UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
______________
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934
For the quarterly period ended June 30, 2009
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______to_______
Commission file number 000-52297
______________
Assure Data, Inc.
(Exact name of small business issuer as specified in its charter)
______________
| Nevada | 06-1678089 | |
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) | |
| |
6680 Yosemite, Dallas, Texas 75214 |
(Address of principal executive offices) |
| |
(214) 823-5383 |
(Issuer’s telephone number) |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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
Indicate by check mark whether the registrant is an accelerated filer, or a non-accelerated filer:
| | | Large accelerated filed | 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 Exchange Act: Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer’s classes of common equity, as of August 10, 2009: 1,640,000 shares of common stock.
| PART I -- FINANCIAL INFORMATION |
| Item 1. Financial Statements |
|
|
| ASSURE DATA, INC. | |
| BALANCE SHEETS | |
| | | | | | | December 31, | |
| | | | June 30, 2009 | | | 2008 | |
| | | | (Unaudited) | | | (Audited) | |
| Assets | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash | | | $ | 6,245 | | $ | 3,369 | |
| Accounts receivable | | | | 1,403 | | | 2,038 | |
| | | |
| Total current assets | | | | 7,648 | | | 5,407 | |
| | | |
| Total assets | | | $ | 7,648 | | $ | 5,407 | |
| | | |
| Liabilities and Stockholders' Equity | | | | | | | | |
| | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | | $ | 4,614 | | $ | 12,500 | |
| Due to related party | | | | 59,961 | | | 47,961 | |
| Payroll liabilities | | | | 2,752 | | | 2,646 | |
| | | |
| Total current liabilities | | | | 67,327 | | | 63,107 | |
| | | |
| Stockholders' equity: | | | | | | | | |
| Common stock: $.001 par value. Authorized: 100,000,000 | | | | | | | | |
| shares; issued and outstanding: 1,640,000 | | | | 1,640 | | | 1,640 | |
| Additional paid-in capital | | | | 375,207 | | | 375,207 | |
| Accumulated deficit | | | | (436,526 | ) | | (434,547 | ) |
| | | |
| Total stockholders' equity | | | | (59,679 | ) | | (57,700 | ) |
| | | |
| Total liabilities and stockholders' equity | | | $ | 7,648 | | | 5,407 | |
The accompanying notes are an integral part of these unaudited financial statements
ASSURE DATA, INC. |
Consolidated Statements of Operations |
| | | | Three Months | | | Three Months | | | Six Months | | | Six Months | |
| | | | June 30, 2009 | | | June 30, 2008 | | | June 30, 2009 | | | June 30, 2008 | |
| | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | |
| | | | |
| Revenues | | | $ | 20,866 | | $ | 62,037 | | $ | 82,898 | | $ | 107,180 | |
| Cost of revenues | | | | 11,037 | | | 8,954 | | | 21,236 | | | 15,834 | |
| | | | | |
| Gross profit | | | | 9,829 | | | 53,083 | | | 61,662 | | | 91,346 | |
| | | | | |
| Operating expenses: | | | | | | | | | | | | | | |
| General and administrative | | | | 31,084 | | | 31,670 | | | 63,641 | | | 68,790 | |
| | | | | |
| Total operating expenses | | | | 31,084 | | | 31,670 | | | 63,641 | | | 68,790 | |
| | | | | |
| Net income(loss) | | | $ | (21,255 | ) | $ | 21,413 | | $ | (1,979 | ) | $ | 22,556 | |
| | | | | |
| Basic and diluted income (loss) per share | | | $ | (0.01 | ) | $ | 0.01 | | $ | (0.00 | ) | $ | 0.01 | |
| | | | | |
| Weighted average number of shares | | | | | | | | | | | | | | |
| outstanding - basic and diluted | | | | 1,640,000 | | | 1,640,000 | | | 1,640,000 | | | 1,640,000 | |
The accompanying notes are an integral part of these unaudited financial statements
ASSURE DATA, INC.
