UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report under Section 13 or 15 (d) of Securities Exchange Act of 1934
For the Period ended June 30, 2010
Commission File Number 333-147104
Attune RTD.
(Exact name of Registrant as specified in its charter)
| Nevada | 32-0212241 | |
| (State of Incorporation) | (IRS Employer ID Number) |
| 3700 B Tachevah Road |
| Palm Springs CA 92262 |
(Address and telephone number of principal executive offices)
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No 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 under Rule 12b-2 of the Exchange Act. (Check one.)
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 Exchange Act). Yes o No x
Attune RTD is referred to herein as “the Company”, “us”, ”we”, or ”our”.
As of August 13, 2009, we had 23,410,549 shares of our common stock, $0.0166 par value, outstanding.
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TABLE OF CONTENTS
| Page | ||
| PART I | 3 | |
| Item I | 3 | |
| 5 | ||
| 6 | ||
| 7 | ||
| 8 | ||
| Item 2 | 14 | |
| Item 4T | 17 | |
| PART II | 18 | |
| Item 1. | 18 | |
| Item 2. | 18 | |
| Item 3. | 18 | |
| Item 4. | 18 | |
| Item 5. | 18 | |
| Item 6. | 18 | |
| 19 |
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
| ATTUNE RTD | |||||||
| (a development stage company) | |||||||
| Financial Statements | |||||||
| For the Three And Six Months Ended June 30, 2010 and 2009 | |||||||
| and the Period from July 14, 2007 (Inception of Development Stage) to June 30, 2010 | |||||||
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| TABLE OF CONTENTS | |
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| Attune RTD | ||||||||
| (a development stage company) | ||||||||
Condensed Balance Sheets | ||||||||
| June 30, | December 31, | |||||||
| 2010 | 2009 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 42,648 | $ | 106,496 | ||||
| Prepaid Expenses | 72,918 | - | ||||||
| Total Current Assets | 115,566 | 106,496 | ||||||
| Property and Equipment, net | 12,043 | 13,809 | ||||||
| Other Assets | ||||||||
| Loans Receivable from Officers | - | 175,825 | ||||||
| Deferred Patent Costs | 41,378 | 41,378 | ||||||
| Capitalized Trademarks | 18,907 | - | ||||||
| Security Deposit | 1,800 | 1,800 | ||||||
| Total Other Assets | 62,085 | 219,003 | ||||||
| Total Assets | $ | 189,694 | $ | 339,308 | ||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 224,757 | $ | 127,358 | ||||
| Accrued Salaries | 205,486 | 175,239 | ||||||
| Accrued Expenses | 3,055 | - | ||||||
| Bank Line of Credit Payable | 12 | - | ||||||
| Liability to Guarantee Equity Value | 118,980 | 83,980 | ||||||
| Capital lease obligation | 1,881 | 1,881 | ||||||
| Total Current Liabilities | 554,171 | 388,458 | ||||||
| Long Term Liabilities | ||||||||
| Capital lease obligation - less current portion | 833 | 1,779 | ||||||
| Total Liabilities | 555,004 | 390,237 | ||||||
| Commitments and Contingencies (See Note 7) | ||||||||
| Stockholders' Equity (Deficit) | ||||||||
| Class B Participating Cumulative Preferred Super voting Stock, $0.0166 par value; | 16,600 | 16,600 | ||||||
| 1,000,000 shares authorized; 1,000,000 issued and outstanding at | ||||||||
| June 30, 2010 and December 31, 2009, respectively | ||||||||
| Class A Common Stock, $0.0166 par value; 59,000,000 shares authorized; | 380,667 | 355,889 | ||||||
| 22,947,036 and 21,439,145 shares issued and outstanding at | ||||||||
| June 30, 2010 and December 31, 2009, respectively | ||||||||
| Additional Paid-in Capital | 1,386,961 | 1,086,773 | ||||||
| Deficit accumulated during development stage | (2,149,538 | ) | (1,510,191 | ) | ||||
| Total Stockholders' Equity (Deficit) | (365,310 | ) | (50,929 | ) | ||||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 189,694 | $ | 339,308 | ||||
The accompanying unaudited notes are an integral part of these Financial Statements.
