SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ____
Commission File No. 333-163579
ATTUNE RTD
(Exact name of registrant as specified in its charter)
| Nevada | 32-0212241 |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
3700 E. Tachevah Dr., #B117
Palm Springs, California 92262
(Address of principal executive offices, zip code)
(760) 323-0233
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the issuer (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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer o Accelerated filero Non-accelerated filer o (Do not check if a smaller reporting company)Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act): Yes o No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 13, 2011, there were 43,838,521 shares of Class A common stock, $0.0166 par value per share, outstanding; and 1,000,000 shares of Class B preferred cumulative participating super voting stock, $0.0166 par value per share, outstanding.
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ATTUNE RTD
(A Development Stage Company)
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2011
INDEX
| Index | Page | |||
| Part I. | Financial Information | |||
| Item 1. | Financial Statements | |||
| Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010. | 4 | |||
| Statements of Operations for the three ended June 30, 2011 and 2010, and the period from July 14, 2007 (Inception) to June 30, 2011 (unaudited). | 5 | |||
| Statements of Cash Flows for the three months ended June 30, 2011 and 2010, and the period from July 14, 2007 (Inception) through June 30, 2011 (unaudited). | 6 | |||
| Notes to Financial Statements (unaudited). | 7 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 8 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 10 | ||
| Item 4T. | Controls and Procedures. | 11 | ||
| Part II. | Other Information | |||
| Item 1. | Legal Proceedings. | 11 | ||
| Item 1A. | Risk Factors | 11 | ||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 11 | ||
| Item 3. | Defaults Upon Senior Securities. | 11 | ||
| Item 4. | (Removed and Reserved). | 11 | ||
| Item 5. | Other Information. | 11 | ||
| Item 6. | Exhibits. | 11 | ||
| Signatures | 12 | |||
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Attune RTD, a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: our ability to generate meaningful revenues, whether our products will ever be sold on a mass market commercial basis, our ability to protect our intellectual property, the Company’s need for and ability to obtain additional financing, the exercise of the approximately 94.2% control the Company’s officers and directors collectively hold of the Company’s voting securities, other factors over which we have little or no control, and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).
Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
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ITEM 1. CONDENSED FINANCIAL STATEMENTS.
| TABLE OF CONTENTS | |
| Page | |
| Condensed Balance Sheets at June 30, 2011 (Unaudited) and December 31, 2010 | F-2 |
| Condensed Statements of Operations for the three and six months ended June 30, 2011 and 2010 and | |
| the period from July 14, 2007 (Inception of Development Stage) to June 30, 2010 (Unaudited) | F-3 |
| Condensed Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and | |
| the period from July 14, 2007 (Inception of Development Stage) to June 30, 2011 (Unaudited) | F-4 |
| Notes to Unaudited Condensed Financial Statements | F-5 |
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| Attune RTD | ||||||||
| (a development stage company) | ||||||||
| Condensed Balance Sheets | ||||||||
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 697,505 | $ | 35,495 | ||||
| Accounts Receivable | - | 28,422 | ||||||
| Prepaid Expenses | 5,571 | - | ||||||
| Total Current Assets | 703,076 | 63,917 | ||||||
| Property and Equipment, net | 122,063 | 13,446 | ||||||
| Other Assets | ||||||||
| Software License, net of amortization | 109,452 | - | ||||||
| Deferred Patent Costs | 40,861 | 41,121 | ||||||
| Capitalized Trademarks | 21,254 | 21,254 | ||||||
| Security Deposit | 1,800 | 1,800 | ||||||
| Total Other Assets | 173,367 | 64,175 | ||||||
| Total Assets | $ | 998,506 | $ | 141,537 | ||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 120,554 | $ | 160,073 | ||||
| Accrued Salaries | 126,907 | 242,636 | ||||||
| Accrued Expenses | 1,918 | 1,618 | ||||||
| Liability to Guarantee Equity Value | 118,980 | 118,980 | ||||||