Consolidated Statements of Cash Flows
| | | | Six Months | | | Six Months | |
| | | | Ended | | | Ended | |
| | | | June 30, 2009 | | | June 30,2008 | |
| | | | (Unaudited) | | | (Unaudited) | |
| | | |
| Cash flows from operating activities: | | | | | | | | |
| Net income (loss) | | | $ | (1,979 | ) | $ | 22,556 | |
| Adjustments to reconcile net income (loss) to | | | | | | | | |
| net cash provide by (used in) operating | | | | | | | | |
| activities: | | | | | | | | |
| | | |
| Changes in assets and liabilities: | | | | | | | | |
| Accounts receivable | | | | 635 | | | (6,486 | ) |
| Accounts payable and accrued expenses | | | | (7,780 | ) | | (24,557 | ) |
| Deferred revenue | | | | -- | | | (56 | ) |
| | | |
| Net cash provided by (used in) | | | | | | | | |
| operating activities | | | | (9,124 | ) | | (8,543 | ) |
| | | |
| Cash flows from financing activities: | | | | | | | | |
| Proceeds from notes payable to related party | | | | 12,000 | | | 20,000 | |
| | | |
| Net cash provided by | | | | | | | | |
| Financing activities | | | | 12,000 | | | 20,000 | |
| | | |
| Net increase in cash | | | | 2,876 | | | 11,457 | |
| | | |
| Cash at beginning of period | | | | 3,369 | | | (975 | ) |
| | | |
| Cash at end of period | | | $ | 6,245 | | $ | 10,662 | |
The accompanying notes are an integral part of these unaudited financial statements
ASSURE DATA, INC. |
NOTES TO FINANCIAL STATEMENTS |
June 30, 2009 |
(Unaudited) |
ORGANIZATION
Assure Data, Inc. (the "Company") is a Nevada Corporation which 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.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form l0-Q. Accordingly, they do not include all the information and disclosures required for annual financial statements. These financial statements should be read in conjunction with the financial statements and related footnotes for the year ended December 31, 2008, included in the Annual Report filed on Form l0-KSB for the year then ended.
In the opinion of the management of Assure Data, Inc. (the "Company"), all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position as of June 30, 2009, and the results of operations and cash flows for the six-month period ending June 30, 2009 have been included. The results of operations for the six-month period ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report filed on Form l0-KSB as filed with the Securities and Exchange Commission for the year ended December 31, 2008.
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 June 30, 2009. 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 June 30, 2009, the Company does not believe that any impairment has occurred.
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.
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 cash, accounts payable and accrued expenses approximate fair value because of the short maturity of those instruments.
EARNINGS (LOSS) PER COMMON SHARE
The Company reports loss per common share in accordance with Statement of Financial Accounting Standards (“SFAS”) no. 128, “Earnings per Share”. We have no common stock equivalents as of June 30, 2009.
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 Company’s financial statements for the six months ended June 30, 2009.
RELATED PARTY TRANSACTIONS
During the six months ended June 30, 2009 an officer of the company loaned the company an additional $12,000. The note is non interest bearing and is due on demand.
SALE OF COMMON STOCK
No sale of common stock took place during the six months ended June 30, 2009.
RECENTLY ISSUED ACCOUNTING STANDARDS
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.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
Item 2 Management’s Discussion and Analysis and Plan of Operations
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO OF THE COMPANY, CONTAINED ELSEWHERE IN THE FORM 10-KSB.
When used in this discussion, the words "expect(s)", "feel(s)", "believe(s)", "will", "may", "anticipate(s)" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, and are urged to carefully review and consider the various disclosures elsewhere in this Form 10-QSB. The provision of Section 27A of the Securities Act of 1933 and Section 21 of the Securities and Exchange Act of 1934 shall apply to any forward looking information in this Form 10-Q.
General
Assure Data began operations in 2003 offering data backup services. We obtained $100,000 of initial funding from a private placement in mid-2003. In September of 2005 the Company completed a public offering in which 600,000 shares of common stock were sold resulting in proceeds of $300,000 before offering costs were paid. In March of 2006 we completed a private placement of 40,000 shares resulting in proceeds of $20,000 before offering costs. The following is a summary of our financial results and condition for the six months ended June 30, 2009 and 2008.
For the six months ended June 30, 2009 compared to the six months ended June 30, 2008, revenues decreased from $107,180 to $82,898, a decrease of $24,282. The changes in revenues were due to a decrease in the overall billings for services requested by our customers. For the six months ended June 30, 2009 compared to the six months ended June 30, 2008, cost of revenues increased from $15,834 to $21,236 an increase, of $5,402. The cost of revenue increase was due to an increase in medical insurance costs, and a slight increase in 3rd party contract expenses. For the six months ended June 30, 2009 compared to the six months ended June 30, 2008, gross profit decreased from $91,346 to $61,662, a decrease of $29,684. This decrease was due to a reduced requirement of services requested by our customers. The overall economy downturn has caused our customer base to reduce the overall amount of services. For the six months ended June 30, 2009 compared to the six months ended June 31, 2008, general and administrative expenses decreased from $68,790 to $63,641. Selling, general and administrative remained constant due to the accounting fees, legal fees and payroll expense remaining the same.