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| Attune RTD | ||||||||||||||||||||
| (a development stage company) | ||||||||||||||||||||
Condensed Statements of Operations | ||||||||||||||||||||
| Period from July 14, 2007 | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | (Inception of Development Stage) | ||||||||||||||||||
| June 30, 2010 | June 30, 2009 | June 30, 2010 | June 30, 2009 | to June 30, 2010 | ||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||
| Revenues | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Operating Expenses | ||||||||||||||||||||
| Advertising and Promotions | 6,000 | 5,000 | 11,700 | 5,000 | 93,560 | |||||||||||||||
| Contributed Services | - | - | - | - | 111,781 | |||||||||||||||
| Depreciation Expense | 883 | 803 | 1,766 | 1,606 | 6,330 | |||||||||||||||
| Legal Expense | 5,741 | 2,451 | 29,741 | 2,451 | 43,241 | |||||||||||||||
| Marketing Expense | 29,472 | - | 46,337 | - | 86,572 | |||||||||||||||
| Payroll Expense | 63,454 | 65,046 | 127,468 | 131,920 | 572,371 | |||||||||||||||
| Product Development | 5,070 | 28,500 | 5,070 | 37,176 | 129,246 | |||||||||||||||
| Professional Fees | 8,480 | 3,285 | 37,681 | 11,541 | 186,470 | |||||||||||||||
| Rent Expense | 5,349 | 5,523 | 10,751 | 8,986 | 43,331 | |||||||||||||||
| Research and Development | - | - | - | - | 15,682 | |||||||||||||||
| Other Operating Expenses (including stock based | 267,301 | 18,125 | 355,962 | 31,050 | 813,718 | |||||||||||||||
| expenses of $203,933 and $0 for the six | ||||||||||||||||||||
| months ende dJune 30, 2010 and 2009, | ||||||||||||||||||||
| respectively) | ||||||||||||||||||||
| Total Operating Expenses | 391,750 | 128,733 | 626,476 | 229,730 | 2,102,302 | |||||||||||||||
| Loss from Operations | (391,750 | ) | (128,733 | ) | (626,476 | ) | (229,730 | ) | (2,102,302 | ) | ||||||||||
| Other income (expense) | ||||||||||||||||||||
| Income Tax | (800 | ) | - | (800 | ) | - | (800 | ) | ||||||||||||
| Gain on asset theft, net | - | - | - | - | 29,125 | |||||||||||||||
| Interest Expense | - | - | - | - | (1,678 | ) | ||||||||||||||
| Interest Income | - | - | - | - | 15,825 | |||||||||||||||
| (Loss) Gain on Debt conversion, net | - | 28,514 | (12,071 | ) | 28,514 | (89,708 | ) | |||||||||||||
| Total Other income (expense) | (800 | ) | 28,514 | (12,871 | ) | 28,514 | (47,236 | ) | ||||||||||||
| Net Loss | (392,550 | ) | (100,219 | ) | (639,347 | ) | (201,216 | ) | (2,149,538 | ) | ||||||||||
| Preferred stock dividends | (5,049 | ) | (5,049 | ) | (10,042 | ) | (10,042 | ) | (60,209 | ) | ||||||||||
| Net loss applicable to common stock | $ | (397,599 | ) | $ | (105,268 | ) | $ | (649,389 | ) | $ | (211,258 | ) | $ | (2,209,747 | ) | |||||
| Net loss per common share applicable to common stock: | ||||||||||||||||||||
| Basic and diluted | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.12 | ) | |||||
| Weighted average number of common shares outstanding: | ||||||||||||||||||||
| Basic and diluted | 22,120,698 | 15,456,779 | 21,800,732 | 19,394,257 | 17,680,118 | |||||||||||||||
The accompanying unaudited notes are an integral part of these Financial Statements.