| Capital lease obligation | 736 | 1,779 | ||||||
| Current Portion of Long Term Debt | 39,791 | - | ||||||
| Total Current Liabilities | 408,886 | 525,086 | ||||||
| Long Term Liabilities | ||||||||
| Long-term debt - less current portion | 172,696 | - | ||||||
| Total Liabilities | 581,582 | 525,086 | ||||||
| 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, 2011 and December 31, 2010, respectively | ||||||||
| Class A Common Stock, $0.0166 par value; 59,000,000 shares authorized; | 522,589 | 406,770 | ||||||
| 31,517,271 and 24,519,509 shares issued and outstanding at | ||||||||
| June 30, 2011 and December 31, 2010, respectively | ||||||||
| Additional Paid-in Capital | 3,130,192 | 1,740,210 | ||||||
| Deficit accumulated during development stage | (3,252,457 | ) | (2,547,129 | ) | ||||
| Total Stockholders' Equity (Deficit) | 416,924 | (383,549 | ) | |||||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 998,506 | $ | 141,537 | ||||
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| (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, 2011 | June 30, 2010 | June 30, 2011 | June 30, 2010 | to June 30, 2011 | ||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
| Revenues | $ | - | $ | - | $ | 13,715 | $ | - | $ | 38,140 | ||||||||||
| Operating Expenses | ||||||||||||||||||||
| Advertising and Promotions | 609 | 6,000 | 609 | 11,700 | 94,169 | |||||||||||||||
| Contributed Services | 0 | - | - | - | 111,781 | |||||||||||||||
| Depreciation Expense | 4,689 | 883 | 5,572 | 1,766 | 13,668 | |||||||||||||||
| Legal Expense | 8,240 | 5,741 | 20,197 | 29,741 | 79,659 | |||||||||||||||
| Marketing Expense | 9,000 | 29,471 | 10,473 | 46,337 | 167,000 | |||||||||||||||
| Payroll Expense | 106,289 | 63,454 | 175,914 | 127,468 | 874,921 | |||||||||||||||
| Product Development | 59,250 | 5,070 | 89,630 | 5,070 | 239,662 | |||||||||||||||
| Professional Fees | 9,929 | 8,480 | 29,514 | 37,681 | 241,760 | |||||||||||||||
| Rent Expense | 4,200 | 5,349 | 8,400 | 10,751 | 61,281 | |||||||||||||||
| Research and Development | - | - | - | - | 15,682 | |||||||||||||||
| Subcontracted Services | - | - | 153,199 | |||||||||||||||||
| - | ||||||||||||||||||||
| Other Operating Expenses | 325,958 | 267,301 | 374,876 | 355,962 | 1,148,740 | |||||||||||||||
| Total Operating Expenses | 528,164 | 391,750 | 715,186 | 626,476 | 3,201,522 | |||||||||||||||
| Loss from Operations | (528,164 | ) | (391,750 | ) | (701,471 | ) | (626,476 | ) | (3,163,382 | ) | ||||||||||
| Other income (expense) | ||||||||||||||||||||
| Income Tax | - | (800 | ) | (1,966 | ) | (800.00 | ) | (2,816 | ) | |||||||||||
| Gain on asset theft, net | - | - | - | - | 29,125 | |||||||||||||||
| Interest Expense | (1,394 | ) | - | (1,891 | ) | - | (3,958 | ) | ||||||||||||
| Interest Income | - | - | - | - | 15,826 | |||||||||||||||
| (Loss) Gain on Debt conversion, net | - | - | - | (12,071 | ) | (127,252 | ) | |||||||||||||
| Total Other income (expense) | (1,394 | ) | (800 | ) | (3,857 | ) | (12,871 | ) | (89,075 | ) | ||||||||||
| Net Loss | (529,558 | ) | (392,550 | ) | (705,328 | ) | (639,347 | ) | (3,252,457 | ) | ||||||||||
| Preferred stock dividends | (5,049 | ) | (5,049 | ) | (10,042 | ) | (10,042 | ) | (80,279 | ) | ||||||||||
| Net loss applicable to common stock | $ | (534,607 | ) | $ | (397,599 | ) | $ | (715,370 | ) | $ | (649,389 | ) | $ | (3,332,736 | ) | |||||
| Net loss per common share applicable to common stock: | ||||||||||||||||||||
| Basic and diluted | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.03 | ) | ||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||||||
| Basic and diluted | 29,436,309 | 22,120,698 | 27,144,409 | 21,800,732 | ||||||||||||||||
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| (a development stage company) | ||||||||||||
| Condensed Statements of Cash Flows | ||||||||||||
| (Unaudited) | ||||||||||||
| Six Months Ended | Period from July 14, 2007 | |||||||||||
| June 30, | (Inception of Development Stage) | |||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | 2011 | 2010 | to June 30, 2011 | |||||||||
| Net Loss | $ | (705,328 | ) | (639,347 | ) | $ | (3,252,457 | ) | ||||
| Adjustments to Reconcile Net loss to Net Cash Used in Operating Activities: | ||||||||||||
| Class A Common stock and preferred stock granted for services | 220,050 | 182,000 | 907,565 | |||||||||
| Contributed Capital | - | - | 111,781 | |||||||||
| Depreciation and Amortization | 13,650 | 1,766 | 22,004 | |||||||||
| Amortization of Debt Discount | 1,693 | - | 1,693 | |||||||||
