| NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION |
So Act Network, Inc. (the "Company") was incorporated in Delaware on December 9, 2005. The Company is currently in the development stage and plans to create search technologies within an online networking platform.
(B) Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.
It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.
Activities during the development stage include developing the business plan and raising capital.
(C) Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
(D) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
(E) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful life of three to five years.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
(F) Research and Development
The Company has adopted the provisions of FASB Accounting Standards Codification No. 350, Intangibles – Goodwill & Other. Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years. Expenses subsequent to the launch have been expensed as website development expenses.
(G) Revenue Recognition
The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
(H) Advertising Costs
Advertising costs are expensed as incurred and include the costs of public relations activities. These costs are included in consulting and general and administrative expenses and totaled $0 and $0 for the three months ended March 31, 2010 and 2009, respectively.
(I) Identifiable Intangible Assets
As of March 31, 2010 and 2009, $275 and $275, respectively of costs related to registering a trademark has been capitalized. It has been determined that the trademark has an indefinite useful life and not subject to amortization. However, the trademark will be reviewed for impairment annually or more frequently if impairment indicators arise.
(J) Loss Per Share
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. Because of the Company’s net losses, the effects of stock warrants would be anti-dilutive and accordingly, is excluded from the computation of earnings per share. The number of such shares excluded from the computations of diluted loss per share totaled 500,000 and 0, for the three months ended March 31, 2010 and 2009, respectively.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
(K) Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(L) Business Segments
The Company operates in one segment and therefore segment information is not presented.
(M) Recent Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) No. 2009-13, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. The ASU significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. The ASU will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Company does not expect the adoption of ASU No. 2009-13 to have any effect on its financial statements upon its required adoption on January 1, 2011.
(N) Fair Value of Financial Instruments
The carrying amounts on the Company’s financial instruments including accounts payable accrued expenses, and stockholder loans, approximate fair value due to the relatively short period to maturity for this instrument.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
(O) Stock-Based Compensation
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
(P) Reclassification
Certain amounts from prior periods have been reclassified to conform to the current period presentation.
As reflected in the accompanying financial statements, the Company is in the development stage with no operations, has an accumulated deficit of $4,614,677 for the period from December 9, 2005 (inception) to March 31, 2010, and has negative cash flow from operations of $254,964 from inception. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
| NOTE 3 | NOTE PAYABLE – PRINCIPAL STOCKHOLDER |
During the year ended December 31, 2008, the Company received $18,803 from the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand. In 2008, the Company repaid $15,000 in principal to the principal stockholder. In 2009, the Company repaid $3,803 in principal to the principal stockholder. As of March 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 8).
On May 11, 2009 the Company received $9,500 from the principal stockholder. During the year ended December 31. 2009, the Company repaid $1,500 in principal to the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand. On January 4, 2010 the Company repaid $3,000 to the principal stockholder under the terms of the loan (See Note 8).
On May 22, 2009 the Company received $15,000 from the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 8).
On May 26, 2009 the Company received $16,700 from the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 8).
As of March 31, 2010, the Company owes $36,700 in principal and $1,103 of accrued interest to the principal stockholder related to these principal stockholder loans (See Note 8).
| NOTE 4 | LINE OF CREDIT – PRINCIPAL STOCKHOLDER |
On May 28, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000. The line of credit carries an interest rate of 3.25%. As of March 31, 2010, the principal stockholder has advanced the Company $100,000 under the terms of the line of credit agreement (See Note 8).
On November 10, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000. The line of credit carries an interest rate of 3.25%. As of March 31, 2010, the principal stockholder has advanced $95,650 to the Company under this line of credit agreement (See Note 8).