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| Attune RTD | ||||||||||||
| (a development stage company) | ||||||||||||
Condensed Statements of Cash Flows | ||||||||||||
| (Unaudited) | ||||||||||||
| Period from July 14, 2007 (Inception of Development Stage) to June 30, 2010 | ||||||||||||
Six Months Ended June 30, | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | 2010 | 2009 | ||||||||||
| Net Loss | $ | (639,347 | ) | (201,216 | ) | $ | (2,149,538 | ) | ||||
| Adjustments to Reconcile Net loss to Net Cash Used in Operating Activities: | ||||||||||||
| Class A Common stock and preferred stock granted for services | 175,000 | - | 521,510 | |||||||||
| Stock based expense paid by officers | 7,000 | - | 7,000 | |||||||||
| Contributed Capital | - | - | 111,781 | |||||||||
| Depreciation and Amortization | 1,766 | 1,606 | 6,330 | |||||||||
| Interest expense on conversion to Class A common stock | - | - | 449 | |||||||||
| Loss (Gain) on conversions of debt to Class A common stock, net | 12,071 | - | 109,708 | |||||||||
| Gain on asset theft, net | - | - | (29,125 | ) | ||||||||
| Stock issued as gifts | 7,350 | - | 7,350 | |||||||||
| Amortization of stock based prepaid expenses | 14,582 | 14,582 | ||||||||||
| Changes in Assets and Liabilities: | ||||||||||||
| Security Deposit | - | - | (1,800 | ) | ||||||||
| Accounts Payable | 136,570 | 5,580 | 327,908 | |||||||||
| Accrued Expenses | 3,055 | (11,503 | ) | 3,055 | ||||||||
| Accrued Salaries | 30,247 | 47,000 | 205,486 | |||||||||
| NET CASH USED IN OPERATING ACTIVITIES | (251,706 | ) | (158,533 | ) | (865,304 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Purchase of Equipment | - | (2,370 | ) | (13,151 | ) | |||||||
| Deferred Patent costs | - | - | (41,378 | ) | ||||||||
| Loans receivable from Officers | - | - | (175,825 | ) | ||||||||
| Trademark Costs | (18,907 | ) | - | (18,907 | ) | |||||||
| Insurance proceeds on asset theft | - | - | 30,961 | |||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (18,907 | ) | (2,370 | ) | (218,300 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Sale of Class A - Common Stock | 207,699 | 211,382 | 1,041,384 | |||||||||
| Offering costs related to the Sale of Class A - Common Stock | - | (10,000 | ) | (11,000 | ) | |||||||
| Sale of Class B - Preferred Stock | - | - | 45,000 | |||||||||
| Proceeds from Line of Credit | 12 | 12 | ||||||||||
| Principal Payments on Capital Lease Obligations | (946 | ) | (756 | ) | (4,344 | ) | ||||||
| Loan Payable to Principal Stockholder | - | - | 60,000 | |||||||||
| Repayment of Loan Payable to Principal Stockholder | - | - | (4,800 | ) | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 206,765 | 200,626 | 1,126,252 | |||||||||
| NET INCREASE (DECREASE) IN CASH | (63,848 | ) | 39,723 | 42,648 | ||||||||
| CASH AT BEGINNING OF PERIOD | 106,496 | 22,513 | - | |||||||||
| CASH AT END OF PERIOD | $ | 42,648 | $ | 62,236 | $ | 42,648 | ||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||
| Cash paid during the period: | ||||||||||||
| Interest Expense | $ | - | $ | - | $ | 222 | ||||||
| Income Tax | $ | 800 | $ | - | $ | 800 | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||||||
| Conversion of a Vendor Liability into Shares of Class A Common Stock | $ | 39,170 | $ | - | $ | 54,170 | ||||||
| Capital Lease Obligation Recorded as Property and Equipment | $ | - | $ | - | $ | 7,058 | ||||||
| Conversion of a shareholder loan into shares of Class A common stock | $ | - | $ | - | $ | 55,200 | ||||||
| Reclassification of equity to liability to guarantee equity value due to price guarantee upon conversion | $ | 35,000 | $ | - | $ | 70,000 | ||||||
| Reclassification of accounts payable to liability to guarantee equity value due to price guarantee upon conversion | $ | - | $ | - | $ | 48,980 | ||||||
| Redemption of stock by officers for loan repayment | $ | 175,825 | $ | - | $ | 175,825 | ||||||
| Prepaid Common stock issued for services | $ | 87,500 | $ | - | $ | 87,500 | ||||||
The accompanying unaudited notes are an integral part of these Financial Statements.
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ATTUNE RTD
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
We were incorporated on December 19, 2001, under the name Catalyst Set Corporation and were dormant until July 14, 2007. On September 7, 2007, we changed our name to Interfacing Technologies, Inc. On March 24, 2008, we changed our name to Attune RTD.
Attune RTD (“The Company”, "us", "we", or "our") was formed to provide developed technology related to the operations of energy efficient electronic systems such as swimming pool pumps, sprinkler controllers and heating and air conditioning controllers among others.
We are presented as in the development stage from July 14, 2007, (Inception of Development Stage) through June 30, 2010. To-date, our business activities during development stage have been corporate formation, raising capital and the development and patenting of our products with the intent of entering the commercial marketplace in the near future.
The interim condensed financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America, and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of our management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations and cash flows for the three and six months ended June 30, 2010 and 2009 and our financial position as of June 30, 2010 have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.
Certain information and disclosures normally included in the notes to the annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, these interim condensed financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended December 31, 2009. The December 31, 2009 balance sheet is derived from those statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited financial statements include the estimates of depreciable lives and valuation of property and equipment, allowances for losses on loans receivable, valuation of deferred patent and trademark costs, valuation of equity based instruments issued for other than cash, valuation of officer's contributed services, and the v aluation allowance on deferred tax assets.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, we consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at June 30, 2010.
