENTS - END OF YEAR | $ | 3,369 | $ | (795 | ) | |||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | — | $ | — | ||||
Income taxes | $ | — | $ | — |
See notes to financial statements
ASSURE DATA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
(1) ORGANIZATION
Assure Data, Inc. (the "Company") is a Nevada Corporation that was formed in November 2002 and commenced operations in April 2003. The Company provides fully automated remote data backup services for small to medium sized businesses.
In May 2008 The Company amended and restated their Articles of Incorporation to increase the aggregate number of shares authorized to issue from 100,000,000 to 200,000,000 shares, of which 100,000,000 shares will be shares of common stock and 100,000,000 shares will be shares of preferred stock.
(2) GOING CONCERN
The accompanying consolidated financial statements are prepared assuming the Company will continue as a going concern. At December 31, 2008, the Company has an accumulated deficit of $434,547, and for the years ended December 31, 2008 and 2007, incurred net losses $23,667 and $103,396, respectively.
Management's plans with regard to these matters include the following:
The aggressive marketing of the Company's products and services.
Obtaining additional capital through the sale of common stock to
existing and new stockholders.
Accordingly, management is of the opinion that aggressive marketing combined with additional capital will result in improved operations and cash flow in 2009 and beyond. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
The Company maintains its cash in bank accounts at high credit quality financial institutions. The balances at times may exceed federally insured limits.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements, in conformity with the generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company charges its customers an initial set-up fee, which is refundable for a 30 day period. The revenues from set-up fees are deferred and, upon expiration of the refund period, recognized over the expected period of performance, which management has estimated to be three years. In the event a customer contract is cancelled, any remaining deferred set-up fee revenue is recognized in the period of cancellation.
The Company charges its customers monthly fees for its services based on the provisions of each customer's contract. The monthly fees consist of a base fee, a volume based data transfer fee and a volume based data storage fee. Revenues are recognized in the month the services are provided.
The revenues from set-up fees and monthly fees are recognized based on the Company's determination that the criteria provided in SEC Staff Accounting Bulletin 104 - Revenue Recognition have been met. These criteria include that persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price to the buyer is fixed or determinable and collectibility is reasonably assured. The Company determines that these criteria have been met by entering into written contracts with its customers that specifically state the fees for set-up and monthly services. Set-up fees are invoiced after the actual set-up has been performed. Monthly fees are invoiced based on the actual usage during a particular month. Collectibility of revenues has not been an issue as of December 31, 2008 and 2007. However, if the set-up fees have not been paid, monthly service would not be initiated. If the monthly service fees were not paid, the monthly service would be discontinued.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable assets related to those on a quarterly basis for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At December 31, 2008, the Company does not believe that any impairment has occurred.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based on the Company's assessment of the collectibilty of customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer's credit worthiness or actual defaults are higher than the Company's historical experience, the Company's estimates of the recoverability of amounts due it could be adversely affected. The Company regularly reviews the adequacy of the Company's allowance for doubtful accounts through identification of specific receivables where it is expected that payments will not be received. The Company also establishes an unallocated reserve that is applied to all amounts that are not specifically identified. In determining specific receivables where collections may not be received, the Company reviews past due receivables and gives consideration to prior collection history and changes in the customer's overall business condition. The allowance for doubtful accounts reflects the Company's best estimate as of the reporting dates. Changes may occur in the future, which may require the Company to reassess the collectibility of amounts, at which time the Company may need to provide additional allowances in excess of that currently provided. At December 31, 2008 and 2007 the allowance for doubtful accounts was $0 and $6,816, respectively.
CONCENTRATION OF CREDIT RISKS
The Company is subject to concentrations of credit risk primarily from cash and cash equivalents and accounts receivable. The Company maintains accounts with financial institutions, which at times exceeds the insured limit of approximately $100,000. The Company minimizes its credit risks associated with cash by periodically evaluating the credit quality of its primary financial institutions. The Company does not require collateral to secure its accounts receivables. Four and five of the Company’s customers accounted for 100% and 69% of its net accounts receivable at December 31, 2008 and 2007 respectively.