| Interest expense on conversion to Class A common stock | - | - | 447 | |||||||||
| Loss (Gain) on conversions of debt to Class A common stock, net | - | 12,071 | 147,252 | |||||||||
| Gain on asset theft, net | - | - | (29,125 | ) | ||||||||
| Changes in Assets and Liabilities: | ||||||||||||
| Accounts Receivable | 28,422 | - | - | |||||||||
| Prepaid Expenses | (5,571 | ) | (5,571 | ) | ||||||||
| Security Deposit | - | - | (1,800 | ) | ||||||||
| Accounts Payable | (39,518 | ) | 158,502 | 231,923 | ||||||||
| Accrued Expenses | - | 3,055 | 1,721 | |||||||||
| Accrued Salaries | (115,429 | ) | 30,247 | 127,058 | ||||||||
| Liability to Guarantee Value | - | 35,000 | ||||||||||
| NET CASH USED IN OPERATING ACTIVITIES | (602,031 | ) | (251,706 | ) | (1,702,509 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Cash Deposit Paid for Truck Purchase | (11,500 | ) | - | (27,820 | ) | |||||||
| Deferred Patent costs | - | - | (41,378 | ) | ||||||||
| Loans receivable from Officers | - | - | (175,825 | ) | ||||||||
| Trademark Costs | - | (18,907 | ) | (21,254 | ) | |||||||
| Insurance proceeds on asset theft | - | - | 30,961 | |||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (11,500 | ) | (18,907 | ) | (235,316 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Sale of Class A - Common Stock | 1,290,750 | 207,699 | 2,566,616 | |||||||||
| Offering costs related to the Sale of Class A - Common Stock | - | - | (11,000 | ) | ||||||||
| Sale of Class B - Preferred Stock | - | - | 45,000 | |||||||||
| Proceeds from Line of Credit | - | 12 | - | |||||||||
| Principal Payments on Capital Lease Obligations | (1,042 | ) | (946 | ) | (6,320 | ) | ||||||
| Loan Payable to Principal Stockholder | - | - | 60,000 | |||||||||
| Repayment of Loan Payable to Principal Stockholder | - | - | (4,800 | ) | ||||||||
| Redemption of Common Stock for Value | (5,000 | ) | (5,000 | ) | ||||||||
| Principal Payments on Software Financing | (9,166 | ) | (9,166 | ) | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,275,542 | 206,765 | 2,635,330 | |||||||||
| NET INCREASE (DECREASE) IN CASH | 662,010 | (63,848 | ) | 697,505 | ||||||||
| CASH AT BEGINNING OF PERIOD | 35,495 | 106,496 | - | |||||||||
| CASH AT END OF PERIOD | $ | 697,505 | 42,648 | $ | 697,505 | |||||||
| 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 | $ | 35,000 | ||||||
| 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 | ||||||
| Financing of Software costs | $ | 117,270 | $ | - | $ | 117,270 | ||||||
| Financing of Truck Purchase | $ | 114,190 | $ | - | $ | 114,190 | ||||||
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ATTUNE RTD
(A Development Stage Company)
June 30, 2011
(Unaudited)
| 1. | NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The Company was incorporated on December 19, 2001 under the name Catalyst Set Corporation and was dormant until July 14, 2007. On September 7, 2007, the Company changed its name to Interfacing Technologies, Inc. On March 24, 2008, the name was changed to Attune RTD.
Attune RTD (“The Company”, “us”, ”we”, ”our”) was 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.
The Company is presented as in the development stage from July 14, 2007 (Inception of Development Stage) through June 30, 2011. To-date, the Company’s business activities during development stage have been corporate formation, raising capital and the development and patenting of its products with the hopes of entering the commercial marketplace in the near future.
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 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 financial statements include the estimates of depreciable lives and valuation of property and equipment, allowances for losses on loans receivable, valuation of deferred patent costs, valuation of equity based instruments issued for other than cash, valuation of officer’s contributed services, and the valuation allowance on deferred tax assets.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Company considers 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, 2011 and December 31, 2010.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the related assets of five years. Expenditures for additions and improvements are capitalized while maintenance and repairs are expensed as incurred.
REVENUE RECOGNITION
We recognize revenue when the following criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed or determinable, no significant company obligations remain, and collection of the related receivable is reasonably assured.