DEFERRED PATENT COSTS
Patent costs are stated at cost and will be reclassified to intangible assets and amortized on a straight-line basis over the estimated future periods to be benefited (twenty years) if and once the patent has been granted by the United States Patent and Trademark office (“USPTO”). We will write-off any currently capitalized costs for patents not granted by the USPTO. Currently, we have two patents pending with the USPTO as one was approved during the three months ended June 30, 2010. Amortization will begin on July 1, 2010.
TRADEMARKS
Trademark costs are capitalized on our balance sheet during the period such costs are incurred. The trademark is determined to have an indefinite useful life and is not amortized until such useful life is determined no longer indefinite. The trademark is reviewed for impairment annually.
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ATTUNE RTD
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
RESEARCH AND DEVELOPMENT
In accordance generally accepted accounting principles (ASC 730-10), expenditures for research and development of our products are expensed when incurred, and are included in operating expenses.
ADVERTISING
We conduct advertising for the promotion of our products and services. In accordance with generally accepted accounting principles (ASC 720-35), advertising costs are charged to operations when incurred; such amounts aggregated $11,700 and $5,000 for the six months ended June 30, 2010 and 2009, respectively.
STOCK-BASED COMPENSATION
Compensation expense associated with the granting of stock based awards to employees and directors and non-employees is recognized in accordance with generally accepted accounting principles (ASC 718-20) which requires companies to estimate and recognize the fair value of stock-based awards to employees and directors. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of our financial instruments, including cash, loans receivable and current liabilities, approximate fair value because of their short maturities. Based upon our estimate of our current incremental borrowing rate for loans with similar terms and average maturities, the carrying amounts of loans payable, and capital lease obligations approximate fair value. We adopted the provisions of SFAS 157 (ASC 820) on January 1, 2008.
RECLASSIFICATIONS
Certain amounts in the accompanying 2009 financial statements have been reclassified to conform to the 2010 presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”. This update provides amendments to Topic 820 that will provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The adoption of ASU 2010-06 did not have a material impact on our consolidated results of operations or financial condition.
In February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements”. This update addresses both the interaction of the requirements of Topic 855, “Subsequent Events”, with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provision related to subsequent events (paragraph 855-10-50-4). The amendments in this update have the potential to change reporting by both private and public entities, however, the nature of the change may vary depending on facts and circumstances. The adoption of ASU 2010-09 did not have a material impact on our consolidated results of operations or financial condition.
In April 2010, the FASB issued ASU No. 2010-13, “Compensation – Stock Compensation”. This update will clarify the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which the underlying security trades. This update will be effective for the first fiscal quarter beginning after December 15, 2010, with early adoption permitted. We do not expect the provisions of ASU 2010-13 to have a material effect on our consolidated results of operations or financial condition.
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ATTUNE RTD
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
| 2. | GOING CONCERN |
The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. For the six months ended June 30, 2010, we had a net loss applicable to common stock of $649,389; net cash used in operations of $251,706 and were a development stage company with no revenues. In addition, as of June 30, 2010, we had a working capital deficit of $438,605, a stockholders' deficit of $365,310, and a deficit accumulated during the development stage of $2,149,538.
These conditions raise substantial doubt about our ability to continue as a going concern. These condensed financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.
In order to execute our business plan, we will need to raise additional working capital and generate revenues. There can be no assurance that we will be able to obtain the necessary working capital or generate revenues to execute our business plan.
Management’s plan in this regard, includes completing product development, generating marketing agreements with product distributors and raising additional funds through a private placement offering of Company's common stock.
Management believes our business development and capital raising activities will provide us with the ability to continue as a going concern.
3. LOANS RECEIVABLE FROM OFFICERS
Pursuant to two separate unsecured promissory notes with our chief executive officer and our chief financial officer (borrowers) dated August 1, 2007, each borrower may borrow an amount equal to or less than $90,000 each at a rate of 5.75%. Principal and interest are due under the terms of the loans on or before January 31, 2017. Total principal and interest due under the loans as of June 30, 2010 and December 31, 2009 were $0 and $175,825 respectively. During the six months ended June 30, 2010 the loans that were outstanding at December 31, 2009 were fully repaid by the redemption of common stock from the officers, in an amount satisfactory enough to settle the obligation in its entirety, see Notes 4 and 6.
| 4. | RELATED PARTY TRANSACTIONS |
As of June 30, 2010 and December 31, 2009, we owed two of our officers, accrued salary of $205,486 and $175,239 respectively, based on the terms of their employment contracts.