On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000. The line of credit carries an interest rate of 3.25%. As of March 31, 2010 the principal stockholder has advanced $0 to the Company under this line of credit agreement (See Note 8).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
As of March 31, 2010, the Company owes $195,650 in principal and $2,419 of accrued interest to the principal stockholder related to these lines of credit (See Note 8).
| NOTE 5 | PROPERTY AND EQUIPMENT |
At March 31, 2010, and December 31, 2009, respectively, property and equipment is as follows:
| | | March 31, 2010 | | | December 31, 2009 | |
| | | | | | | |
| Website Development | | $ | 112,722 | | | $ | 112,722 | |
| Software | | | 400 | | | | 400 | |
| Office Equipment | | | 1,135 | | | | 1,135 | |
| Less accumulated depreciation and amortization | | | (22,526 | ) | | | (13,185 | ) |
| | | | | | | | | |
| | | $ | 91,731 | | | $ | 101,072 | |
Depreciation/amortization expense for the three months ended March 31, 2010 and 2009 was $9,341 and $211 respectively.
| NOTE 6 | STOCKHOLDERS’ DEFICIENCY |
(A) Common Stock Issued for Cash
On December 31, 2005 the Company issued 100,000 shares of common stock for cash of $100 in exchange for acceptance of the incorporation expenses for the Company ($0.001/share). As a result of the forward split, the 100,000 shares were increased to 400,000 shares ($0.00025/share) (See Note 6(D)).
For the year ended December 31, 2008 the Company issued 473,000 shares of common stock for cash of $118,250 ($0.25/share), of which $67,750 was a subscription receivable. During the month of January 2009, $67,750 of stock subscription receivable was collected. As a result of the forward split, the 473,000 shares were increased to 1,892,000 shares ($0.0625/share). (See Note 6(D)).
On January 2, 2009, the Company entered into stock purchase agreements to issue 20,000 shares of common stock for cash of $5,000 ($0.25/share). As a result of the forward split, the 20,000 shares were increased to 80,000 shares ($0.0625/share) (See Note 6(D)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 6(D)).
On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 6(D)).
On January 11, 2009, the Company entered into stock purchase agreements to issue 32,000 shares of common stock for cash of $8,000 ($0.25/share). As a result of the forward split, the 32,000 shares were increased to 128,000 shares ($0.0625/share) (See Note 6(D)).
On January 12, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 6(D)).
On January 15, 2009, the Company entered into stock purchase agreements to issue 4,000 shares of common stock for cash of $1,000 ($0.25/share). As a result of the forward split, the 4,000 shares were increased to 16,000 shares ($0.0625/share) (See Note 6(D)).
In February of 2009, the Company paid direct offering costs of $850 related to the securities sold.
(B) Stock Issued for Services
On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided. As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025 (See Note 6(D) and Note 8).
On November 24, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D)).
On December 5, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D)).
On December 20, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On January 12, 2009, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D)).
On January 14, 2009, the Company issued 20,000 shares of common stock having a fair value of $5,000 ($0.25/share) in exchange for services related to a development services agreement entered on January 19, 2009. As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D) and Note 7(B)).
On August 25, 2009, the Company issued 50,000 shares of common stock having a fair value of $3,125 ($0.0625/share), based upon the fair value on the date of grant, in exchange for professional services.
On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009. Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 7(B)).
On September 18, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant. On November 11, 2009, the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassed to $0 (See Note 7(B)).
On September 18, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0 (See Note 7(B)).
On September 21, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. On December 18, 2009, the Company terminated the consulting agreement and 400,000 shares were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0 (See Note 7(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On November 12, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $178,000 ($1.78/share) based upon fair value on the date of grant. During 2009, $11,948 was recorded as consulting expense. For the three months ended March 31, 2010, $21,945 is recorded as consulting expense and $144,107 is recorded as deferred compensation (See Note 7(B)).
On November 12, 2009, the Company issued 200,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $400,000 ($2.00/share) based upon fair value on the date of grant. During 2009, $22,466 was recorded as consulting expense. For the three months ended March 31, 2010, $49,315 is recorded as consulting expense and $328,219 is recorded as deferred compensation (See Note 7(B)).
On November 16, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $180,000 ($1.80/share) based upon fair value on the date of grant. During 2009, $11,096 was recorded as consulting expense. For the three months ended March 31, 2010, $22,192 is recorded as consulting expense and $146,712 is recorded as deferred compensation (See Note 7(B)).
On November 18, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $45,000 ($1.50/share) based upon fair value on the date of grant. During 2009, $5,301 was recorded as consulting expense. For the three months ended March 31, 2010, $11,096 is recorded as consulting expense and $28,603 is recorded as deferred compensation (See Note 7(B)).