CUSTOMER CONCENTRATION RISK
The company’s largest customer accounted for 84% of its revenue during 2008. Four of the Company’s customers accounted for 84% of its revenues during 2007. No other customers accounted for more than 5% of its revenues.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated economic lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard No. 107 `Disclosures about Fair Value of Financial Instruments' (SFAS 107) requires the disclosure of fair value information about financial instruments whether or not recognized on the balance sheet, for which it is practicable to estimate the value. Where quoted market prices are not readily available, fair values are based on quoted market prices of comparable instruments. The carrying amount of accounts payable and accrued expenses approximate fair value because of the short maturity of those instruments.
EARNINGS (LOSS) PER COMMON SHARE
The Company reports earnings and loss per common share in accordance with Statement of Financial Accounting Standards ("SFAS") no. 128, "Earnings per Share". In the case of losses, the per share effects of potential common shares such as warrants, options, convertible debt and convertible preferred stock have not been included, as the effect would be antidilutive. As of December 31, 2008 and 2007, there were no outstanding potential common shares.
STOCK BASED COMPENSATION
The Company adopted SFAS No. 123R, “Share Based Payments.” SFAS No. 123R requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.
In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. Applying SFAS No. 123R had no impact on the financial statements for the year ended December 31, 2008 and 2007.
RECENT ACCOUNTING PRONOUNCEMENTS
FASB 161 - Disclosures about Derivative Instruments and Hedging Activities
In March 2008, the FASB issued FASB Statement No. 161, which amends and expands the disclosure requirements of FASB Statement No. 133 with the intent to provide users of financial statements with an enhanced understanding of; how and why an entity uses derivative instruments, how the derivative instruments and the related hedged items are accounted for and how the related hedged items affect an entity’s financial position, performance and cash flows. This Statement is effective for financial statements for fiscal years and interim periods beginning after November 15, 2008. Management believes this Statement will have no impact on the financial statements of the Company once adopted.
FASB 162 – The Hierarchy of Generally Accepted Accounting Principles
In May 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 162, "The Hierarchy of Generally Accepted Accounting Principles." The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for non-governmental entities. Management believes this Statement will have no impact on the financial statements of the Company once adopted.
(4) - PROPERTY AND EQUIPMENT
At December 31, 2008 and 2007, property and equipment consisted of the following:
Estimated life | |||||
---|---|---|---|---|---|
Computer equipment and software | 3 years | $ | 15,044 | ||
15,044 | |||||
Less: Accumulated depreciation | (15,044) | ||||
$ | -- |
For the years ended December 31, 2008 and 2007, depreciation and amortization expense amounted to $0 and $3,052, respectively.
(5) RELATED PARTY TRANSACTIONS
The Company paid consulting fees to a company (the “Affiliate”) controlled by one of its officers and stockholders of approximately $0 and $4,000 during 2008 and 2007, respectively. The $4000 was included in general and administrative expenses in the year 2007.
The balance due to related party of approximately $47,961 and $6,961 as of December 31, 2008 and 2007, respectively, is non-interest bearing, due on demand and unsecured.
The Company uses office space of a related party at no charge.
(6) INCOME TAXES
Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company's assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some or the entire deferred tax asset will not be realized.
The Company has net operating losses at December 31, 2008 of approximately $434,000 expiring through 2028. Utilization of these losses may be limited by the "change of ownership" rules as set forth in section 382 of the Internal Revenue Code.
The table below summarizes the differences between the Company’s effective tax rate and the statutory federal rate as follows for the periods ended December 31, 2008 and 2007:
Year Ended | Year Ended | |||||||
---|---|---|---|---|---|---|---|---|
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Tax (benefit) computed at “expected” statutory rate | $ | (8,000 | ) | $ | (36,000 | ) | ||
Increase in valuation allowance | 8,000 | 36,000 | ||||||
Net income tax benefit | $ | - | $ | - |
Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset is as follows:
Year Ended | Year Ended | |||||||
---|---|---|---|---|---|---|---|---|
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Tax (benefit) of net operating loss carryforward | $ | 152,000 | $ | 143,000 | ||||
Valuation allowance | (152,000 | ) | (143,000 | ) | ||||
Net deferred tax asset | $ | - | $ | - |