In January 2010, certain officer shares were redeemed, See Notes 3 and 6.
During the six months ended June 30, 2010, we awarded the officers 400,000 shares of common stock as a bonus incentive valued at $140,000 or $0.35 per share, the shares were immediately vested (See Note 6).
Our officers contributed 20,000 shares (10,000 shares per officer) valued at $7,000 or $0.35 per share, of their common stock back to our treasury which was then reissued by us to a Public Relations firm for services (See Note 6).
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ATTUNE RTD
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
5. LINE OF CREDIT
During the six months ended June 30, 2010, we entered into a $10,000 Line of Credit arrangement with our bank. The arrangement bears interest at the rate of 14% per year. The outstanding balance under this arrangement at June 30, 2010 was $12, and the remaining balance available for use is $9,988.
6. COMMON STOCK
We are authorized to issue two classes of stock. The first class of stock is Class A Common Stock, par value $0.0166, of which 59,000,000 shares are authorized and the holders of the Class A Common Stock are entitled to one vote per share. The second class of stock is Class B Participating Cumulative Preferred Super-voting Stock, par value $0.0166, of which 1,000,000 shares are authorized and the holders of the Class B Participating Cumulative Preferred Super-voting Stock are entitled to one hundred votes per share. The Class B Participating Cumulative Preferred Super-voting Stock pays dividends at 6%. For the three and six months ended June 30, 2010, the board of directors did not declare any dividends. Total undeclared Class B Participating Cumulative Preferred Super-voting Stock dividends as of June 30, 2010 was $60,209.
Class A Common Stock
Issuances of our common stock during the three and six months ended June 30, 2010, included the following:
Shares Issued for Cash
952,901 shares of Class A common stock were issued for $207,699 cash with various prices per share ranging from $0.10 to $0.35. In conjunction with the cash investments, certain investors were granted warrants totaling, 900,000 during the six months ended June 30, 2010. The warrants are exercisable, into 900,000 Class A common stock at $0.40 per share and expire on April 15, 2013.
Shares Issued for Services
In May 2010, we issued 20,000 shares of Class A common stock for services. These shares were valued at $0.35 per share, based on contemporaneous cash sales prices) and we recognized an expense of $7,000. The issued shares were personal shares of two of our officers which they returned and were issued for the above services.
In June 2010, we issued 400,000 shares of Class A common stock to two officers, 200,000 individually, as a bonus incentive. The shares were immediately vested. The share grants were valued at $140,000 or $0.35 per share, based on contemporaneous cash sales prices. This amount was fully expensed as of June 30, 2010.
In June 2010, we issued 250,000 shares of Class A common stock to an investor relations firm in exchange for professional services related to consulting, promotional and marketing services. The shares were valued at $0.35, based on contemporaneous cash sales prices. The total value of the services was $87,500 and will be recognized over the three month term of the contract. As of June 30, 2010, we have amortized $14,582 related to this contract.
In June 2010, we issued 100,000 shares of Class A common stock for services. These shares were valued at $0.35 per share, based on contemporaneous cash sales prices, and we recognized an expense of $35,000 as the shares were for services rendered and the stock fully vested.
-11-
ATTUNE RTD
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
Shares Issued as Gifts
On January 4, 2010, we gifted 21,000 shares of common stock to three unrelated parties at $0.35 per share based on contemporaneous cash sales prices. The total value of the share gifts were $7,350 which was expensed during the six months ended June 30, 2010.
Shares Issued in Conversion of liabilities
In January 2010, 20,000 shares of Class A common stock were issued upon conversion of a $6,000 liability from a vendor. The shares were valued at $7,000 or $0.35, based on a contemporaneous cash sales price. We recognized a loss on the conversion of $1,000.
In February 2010, 20,000 shares of Class A common stock were issued upon conversion of a $7,250 liability from a vendor. The shares were valued at $7,000 or $0.35, based on a contemporaneous cash sales price. We recognized a gain on the conversion of $250.
In March 2010, 120,000 shares of Class A common stock were issued upon conversion of a $24,000 liability from a vendor. The shares were valued at $42,000 or $0.35 per share, based on a contemporaneous cash sales price and the Company recognized a loss on conversion of $18,000. We agreed with the vendor, prior to conversion, that it would guarantee the value of the stock, when sold by the vendor, up to the dollar value for the 2009 liability converted in 2010 of $24,000, plus an additional $11,000 for a total sales price of $35,000 when sold by the vend or. Any difference in value, if less than the liability, will be paid by us in cash or through the issuance of additional common stock. As a result, we recorded the $24,000 conversion as a liability along with the additional $11,000 guarantee for a total guarantee liability of $35,000. The total cumulative liability to guarantee equity value from fiscal 2009 and 2010 totaled $118,980 as of June 30, 2010.