On November 21, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the marketing agreement, having a fair value of $53,100 ($1.77/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $53,100 is recorded as consulting expense (See Note 7(B)).
On December 3, 2009, the Company issued 240,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $468,000 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $468,000 was recorded as consulting expense (See Note 7(B)).
On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $68,250 was recorded as consulting expense (See Note 7(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $68,250 was recorded as consulting expense (Note 7(B)).
On December 3, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $19,500 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $19,500 is recorded as consulting expense (See Note 7(B)).
On December 15, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $200,000 ($2/share) based upon fair value on the date of grant. During 2009, $71,111 was recorded as consulting expense. For the three months ended March 31, 2010, $128,889 is recorded as consulting expense (See Note 7(B)).
On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $19,400 is recorded as consulting expense (See Note 7(B)).
On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $9,700 is recorded as consulting expense, and $9,700 is recorded as deferred compensation (See Note 7(B)).
On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $9,700 is recorded as consulting expense, and $9,700 is recorded as deferred compensation (See Note 7(B)).
On December 30, 2009, the Company issued 1,500,000 shares of common stock as compensation pursuant to the terms of the advertising agreement, having a fair value of $2,895,000 ($1.93/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $707,843 is recorded as consulting expense, and $2,187,157 is recorded as deferred compensation (See Note 7(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $28,695 is recorded as consulting expense, and $116,055 is recorded as deferred compensation (See Note 7(B)).
On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $28,695 is recorded as consulting expense, and $116,055 is recorded as deferred compensation (See Note 7(B)).
On December 31, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $237,945 is consulting expense, and $727,055 is recorded as deferred compensation (See Note 7(B)).
During December, 2009, the Company issued 680,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,312,400 ($1.93/share) based upon fair value on the date of grant. During 2009, $2,802 was recorded as consulting expense. For the three months ended March 31, 2010, $162,992 is recorded as consulting expense and $1,146,606 is recorded as deferred compensation (See Note 7(B)).
During December, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,170,000 ($1.95/share) based upon fair value on the date of grant. During 2009, $34,192 was recorded as consulting expense. For the three months ended March 31, 2010, $144,247 is recorded as consulting expense and $991,561 is recorded as deferred compensation (See Note 7(B)).
On January 15, 2010, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $170,000 ($1.70/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $17,466 is recorded in consulting expense, and $152,534 is recorded as deferred compensation (See Note 7(B)).
On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010. In exchange for the services provided, the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/share) based upon fair value on the date of grant. For the three months ended March 31, 2010, $142,685 is recorded as consulting expense and $1,097,315 is recorded as deferred compensation (See Note 7(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
.
(C) Common Stock Warrants
On December 30, 2009 the Company issued 500,000 warrants under a consulting agreement. The Company recognized an expense of $823,077 for the year ended December 31, 2009. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2009, dividend yield of zero, expected volatility of 112.80%; risk-free interest rates of 1.65%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.52 per share.
The following table summarizes information about warrants for the Company as of March 31, 2010.
| 2010 Warrants Outstanding | | | Warrants Exercisable | |
| Range of Exercise Price | | | Number Outstanding at March 31, 2010 | | | Weighted Average Remaining Contractual Life | | | Weighted Average Exercise Price | | | Number Exercisable at March 31, 2010 | | | Weighted Average Exercise Price | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(D) Stock Split Effected in the Form of a Stock Dividend
On January 16, 2009, the Company's Board of Directors declared a four-for-one stock split to be effected in the form of a stock dividend. The stock split was distributed on January 16, 2009 to shareholders of record. A total of 136,713,000 shares of common stock were issued. All basic and diluted loss per share and average shares outstanding information has been adjusted to reflect the aforementioned stock dividend.
(E) Amendment to Articles of Incorporation
On January 27, 2009, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 250,000,000 common shares at a par value of $0.001 per share, and 10,000,000 preferred shares at a par value of $0.001 with class and series designations, voting rights, and relative rights and preferences to be determined by the Board of Directors of the Company from time to time.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
(F) In Kind Contribution
During the fourth quarter of 2008, a former stockholder of the Company paid $4,400 of operating expenses on behalf of the Company.