The company recognizes revenue in the same period in which they are incurred from its business activities when goods are transferred or services rendered. The company’s revenue generating process consists of the sale of its proprietary technology or the rendering of professional services consisting of consultation and engineering relating types of activity within the industry. The company’s current billing process consists of generating invoices for the sale of its merchandise or the rendering of professional services. Typically, invoices are accepted by vendor and payment is made against the invoice within 60 days upon receipt.
Revenues for the six months ending June 30, 2011 were concentrated solely from one customer.
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DEFERRED PATENT COSTS AND TRADEMARK
Patent costs are stated at cost (inclusive of perfection costs) 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”). The Company will write-off any currently capitalized costs for patents not granted by the USPTO. Currently, the Company has four patents pending with the USPTO.
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. As of June 30, 2011, there was no impairment of the Trademark.
SOFTWARE LICENSE
Software license fee are capitalized and amortized with a useful life of 5 years and are included in Other Assets on the balance sheet in accordance with ASC 350.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (ASC 360-10). This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
RESEARCH AND DEVELOPMENT
In accordance generally accepted accounting principles (ASC 730-10), expenditures for research and development of the Company’s products are expensed when incurred, and are included in operating expenses.
ADVERTISING
The Company conducts advertising for the promotion of its products and services. In accordance with generally accepted accounting principles (ASC 720-35), advertising costs are charged to operations when incurred; such amounts aggregated $609 and $6,900 for the six months ended June 30, 2011 and 2010, 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 the Company’s financial instruments, including cash, loans receivable and current liabilities, approximate fair value because of their short maturities. Based upon the Company’s estimate of its 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. The Company adopted the provisions of SFAS 157 (ASC 820) on January 1, 2008.
The Company values it non-employee equity based payments utilizing marked to market, under ASC 505-50.
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BASIC AND DILUTED NET LOSS PER COMMON SHARE
Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potentially dilutive securities consist of the incremental common shares issuable upon exercise of common stock equivalents such as stock options and convertible debt instruments. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. As a result; the basic and diluted per share amounts for all periods presented are identical.
NEW ACCOUNTING PRONOUNCEMENTS
In May 2009, the Financial Accounting Standards Board (“FASB”) issued an accounting standard that became part of ASC Topic 855, “Subsequent Events”. ASC Topic 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC Topic 855 sets forth (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC Topic 855 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of ASC Topic 855 did not have a material effect on the Company’s financial statements.
In June 2009, the FASB issued an accounting standard whereby the FASB Accounting Standards Codification (“Codification”) will be the single source of authoritative non-governmental United States of America generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. ASC Topic 105 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in ASC Topic 105. All other accounting literature not included in the Codification is non-authoritative. The Codification has not had a significant impact on the Company’s financial statements.
In December 2010, the FASB Accounting Standards Update 2010-29 Business Combinations Topic 805, which requires a public entity to disclose pro forma information for business combinations that occurred in the current
reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. Effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption did not have an impact on the Company’s financial position and results of operations.
In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company.
In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), “Consolidation (Topic 810): Amendments for Certain Investment Funds.” The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted. The Company’s adoption of provisions of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows.
In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position and results of operations.
In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.
In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.
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In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or
may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard will become effective on January 1, 2011.
In October 2009, FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.
| 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 continuation of the Company as a going concern. For the six months ended June 30, 2011, the Company had a net loss of $705,328; net cash used in operations of $602,031and was a development stage company with limited revenues. In addition, as of June 30, 2011, the Company had a deficit accumulated during the development stage of $3,252,457.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These 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 its business plan, the Company will need to raise additional working capital and generate revenues. There can be no assurance that the Company will be able to obtain the necessary working capital or generate revenues to execute its 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 the Company’s common stock.
Management believes its business development and capital raising activities will provide the Company with the ability to continue as a going concern.
| 3. | INTANGIBLES |
| Intangibles consist of patents, trademarks and a software license as follows: |
Est. Useful Lives | June 30, 2011 | December 31, 2010 | |||||||
| Patent Costs | 20 Years | $ | 41,378 | $ | 41,378 | ||||
| Trademark | Indefinite | 21,254 | 21,254 | ||||||
| Software License | 5 Years | 117,270 | 0 | ||||||
| 179,902 | 62,632 | ||||||||
| Less total Accumulated amortization | (8,335 | ) | (257 | ) | |||||
| $ | 171,567 | $ | 41,378 | ||||||
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Total amortization expense relating to the Company’s patents and software license was $8,077 and $257 for the six months ended June 30, 2011 and the year ended December 31, 2010 respectively.
See Note 4 Software License for additional terms related to the software license.