In June 2010, 5,485 shares of Class A common stock were issued for the conversion of an accounts payable balance of $1,920 or $0.35 per share. There was no gain or loss recorded on the conversion as the conversion rate equaled the fair market value of the common stock.
Redemption of Shares
In January 2010, our Chief Executive Officer and Chief Financial Officer redeemed 521,439 shares (collectively) of their common stock in the Company, with a value of $0.35 per share, based on contemporaneous cash sales, to satisfy an outstanding debt obligation with us arising from two separate unsecured promissory notes dated August 1, 2007. The value of the note receivable was $175,825 upon conversion and accordingly, we recognized a gain on conversion of $6,679.
In June 2010, our Chief Executive Officer and Chief Financial Officer contributed 20,000 shares (collectively) of their common stock back to us. We then issued the same 20,000 shares to a Public Relations firm to provide public relations to us. (See shares issued for services above)
2010 Equity Incentive Plan
In June 2010, we registered 4,000,000 shares of our Class A Common Stock pursuant to our 2010 Equity Incentive Plan which was also enacted in June 2010. Our Board of Directors have authorized the issuance of the Class A Shares to Employees upon effectiveness of a recently issued Registration Statement. The Equity Incentive Plan is intended to compensate Employees for services rendered. The Employees who will participate in the 2010 Equity Incentive Plan have agreed or will agree in the future to provide their expertise and advice to us for the purposes and consideration set forth in their written agreements pursuant to the 2010 Equity Incentive Plan. The services to be provided by the Employees will not be rendered in connection with: (i) capital-raising transactions; (ii) direct or indirect promotion of our Class A Common S hares; (iii) maintaining or stabilizing a market for our Class A Common Shares. The Board of Directors may at any time alter, suspend or terminate the Equity Incentive Plan.
As of June 30, 2010, no stock had been issued under this plan.
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ATTUNE RTD
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2010
(Unaudited)
| 7. | COMMITMENTS AND CONTINGIENCIES |
| Employment and operating Agreements |
Effective March 26, 2008, we entered into two employment agreements with our Chief Executive Officer and Chief Financial Officer. These agreements established a yearly salary for each of $120,000. As of June 30, 2010 and December 31, 2009, we owed our officers $205,486 and $175,239, respectively, based on the terms of the agreement.
We have a written agreement with a marketing firm for their services. The marketing firm will receive 5% of total revenues plus 5% of revenue payable in stock grants at $0.32 cents per share for three years beginning in December 2008 and ending in November 2011. No revenues have been generated to date.
Operating Leases
We currently lease office space under a long-term operating lease agreement expiring on September 30, 2010. Within sixty days of expiration, we have the option to extend the lease for an additional five years. In March 2010, the lease was extended for a period of one year beginning on October 1, 2010 and ending on September 30, 2011. Rent was set with the new lease agreement at $1,400 per month.
Legal Matters
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2010, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
| 8. | SUBSEQUENT EVENTS |
In July and August 2010, we received cash investments of $91,000 for the purchase of 463,513 shares of common stock with values ranging from $0.185 to $0.20 per share.
Management evaluated all of our activity through the issuance date of our financial statements and concluded that other than as disclosed above, no additional subsequent events have occurred that would require recognition in the financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, the industry in which we operate and other matters, as well as management's beliefs and assumptions and other statements regarding matters that are not historical facts. These statements include, in particular, statements about our plans, strategies and prospects. For example, when we use words such as "projects," "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "should," "would," "could," "will," "opportunity," "potential" or "may," and variations of such words or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Securities Exchange Act of 1934 (Exchange Act).
These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by us in those statements. The most important factors that could prevent us from achieving our stated goals include, but are not limited to, the following:
| (a) | volatility or decline of our stock price; |
| (b) | potential fluctuation in quarterly results; |
| (c) | our failure to earn revenues or profits; |
| (d) | inadequate capital to continue or expand our business, inability to raise additional capital or financing to implement our business plans; |
| (e) | failure to commercialize our technology or to make sales; |
| (f) | reductions in demand for our products and services; |
| (g) | rapid and significant changes in markets; |
| (h) | litigation with or legal claims and allegations by outside parties; and |
| (i) | insufficient revenues to cover operating costs, resulting in persistent losses. |
There is no assurance that we will ever generate revenues or be profitable. We may not be able to successfully develop, manage or market our products and services. We may not be able to attract or retain qualified executives and other personnel. Intense competition may suppress the prices that we can charge for our products and services, hindering profitability or causing losses. We may not be able to obtain customers for our products or services. Government regulation may hinder our business. Additional dilution in outstanding stock ownership may be incurred due to the issuance of more shares, warrants and stock options, or the exercise of outstanding warrants and stock options. We are exposed to other risks inherent in our businesses.
Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. We caution you not to place undue reliance on the statements, which speak only as of the date of this unaudited Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q, or to reflect the occurrence of unanticipated events.
OVERVIEW
We were incorporated on December 19, 2001 under the name Catalyst Set Corporation and were dormant until July 14, 2007. On September 7, 2007, we changed our name to Interfacing Technologies, Inc. On March 24, 2008, we changed our name to Attune RTD.
We were formed in order to provide developed technology related to the operations of energy efficient electronic systems such as swimming pool pumps, sprinkler controllers and heating and air conditioning controllers among others.
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We are presented as in the development stage from July 14, 2007 (Inception of Development Stage) through June 30, 2010. To-date, our business activities during development stage have been corporate formation, raising capital and the development and patenting of our products with the hopes of entering the commercial marketplace in the near future.
Critical Accounting Policies
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited financial statements include the estimates of depreciable lives and valuation of property and equipment, allowances for losses on loans receivable, valuation of deferred patent and trademark costs, valuation of equity based instruments issued f or other than cash, valuation of officer's contributed services, and the valuation allowance on deferred tax assets.
Stock Based Compensation: Compensation expense associated with the granting of stock based awards to employees and directors and non-employees is recognized in accordance with generally accepted accounting principles (ASC 718-20) which requires companies to estimate and recognize the fair value of stock-based awards to employees and directors. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.
Results of Operations for the Three Months Ended June 30, 2010 Compared to the Three Months Ended June 30, 2009
Revenue. For both quarters ended June 30, 2010 and 2009, we did not generate revenues. We are in the development stage and for the first six months of 2010, have been involved in the rollout and testing of our first products into the Texas market.
Gross Profit. Since we have yet to record and or achieve any revenues, we do not have any costs associated with sales, therefore we have no gross profits to report.
Operating Expenses. Our total operating expenses were $391,750 for the three months ended June 30, 2010, compared to $128,733 for the same period in 2009, an increase of 204%. This increase was primarily caused by increased operating expenses related to our finalizing of our first product and beginning field testing. Of this increase, $140,000, was for stock based compensation incurred during the quarter and approximately $22,000 related to our marketing efforts. Professional fees (legal, accounting, consulting, public relations and audit fees) increased by approximately $49,000 or approximately 290% in the quarter. The other large increase was the result of an increase in the subcontracted services expense. This item increased by approximately $81,000 for the s ame quarter of the previous year. Employee-related costs decreased from $65,046 to $63,454 to 2.5%.
Provision for Income Taxes. Our income taxes for the three months ended June 30, 2010 were $800, compared to $0 for the same period in 2009. We did not incur any federal tax liability for the three months ended June 30, 2010, and 2009, because we incurred operating losses in these periods.
Net Earnings (loss). We generated net losses of approximately $392,600 for the three months ended June 30, 2010, compared to approximately $100,200 for the same period in 2009, representing an increase of 292%.
Results of Operations for the Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009
Revenue. For both six months ended June 30, 2010, and 2009, we did not generate revenues. We are in the development stage and for the first six months of 2010, we have been involved in the rollout and testing of our first product into the Texas market.
Gross Profit. Since we have yet to record and or achieve any revenues, we do not have any costs associated with sales, therefore there are no gross profits to report.
Operating Expenses. Our total operating expenses were $626,476 for the six months ended June 30, 2010, compared to $229,730 for the same period in 2009, an increase of approximately 173%. This increase was primarily caused by increased operating expenses related to finalizing our first product and commencement of field testing. Of this increase, $140,000 related solely to stock based compensation, approximately $132,000 related to professional fees (legal, accounting, consulting, marketing, public relations and audit fees) the filing of our S-1 registration statement and the required audits and reviews necessary to comply with t he requirements of Regualation S-K and use of Form S-1. The other large increase was in subcontracted services expense. This item increased by approximately $153,000 from the quarter of the previous year. Employee-related costs decreased from $131,920 to $127,468 a decrease of 3.4%. Product Development costs for the six months ended June 30, 2010, decreased by approximately $32,000 from the same period in 2009.