During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 8).
For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 8).
For the three months ended March 31, 2010, the principal stockholder contributed office space with a fair value of $3,150 (See Note 8).
On October 13, 2008 the Company executed an employment agreement with its President and CEO. The term of the agreement is for ten years. As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008. In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation. The agreement also calls for the employee to receive health benefits (See Note 8).
(B) Consulting Agreement
On January 19, 2009, the Company entered into a development services agreement to construct social network software for a fee of $150 and $375 an hour. The contract will remain in place until either party desires to cancel. A retainer fee of $20,000 has been paid upon the execution of the agreement and will be used towards the services provided. In addition, on January 14, 2009 the Company issued 20,000 shares in exchange for services valued at $5,000 ($0.25/share). As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625 (See Note 6(B) and Note 6(D)). On May 29, 2009 the Company amended the consulting agreement by reducing the hourly rate to $75 an hour and reducing the outstanding balance due by $17,163. On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009. Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 6(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On January 20, 2009, the Company entered into a service agreement with a transfer agent to become the Company's transfer agent for the purpose of maintaining stock ownership and transfer records for the Company.
On September 17, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided, on September 18, 2009 the Company issued 500,000 shares of common stock having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant. The Company has an option to cancel the contract during the first ninety days of the agreement and 200,000 shares will be returned back to the Company. On November 11, 2009 the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclaseed to $0 (See Note 6(B)).
On September 18, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. Shares will be issued on or before December 18, 2009 in six 100,000 increments. The Company has an option to cancel the contract at any time, in such event; the consultant will return a prorated amount of shares based on the months remaining in the consulting agreement. On November 18, 2009 the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009 $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0(See Note 6(B)).
On September 21, 2009, the Company entered into an eight month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided, the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. Shares will be issued on or before September 18, 2009, December 18, 2009 and March 18, 2010 in 200,000 increments. The Company has an option to cancel the contract at any time and no additional stock issuances will be due. On December 18, 2009 the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0 (See Note 6(B)).
On October 20, 2009, the Company entered into a marketing agreement with an unrelated third party. In exchange for the services provided, on November 21, 2009, the Company issued 30,000 shares of common stock having a fair value $53,100 ($1.77/share) based upon fair value on the date of grant, and compensation of $5,000, of which $2,500 was paid upon the execution of the agreement and the remaining balance due upon completion (See Note 6(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
During the months of November and December 2009, the Company entered into celebrity endorsement agreements for a period of one to two years of service. In total, 1,710,000 shares of common stock were issued having a fair value of $3,285,400 based upon fair value on the respective date of grant. During 2009, $87,805 was recorded as consulting expense. For the three months ended March 31, 2010, $411,787 is recorded as consulting expense, and $2,785,808 is recorded as deferred compensation (See Note 6(B)).
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 6(B)).
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 240,000 shares of common stock having a fair value $468,000 ($1.95/share) based upon fair value on the date of grant (See Note 6(B)).
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,500 ($1.95/share) based upon fair value on the date of grant (See Note 6(B)).
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 6(B)).
On December 15, 2009, the Company entered into a consulting agreement with an unrelated third party to provide investor services. The Company will receive a 10% of the gross receipts from the investor relations revenue for a two year period. In exchange for the satisfactory services provided, on December 15, 2009, the Company issued 100,000 shares of common stock having a fair value of $200,000 ($2/share) based upon fair value on the date of grant (See Note 6(B)).
On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 6(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On December 27, 2009, the Company entered into an endorsement agreement with an unrelated third party to provide film work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 6(B)).
On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film scripting, editing and production work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 6(B)).
On December 30, 2009, the Company entered into a marketing agreement with an unrelated third party for a period from January 2010 to December 2010. In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant. An additional 1,000,000 shares of common stock having a fair value of $1,930,000 ($1.93/share) based upon fair value on the date of grant were issued for an additional sponsorship commitment. The additional 1,000,000 shares will be held in escrow until June 30, 2010, at which point the unrelated party will have 15 days to accept or decline the additional shares (See Note 6 (B)).