4. SOFTWARE LICENSE
The terms and conditions of the license arrangement that we have in place with our vendor for software is based on a sixty month buyout agreement for a Perpetual License payable in equal consecutive monthly installments in the amount of $5,650. The monthly payment includes interest, a one-time software license fee of $142,669 and associated maintenance fees, “the rider”. This agreement grants Attune the non exclusive, non transferable right to use the specified software in object code form only on its designated servers. The Rider and the installments may not be canceled. If installments are not made when due, and the default continues for 30 days after notice, the remaining unpaid balance of the One-Time License Fee shall be immediately due and payable. The company may prepay the balance of remaining installments at any time, with an appropriate credit, as determined by IBI, for the future portion of the interest. Maintenance will be provided for the balance of the designated period. Vendor may transfer and assign the Licensee’s payment obligation hereunder. The “Buyout Fee” is subject to adjustment in the event of upgrades.
A portion of the payments as relating to the one time license fee are capitalized and included in Other Assets on the balance sheet in accordance with ASC 350, whereas the amount due over the course of the license agreement for this onetime fee is included as long term debt on the balance sheet (net of discount and current portion). The portion of the monthly installments as relating to maintenance fees are expensed as incurred.
5. LONG TERM DEBT
Long Term Debt consists of the flowing:
| June 30, 2011 | December 31, 2010 | |||||||
| Note payable related to software license, with monthly payments of $5,650 including interest | $ | 111,145 | $ | - | ||||
| Note Payable related to the purchase of 2 Company trucks, bearing interest at 1.9%, payable in monthly installments of $755.11 each | 101,342 | - | ||||||
| Total | 212,487 | - | ||||||
| Less Current Portion | 39,791 | - | ||||||
| Total Long Term Debt | $ | 172,696 | $ | - | ||||
6. COMMON STOCK
Upon formation, the Company was authorized to issue 50,000 shares of common stock with no par value. On September 7, 2007, the Company amended its articles of incorporation to increase the number of authorized common shares to 1,000,000. On September 7, 2007, the Company enacted a 280 for 1 forward stock split pursuant to an Amended and Restated Articles of Incorporation filed with the Secretary of State of the State of Nevada. All share and per share data in the accompanying financial statements has been retroactively adjusted to reflect the stock split. On November 28, 2007, the Company again amended its articles of incorporation to establish 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. Each share of Class B preferred stock entitles the holder to one hundred votes, either in person or by proxy, at meetings of shareholders. The holders are permitted to vote their shares cumulatively as one class with the common stock. The Class B Participating Cumulative Preferred Super-voting Stock pays dividends at 6%. For the years ended December 31, 2010, 2009, 2008, and 2007, the board of directors did not declare any dividends. Total undeclared Class B Participating Cumulative Preferred Super-voting Stock dividends as of March 31, 2011 were $75,230
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Class A Common Stock
Issuances of the Company’s common stock during the years ended December 31, 2007, 2008, 2009, 2010 and the six months ended June 30, 2011 included the following:
Shares Issued for Cash
During 2007, 224,000 shares of Class A common stock were issued for $36,000 cash with various prices per share ranging from $0.15 to $0.25. Additionally, the Company paid cash offering costs of $2,500.
During 2008, 2,352,803 shares of Class A common stock were issued for $360,250 cash with various prices per share ranging from $0.13 to $0.25. Additionally, the Company paid cash offering costs of $1,500.
In 2009, 3,688,438 shares of Class A common stock were issued for $437,435 cash with various prices per share ranging from $0.04 to $0.35. Additionally, the company paid cash offering costs of $7,000.
In 2010, 2,138,610 shares of Class A common stock were issued for $442,181 cash with various prices per share ranging from $.18 to $.35.
In 2011, 939,000 shares of Class A common stock were issued for $233,250 cash with various prices per share ranging from $0.20 per share to $0.35 per share, during the three months ended March 31, 2011.
In 2011, 5,273,750 shares of Class A common stock were issued for 1,057,500 cash with various prices per share ranging from $0.20 per share to $0.25 per share, during the three months ended June 30, 2011.
Shares Issued for Services
In 2007, 14,000,000 vested shares of Class A common stock were issued to founders having a fair value of $232,400, based on a nominal value of $0.0166 per share. The $232,400 was expensed upon issuance as the shares were fully vested.
In 2007, 50,000 shares of Class A common stock were issued for legal services provided to the company with a value of $7,500 or $0.15 per share, based on a contemporaneous cash sales price.
In 2008, 169,000 shares of Class A common stock were issued for services having a fair value of $34,530 ranging from $0.13 to $0.25 per share, based on contemporaneous cash sales prices.
In March 2009, 8,000 shares of Class A common stock were issued for services provided to the Company with a value of $2,400 or $0.07 per share, based on a contemporaneous cash sales price.