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Provision for Income Taxes. Our income taxes for the six months ended June 30, 2010 were $800, compared to $0 for the same period in 2009. We did not incur any federal tax liability for the six months ended June 30, 2010 and 2009 because we incurred operating losses in these periods. The income tax relates solely to the minimum tax due to the State of California.
Net Earnings (Loss). We generated net losses of approximately $639,000 for the six months ended June 30, 2010 compared to approximately $201,000 for the same period in 2009, an increase of 218%.
Liquidity and Capital Resources
General. At June 30, 2010, we had cash of $42,648. We have historically met our cash needs through a combination of proceeds from private placements of our securities and from loans. Our cash requirements are generally for operating activities.
Our operating activities used cash in operations of approximately $252,000 for the six months ended June 30, 2010, and we used cash in operations of approximately $159,000 for the same period in 2009. The principal elements of cash flow from operations for the six months ended June 30, 2010, included a net loss of $639,347 offset by: depreciation expense of $1,766, stock-based expenses of $7,350, loss on debt conversions of $12,071, common stock granted for services of $182,000, amortization of stock based prepaid expense of $14,582 and an increased investment in operating working capital elements of approximately $170,000.
Cash used in investing activities during the six months ended June 30, 2010, was $18,907 compared to $2,370 during the same period in 2009.
Cash received in our financing activities was $206,765 for the six months ended June 30, 2010, compared to cash received of approximately $200,626 during the same period in 2009.
As of June 30, 2010, current liabilities exceeded current assets by 4.8 times or by $438,605. Current assets increased approximately 1% from $106,496 at December 31, 2009, to $115,566 at June 30, 2010, while current liabilities increased 43% to $554,171 at June 30, 2010, from $388,458 at December 31, 2009.
We do not have sufficient capital to meet our current cash needs, which include the costs of compliance with the continuing reporting requirements of the Securities Exchange Act of 1934, as amended. We intend to seek additional capital and long term debt financing to attempt to overcome our working capital deficit. We are currently conducting a private placement of our stock to raise capital, but there is no assurance that we can raise sufficient capital or obtain sufficient financing to enable us to sustain our monthly operations. In order to address our working capital deficit, we also intend to endeavor to (i) reduce operating costs, (ii) reduce general, administrative and selling costs, and (iii) increase sales of our existing products and services. There may not be sufficient funds available to us to enable us to remain in busine ss and our needs for additional financing are likely to persist.
Going Concern Qualification
We have incurred significant losses from operations, and such losses are expected to continue. Our auditors have included a "Going Concern Qualification" in their report for the year ended December 31, 2009. In addition, we have limited working capital. The foregoing raises substantial doubt about our ability to continue as a going concern. Management's plans include seeking additional capital or debt financing. There is no guarantee that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The "Going Concern Qualification" might make it substantially more difficult to raise capital.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Not applicable to smaller reporting companies.
| Item 4. | Controls and Procedures |
Not applicable to smaller reporting companies.
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| Item 4T. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, manage ment recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.
At the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2010, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.
We are undertaking to improve our internal control over financial reporting and improve our disclosure controls and procedures. As of December 31, 2009, we had identified the following material weaknesses which still exist as of June 30, 2010 and through the date of this report:
As of December 31, 2009 and as of the date of this report, we did not maintain effective controls over the control environment. Specifically, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.
Changes in Internal Control Over Financial Reporting
There were no changes in internal controls over financial reporting that occurred during the quarter ended June 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the six month period ended June 30, 2010, we issued 1,749,330 shares of our Class A common stock. 952,901 shares were issued for cash and the remainder was issued for debt conversions, services and gifts. In addition, in January 2010 the two officers redeemed 521,439 shares of their Class A common stock as settlement of their outstanding loans with us and in the second quarter the same officers redeemed 20,000 shares of their Class A common stock, which were then issued to a public relations firm.
Item 3. Defaults Upon Senior Securities
None.
Item 4. (Removed and Reserved)
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
(b) The following is a list of Current Reports on Form S-1 filed by us during and subsequent to the quarter for which this report is filed.
| Report on Form S-1 dated February 12, 2010, filed by us relating to the registration of securities. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Attune RTD | |||
| Dated: August 16, 2010 | By: | /s/ Shawn Davis | |
| Shawn Davis | |||
Chief Executive Officer, Director and (Principal Executive Officer) | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/Shawn Davis | Dated: August 16, 2010 |
| Shawn Davis, Chief Executive Officer, Director and (Principal Executive Officer) |
By: /s/Thomas Bianco | Dated: August 16, 2010 |
| Thomas Bianco, Treasurer, Director and (Principal Financial/Accounting Officer) |
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