We estimate the continuing costs of being a public company to be $35,000 during 2009. These costs are being paid from revenues generated by services to customers and loans from an officer of the company. For the six months ended June 30, 2009 compared to the six months ended June 30, 2008, total operating expenses decreased from $68,790 to $63,641. The operating expenses remained basically constant due to no change in payroll, accounting or legal expenses. Service charges are not a constant set fee for most customers. Costs for bandwidth, other internet related fees, and marketing costs are not fixed. Both revenue and associated costs change each month. For the six months ended June 30, 2009 compared to the six months ended June 30, 2008, net income decreased from a gain of $22,556 to a loss of $1,979, due to the decrease in sales.
Comparisons
Comparison of the six months ended June 30, 2009 and 2008:
Revenues decreased $24,282 for the six months ended June 30, 2009 from $107,180 to $82,898. This decrease is attributed to a decrease in the monthly billings for backup services, and the overall billings for additional services requested by our customers.
For the six months ended June 30, 2009 compared to the six months ended June 30, 2008, cost of revenues increased from $15,834 to $21,236 an increase of $5,402. The cost of revenue increase was due to increased medical and a slight increase in 3rd party contract expenses.
Gross profit decreased to $61,662 for the six months ended June 30, 2009 from $91,346 for the comparable 2008 period. This decrease of $29,684 was due primarily a decrease in revenue related to our customer base requesting fewer services.
Operating expenses decreased from $68,790 for the six months ended June 30, 2008 to $63,641 for the six months ended June 30, 2009. The operating expenses remained basically constant due to no change in payroll, accounting or legal expenses.
Liquidity
As of June 30, 2009, the Company’s cash position was $6,245. All of our cash needs have been met from the results of our limited operations, proceeds from notes payable and the sale of our equity securities. Our cash flow statement and statement of operations are essentially the same.
Cash used in operating activities during the six month period ended June 30, 2009 was $9,124, as compared to $8,543 for the six month period ended June 30, 2008, an increase of $581. This increase is very small, and is due to changes in overall employee costs. Cash provided by financing activities was $12,000 for the six month period ended June 30, 2009, as compared to cash provided by financing activities of $20,000 for the six month period ended June 30, 2008, an increase of $8,000. For the six months ended June 30, 2009 an officer of the company loaned the company an additional $12,000.
We believe that, even though our auditors have expressed substantial doubt about our ability to continue as a going concern in the Company’s 10-K for the year ended December 31,2008 we will have sufficient financial resources to meet our obligations for at least the next twelve 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 and maintaining our status as a reporting entity. We believe that on an annual basis those costs would not exceed $35,000. Based on this belief, we believe we will have adequate financial resources to meet our financial obligations as we currently conduct business for at least 12 months. In addition, we currently have the capacity to add 36 more customers with an average monthly service charge of $250 per customer without increasing our current monthly expenses. If all 36 customers were added this would increase our monthly revenues by $9,000 per month. Our current customer
base usage is decreasing slightly. Some customers are reducing the total amount of data being stored, to reduce their monthly costs. Also due to the current business downturn in the economy, our customer base is decreasing their requests for related consulting services.
An officer of the company has agreed to provide additional funding as required to meet our financial obligations.
We have a functional service with paying customers and an increasing monthly revenue stream. We have a web site that is listed with a number of search engines, from which we receive phone calls from potential customers as well as ‘hits’ that are turning into customers and potential customers. The Small Business version of our backup services, and a Home/Personal version that can be used by anyone with a high speed internet connection with no additional hardware required to be installed at the user’s location is now available.
Low cost office space is available and all other expenses will be monitored closely to assure that the focus of the next phase of the business plan moves ahead as planned.
Our continuing challenge in 2009 will be to expand our customer base and develop a partnership for the marketing of our backup product and services.
Capital Expenditures
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 20-30 customers. A new server will be required for each additional 20-30 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.
Future Obligations
We have no indebtedness or other continuing financial commitments.
Item 4T 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.
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.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
ITEM 1A. Risk Factors
As a “smaller reporting company”, the Company is not required to provide information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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.
| Exhibits | | |
| | | |
| 31.1 | | Certification by CEO and CFO pursuant to 18 USC Section 1350 as adopted by Section 302 of the Sarbanes-Oxley Act of 2002. | | |
| | | |
| 32.1 | | Certification by CEO and CFO pursuant to 18 USC Section 1350 as adopted by Section 906 of the Sarbanes-Oxley Act of 2002. | | |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: | August 10, 2009 | | | | |
| | | | | |
| | | ASSURE DATA, INC. | | |
| | | | | |
| | | | | |
| | | By: /s/ Robert Lisle | | |
| | | Robert Lisle, President | | |