In June 2009, 17,333 shares of Class A common stock were issued for services provided to the Company with a value of $2,600 or $0.15 per share, based on a contemporaneous cash sales price.
In August 2009, 41,000 shares of Class A common stock were issued for services provided to the Company with a value of $6,150 or $0.15 per share, based on a contemporaneous cash sales price.
In February 2009, 500,000 shares of contingently issuable Class A common stock were granted to a consultant pursuant to an agreement whereby the consultant must establish a contract with a specific distributor and produce a sale of the Company’s product through such distribution channel in order to earn the shares. As of the date of this filing, no sales have occurred under the contract and the shares have not been earned and are not considered issued or outstanding for accounting purposes. The shares will be valued at fair value and such value recognized as expense on the date the contingency is satisfied
In January 2010, 21,000 shares of Class A common stock were issued for services provided to the Company with a value of $5,250 or $0.25 per share, based on a contemporaneous cash sales price.
In June 2010, 750,000 shares of Class A common stock were issued for services provided to the Company with a value of $270,200 at values ranging from $0.20 to $0.50 per share, based on contemporaneous cash sales prices.
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In July 2010, 250,000 shares of Class A common stock were issued for services provided to the Company with a value of 37,500 or $0.15 per share, based on a contemporaneous cash sales price.
In December 2010, 55,000 shares of Class A common stock were issued to 2 vendors for services with a value of $28,050, based on based on a contemporaneous cash sales price.
In 2011, the Company redeemed 29,988 shares from one of its vendors with a share price of $0.167, for a total value of $5,000.
In June 2011, the Company issued 815,000 shares of Class A common stock were issued for services provided to the Company with a value of $220,050 at a value of $.27 per share based on contemporaneous cash sales prices.
Shares Issued in Conversion of Other Liabilities
During 2008, 100,000 shares of Class A common stock were issued upon conversion of a $35,000 liability to a vendor. The shares were valued at $0.15 per share or $15,000, based on a contemporaneous cash sales price and the Company recorded a $20,000 gain on conversion of debt.
In July 2009, 139,944 shares of Class A common stock were issued upon conversion of a $48,980 liability from a vendor. The shares were valued at $16,793 or $0.12, based on a contemporaneous cash sales price. The Company 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 ($48,980) and the above mentioned 2008 conversion as it was the same vendor ($35,000) and any difference in value, if less than the liability, would be paid in cash by the Company. As a result, the Company recorded the $48,980 conversion as a liability along with the prior year conversion of $35,000 for a total liability of $83,980 as of December 31, 2009 which resulted in a loss on conversion in 2009 of $35,000. These shares were reflected as issued in 2010; however, the liability was recorded in 2009 based on this guarantee.
In August 2009, the Company converted $55,200 of loans due to a shareholder into 788,571 shares of common stock, which were valued at $118,286 or $0.15 per share, based on contemporaneous cash sales prices of the Company’s common stock. The Company recognized a loss on conversion of $62,637 and charged $449 to interest expense.
During 2010, 247,249 shares of Class A common stock were issued upon conversion of $39,272 of vendor liabilities. The shares were valued from $0.10 to $.36 per share, based on a contemporaneous cash sales price and the Company recorded a $49,615 loss on conversion of debt.
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 we 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 vendor. 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 totaled $118,890 based on this guarantee and the 2009 amounts as of December 31, 2010. No shares have been sold by the vendor through May 3, 2011.
In 2010 the Company issued 900,000 warrants to several investors in the Company. These warrants are attached to issuances of common stock. As of May 6 2011, none of the warrants has been exercised and there are 900,000 potentially dilutive securities outstanding.
Warrant Activity for the six months ended June 30, 2011 is as follows:
| Date of Issuance | Warrant Shares | Exercise Price | Value if Exercised | Expiration Date |
| April 15, 2010 | 900,000 | $.040 | $360,000 | April 15, 2013 |
The warrants were valued using the Black Scholes model using the following assumptions: stock price at valuation, $0.35; strike price, $0.40; risk free rate 1.56%; 3 year term; and volatility of 225.63% resulting in a relative fair value of $298,323 relating to these warrants.
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 Shares; (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 June30, 2011, 800,000 shares were approved under this plan for issuance by the Board of Directors. 200,000 shares each were approved for issuance to Shawn Davis, Thomas Bianco, Paul Davis and Raymond Tai.
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Class B Participating Cumulative Preferred Super-voting Stock
Issuances of the Company’s preferred stock during the years ended December 31, 2007, 2008 and 2009 included the following:
Shares Issued for Cash
In 2007, 133,333 shares of Class B preferred stock were issued for $45,000 cash or $0.3375 per share.