On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011. In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/sh) based upon fair value on the date of grant, and deliverable in three increments of 25,000 shares of common stock each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two increments will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 6(B)).
On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011. In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/sh) based upon fair value on the date of grant, and deliverable in three increments of 25,000 each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 6(B)).
On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through December 31, 2010. In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/sh) based upon fair value on the date of grant (See Note 6(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
On January 11, 2010, the Company entered into a twelve month agreement with an unrelated third party for investor relations press release service for an annual fee of $14,250 and an initial onetime fee of $250.
On January 15, 2010, the Company entered into a two year celebrity endorsement agreement. In total, 100,000 shares of common stock were issued having a fair value of $170,000($1.70/share) based upon fair value on the date of grant (See Note 6(B)).
On February 1, 2010, the Company entered into a twelve month consulting agreement effective February 5, 2010, with an unrelated third party to produce music compositions for a fee of $500. The agreement can be renewed for up to two additional years for a fee of $500 for the first renewal year and $750 for the second renewal year.
On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010. In exchange for the services provided, the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/share) based upon fair value on the date of grant (See Note 6(B)).
| NOTE 8 | RELATED PARTY TRANSACTIONS |
On May 28, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000. The line of credit carries an interest rate at 3.25%. As of March 31, 2010, the principal shareholder has advanced the Company $100,000 under the terms of the line of credit agreement (See Note 4)
On November 10, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000. The line of credit carries an interest rate at 3.25%. As of March 31, 2010, the principal shareholder has advanced $95,650 to the Company under this line of credit agreement (See Note 4).
On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000. The line of credit carries an interest rate of 3.25%. As of March 31, 2010 the principal stockholder has advanced $0 to the Company under this line of credit agreement (See Note 4).
For the three months ended March 31, 2010, the Company owes $195,650 in principal and $2,419 of accrued interest to the principal stockholder related to these lines of credit (See Note 4).
During the year ended December 31, 2008, the Company received $18,803 from the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand. In 2008, the Company repaid $15,000 in principal to the principal stockholder. In 2009, the Company repaid $3,803 in principal to the principal stockholder. As of March 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 3).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
On May 11, 2009 the Company received $9,500 from a principal stockholder. During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand. On January 4, 2010 the Company repaid $3,000 to a principal stockholder under the terms of the loan (See Note 3).
On May 22, 2009 the Company received $15,000 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).
On May 26, 2009 the Company received $16,700 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).
For the three months ended March 31, 2010, the Company owes $36,700 in principal and $1,103 of accrued interest to the principal stockholder related to these principal loans (See Note 3).
On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided. As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025 (See Note 6(B) and Note 6(D)).
On October 13, 2008, the Company executed an employment agreement with its President and CEO. The term of the agreement is ten years. As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008. In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation. The agreement also calls for the employee to receive health benefits (See Note 7(A)).
During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 6(F)).
For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 6(F)).
For the three months ended March 31, 2010, the principal stockholder contributed office space with a fair value of $3,150 (See Note 6(F)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
(UNAUDITED)
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through May 12, 2010, the date the financial statements were issued.
On April 5, 2010, the majority stockholder advanced the Company $400 under the line of credit agreement dated March 25, 2010 (See Note 4 and 8).
On April 13, 2010, the majority stockholder advanced the Company $10,000 under the line of credit agreement dated March 25, 2010 (See Note 4 and 8).
On April 9, 2010, the majority stockholder advanced the Company $50,000 under the line of credit agreement dated March 25, 2010 (See Note 4 and 8). The funds were subsequently used by the Company to reduce its liabilities.
On May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange, whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max. Management is currently in the process of valuing the shares in connection with the share exchange and expects to have it completed by August 21, 2010.
In accordance with the share exchange, the former owners of the rights to Max became Executives of the Company. The two new executives individually entered into employment agreements with the Company on May 11, 2010. The term of the employment agreements are for ten years of service at a monthly compensation of $8,500 for each executive. In addition, the Executives are entitled to receive 5% of all revenues derived from the sale of all products and services related to the Max Audio Technology.
About MAX SOUND™ (Patent Pending) Technology