Shares Issued for Services
In 2007, 866,667 shares of Class B preferred stock were issued to founders for services rendered during 2007 with a value of $0.3375 per share based on the above contemporaneous sale of Class B preferred stock.
| 7. | COMMITMENTS AND CONTINGIENCIES |
| Employment Agreements |
Effective March 26, 2008, the Company entered into two employment agreements with its Chief Executive Officer and Chief Financial Officer. These agreements established a yearly salary for each of $120,000. As of June 30, 2011 and December 31, 2010, the Company owed its officers $126,907 and $242,636, respectively, based on the terms of the agreement.
Stock Issuance Commitment
The Company entered into an agreement with one of its vendors, whereby the vendor will provide source code applications to the Company. Upon successful completion of the development of the source code the vendor will be entitled to receive 50,000 shares of Class A common stock with a share price of $0.51 per share.
Operating Leases
The Company currently leases office space under a long-term operating lease agreement expiring on September 30, 2010. Within sixty days of expiration, the Company has 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, 2011, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
In March of 2010, Attune RTD engaged the services of a vendor to complete work described in the Scope of Services portion of a March 2010 agreement. Pursuant to the Agreement, the company paid the vendor a total of $70,618 towards the completion of services. The agreement contained a “not to exceed cost” of $89,435. On or about September 21, 2010 the company issued vendor 250,000 shares of Restricted Class A Common Stock as an incentive for vendor to deliver services not later than March 1, 2011. Vendor agreed to incrementally deliver work in process. No work in process was received from vendor. Vendor requested the company pay an additional $18,817.50. On or about October 4, 2010, vendor repudiated the agreement. On February 23, 2011 The Company engaged the services of legal counsel and made written demand for the return of the stock certificate and attempted to initiate settlement negotiations. Vendor did not acknowledge receipt of letter.
As of this date, the company is currently contemplating litigation with counsel to cancel the stock certificate. Attune's alleged damages resulting from vendors failure to perform and subsequent repudiation of the contract, including the companies lost opportunity costs, should it pursue litigation against vendor will need to be established by an economic expert. Vendor could conceivably pursue litigation against the company for the $18,818, however the Company believes this is not probable and therefore a contingent liability is not warranted.
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| 8. | RELATED PARTY TRANSACTIONS |
As of June 30, 2011 and December 31, 2010, the Company owed its officers $126,907 and $242,636, respectively, based on the terms of their employment agreements.
In June 2011, the Company issued 815,000 shares of its Class A common stock to four of the company’s executive officers (200,000 shares each), and 15,000 shares to the Company’s accountant in exchange for services provided.
9. SUBSEQUENT EVENTS
On July 29, 2011, the Company entered into an agreement with a prior vendor to reduce the liability it had to guarantee the value of the equity. Under the terms of the new agreement the vendor agreed to write off the entire liability in exchange for $10,000 which will be paid out in monthly installments until the $10,000 is paid in full.
On April 4, 2011, The Company sold 15,000 shares of class A common stock to one investor at $0.20 per share for gross proceeds of $3,750.
On or about July 21, 2011 the Chief Financial Officer and the Chief Executive Officer met with TXU Energy Retail Company, LLC executive management to discuss the ongoing pilot program throughout the state of Texas and the existing Professional Services Agreement executed on July 15, 2010. Under the terms of the agreement, the contract expired on Jan 2011, but company and vendor have verbally agreed to extend the term of the existing agreement to continue field testing to date. Management expects to meet again with vendor at the end of August to discuss the future of the relationship and the latent opportunity of migrating from the current pilot program to a larger beta field test to include an additional 1,500-2,000 residential homes in the service area.
Management evaluated all activity of the Company through August 13, 2011 (the issuance date of the Company’s financial statements) and concluded that no 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.
Results of Operations for the Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010
Revenue. For both quarters ended June 30, 2011 and 2010, the company has not had any revenues. The Company is in the development stage and has limited revenues, as the Company has been involved in the rollout and testing of its first products into the Texas market.
Gross Profit. Since the company has yet to record and or achieve any significant revenues, it does not have any costs associated with sales, therefore there are no gross profits to report.
Operating Expenses. Total operating expense was $528,164 for the three months ended June 30, 2011, compared to $391, 749 for the same period in 2010 an increase of approximately 35%. This increase was primarily caused by increased operating expenses related to the Company moving towards finalizing the first of its products and moving into field testing. Of this increase, $220,050 was for stock based compensation incurred in the quarter and approximately $48,446 related to the company’s product development efforts. Marketing expense in the quarter ended June 30, 2011 decreased by approximately $20,000 from the quarter ended June 30, 2010.
Provision for Income Taxes. Our income taxes for the three months ended June 30, 2011 were $0, compared to $800 for the same period in 2010. We did not incur any federal tax liability for the three months ended June 30, 2011 and 2010 because we incurred operating losses in these periods.
Net Earnings. We generated net losses of approximately $529,558 for the three months ended June 30, 2011 compared to approximately $392,500 for the same period in 2010, an increase of 35%.
Results of Operations for the Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010
Revenue. For both six months ended June 30, 2011 and 2010, the company has had limited revenues. The Company is in the development stage and for the first six months of 2011 had revenues of $13,715 from one customer, while for the same period in 2010 has been involved in the rollout and testing of its first products into the Texas market, and had no revenues.
Gross Profit. Since the company has yet to record any significant revenues, it does not have any costs associated with sales, therefore there are no gross profits to report.
Operating Expenses. Total operating expense was $715,186 for the six months ended June 30, 2011, compared to $626,746 for the same period in 2010, an increase of approximately 14%. This increase was primarily caused by increased operating expenses related to the Company moving towards finalizing the first of its products and moving into field testing. Of this increase, $220,050 is related solely to stock based compensation, approximately $48,446 related to product development costs. Employee-related costs increased from $127,468 to $175,914 an increase of 38%.
Provision for Income Taxes. Our income taxes for the six months ended June 30, 2011 were $1,966, compared to $800 for the same period in 2010. We did not incur any federal tax liability for the six months ended June 30, 2011 and 2010 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 $705,328 for the six months ended June 30, 2011 compared to approximately $639, 347 for the same period in 2010, an increase of 10%.
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Liquidity and Capital Resources
General. At June 30, 2011, we had cash of $697,505. 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 $602,031 for the six months ended June 30, 2011, and we used cash in operations of approximately $251,700 for the same period in 2010. The principal elements of cash flow from operations for the six months ended June 30, 2011 included a net loss of $705,328 offset by; depreciation and amortization expense of $13,650, and stock-based expenses of $220,050.
Cash used in investing activities during the six months ended June 30, 2011 was $11,500 compared to $18,907 during the same period in 2010.
Cash received in our financing activities was $1,275,542 for the six months ended June 30, 2011, compared to cash received of approximately $206,765 during the same period in 2010.
As of June 30, 2011, current assets exceeded current liabilities by .71 times or $294,190, compared to June 30 2010, where current liabilities exceeded current assets by 4.8 times or by $461,169. Current assets increased approximately 1000% from $63,917 at December 31, 2010 to $703,076 at June 30, 2011 while current liabilities decreased 22% to $408,886 at June 30, 2011 from $525,086 at December 31, 2010. As a result, our working capital deficit decreased from $461,169 at December 31, 2010 to a surplus of $294,190 at June 30, 2011.
Currently, the Company has sufficient capital to meet its current cash needs. The Company will continue to seek additional capital and long term debt financing to attempt to provide working capital to meets its operating requirements. The Company is currently making a private placement of its stock to raise capital, but there is no assurance that the Company can raise sufficient capital or obtain sufficient financing to enable it to sustain monthly operations.
Going Concern Qualification
The Company has incurred significant losses from operations, and such losses are expected to continue. The Company’s auditors have included a "Going Concern Qualification" in their report for the year ended December 31, 2010. In addition, the Company has limited working capital. The foregoing raises substantial doubt about the Company's 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 the Company. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of June 30, 2011.
There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not currently subject to any legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Not applicable.
None.
ITEM 6. EXHIBITS.
(a) Exhibits required by Item 601 of Regulation SK.
| Number | Description | |
| 3.1 | Articles of Incorporation* | |
| 3.2 | Bylaws* | |
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
*Filed with and incorporated by reference to the Company’s Registration Statement on Form S-1, as amended (File No. 333-163570), as filed with the Securities and Exchange Commission on December 8, 2009.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ATTUNE RTD | |||
| (Name of Registrant) | |||
| Date: ______________, 2011 | By: | /s/ Shawn Davis | |
| Name: Shawn Davis | |||
| Title: Chairman and Chief Executive Officer | |||
EXHIBIT INDEX
| Number | Description | |
| 3.1 | Articles of Incorporation* | |
| 3.2 | Bylaws* | |
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
*Filed with and incorporated by reference to the Company’s Registration Statement on Form S-1, as amended (File No. 333-163570), as filed with the Securities and Exchange Commission on December 8, 2009.