UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2015
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 Number 000- 53337
FLIKMEDIA INC.
(Exact name of registrant as specified in its charter)
| Nevada | 27-1139744 | |
| (State or Other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification No.) |
905 Pacific Avenue, Venice, CA 90291
(Address of Principal Executive Offices including zip code)
(877) 522-2636
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 [ ]
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 [ ] No [X]
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
| Large Accelerated Filer [ ] | Accelerated Filer [ ] | Non-Accelerated Filer [ ] | Smaller reporting company [X] |
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes [ ] No [X]
As of May 18, 2015, 45,554,498 shares of the issuer’s common stock, par value $0.001, were outstanding.
TABLE OF CONTENTS
| 2 |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FLIKMEDIA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2015 | December 31, 2014 | |||||||
| (Unaudited) | (Restated) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 7,776 | $ | 113,176 | ||||
| Prepaid expenses | 45,000 | 60,000 | ||||||
| TOTAL CURRENT ASSETS | 52,776 | 173,176 | ||||||
| NON-CURRENT ASSETS | ||||||||
| Intangible assets, net | 23,716 | 30,133 | ||||||
| Property and equipment, net | 8,755 | 9,369 | ||||||
| Goodwill | 117,224 | 117,224 | ||||||
| TOTAL NON-CURRENT ASSETS | 149,695 | 156,726 | ||||||
| TOTAL ASSETS | $ | 202,471 | $ | 329,902 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 186,801 | $ | 147,711 | ||||
| Accounts payable to related parties | 171,746 | 129,730 | ||||||
| TOTAL CURRENT LIABILITIES | 358,547 | 277,441 | ||||||
| NON-CURRENT LIABILITIES | ||||||||
| Convertible notes, net of discount and beneficial conversion | 91,548 | 9,501 | ||||||
| TOTAL NON-CURRENT LIABILITIES | 91,548 | 9,501 | ||||||
| TOTAL LIABILITIES | 450,095 | 286,942 | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value, 75,000,000 shares authorized, 45,554,498 shares issued and outstanding | 45,554 | 45,554 | ||||||
| Common stock to be issued | 10,500 | 4,200 | ||||||
| Additional paid-in capital | 2,842,491 | 1,403,491 | ||||||
| Accumulated deficit | (3,146,169 | ) | (1,410,285 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | (247,624 | ) | 42,960 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 202,471 | $ | 329,902 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| F-1 |
FLIKMEDIA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED)
| Three months ended | ||||||||
| March 31, 2015 | March 31, 2014 | |||||||
| Operating Expenses | ||||||||
| Research and development | 76,651 | 63,213 | ||||||
| Depreciation and amortization | 7,031 | - | ||||||
| Professional fees | 86,887 | 13,041 | ||||||
| General and administration | 1,533,371 | 15,213 | ||||||
| Total operating expenses | 1,703,940 | 91,467 | ||||||
| Loss from operations | (1,703,940 | ) | (91,467 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense | (31,944 | ) | - | |||||
| Total Other Expense | (31,944 | ) | - | |||||
| Loss before provision for income taxes | (1,735,844 | ) | (91,467 | ) | ||||
| Provision for income taxes | - | - | ||||||
| Net loss | $ | (1,735,844 | ) | $ | (91,467 | ) | ||
| Net loss per share | ||||||||
| Basic | $ | (0.038 | ) | $ | (0.003 | ) | ||
| Diluted | $ | (0.038 | ) | $ | (0.003 | ) | ||
| Weighted average number of shares used in computing basic and diluted net loss per share: | ||||||||
| Basic | 45,554,498 | 32,291,287 | ||||||
| Diluted | 45,554,498 | 32,291,287 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| F-2 |
FLIKMEDIA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED)
| March 31, 2015 | March 31, 2014 | |||||||
| Net loss | $ | (1,735,884 | ) | $ | (91,465 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 7,031 | - | ||||||
| Stock based compensation | 1,381,300 | - | ||||||
| Interest on discount of convertible debt | 21,047 | - | ||||||
| (Increase) decrease in current assets: | ||||||||
| Prepaid expenses | 15,000 | - | ||||||
| Increase (decrease) in current liabilities: | ||||||||
| Accounts payable and accrued expenses | 81,106 | 91,347 | ||||||
| Net cash used in operating activities | (230,400 | ) | (118 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Net cash provided by investing activities | - | - | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Convertible notes | 125,000 | - | ||||||
| Net cash provided by financing activities | 125,000 | - | ||||||
| Net decrease in cash and cash equivalents | (105,400 | ) | (118 | ) | ||||
| Cash and cash equivalents at the beginning of the period | 113,176 | 205 | ||||||
| Cash and cash equivalents at the end of the period | $ | 7,776 | $ | 87 | ||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash paid during the year for: | ||||||||
| Income tax payments | $ | - | $ | - | ||||
| Interest payments | $ | - | $ | - | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| F-3 |
FLIKMEDIA, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2015
(UNAUDITED)
Note 1 – BASIS OF PRESENTATION AND ORGANIZATION
NATURE OF THE BUSINESS
FlikMedia, Inc. was incorporated in the State of Nevada on July 29, 2009, under the name Go Green Directories, Inc. and changed its name to Crossbox, Inc. on January 15, 2014. On July 7, 2014, in contemplation of its acquisition of Flikdate, Inc., Crossbox changed its name to FlikMedia, Inc. We were a development stage company prior to our acquisition of Flikdate described below. When used in these notes, the terms “Company,” “we,” “our,” or “us” mean FlikMedia, Inc. and Subsidiary.
Flikdate, Inc., was incorporated under the laws of the State of Delaware on November 28, 2012. On April 9, 2013, Flikdate, Inc. merged with Flikdate, LLC. Under the terms of the Merger Agreement, the sole member of Flikdate, LLC received a total of 100 shares of voting common stock of Flikdate, Inc. In addition, pursuant to the agreement, Flikdate, LLC ceased as of April 9, 2013.
On July 24, 2014, FlikMedia acquired Flikdate. Under the terms of the Exchange Agreement, all stockholders of Flikdate received a total of 32,291,287 shares of voting common stock of FlikMedia in exchange for all outstanding shares of Flikdate. Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. That is, the share exchange is equivalent to the issuance of stock by Flikdate for the net monetary assets of FlikMedia accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange will be identical to that resulting from a reverse acquisition, except no goodwill will be recorded. Under share reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, FlikMedia are those of the legal acquiree, Flikdate, which is considered to be the accounting acquirer. Share and per share amounts stated have been retroactively adjusted to reflect the merger.
Organization
Flikdate has developed a software application to enable men and women to engage in live video social “dating” interaction on their mobile phones. The technology permits users to go on a virtual date and quickly skip – or “flik” in the parlance of the application - between multiple users. Flikdate is the world’s first real-time video speed dating platform and it anticipates generating revenue in the future from a patented technology which bills users per duration of video session.
Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows for the period ending March 31, 2015, and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The results of operations for the periods ended March 31, 2015 are not necessarily indicative of the operating results for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K/A for the fiscal year ended December 31, 2014 filed with the U.S. Securities and Exchange Commission on May 18, 2015.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of FlikMedia, Inc. and its wholly owned subsidiary Flikdate, Inc. All inter-company accounts and transactions have been eliminated in the preparation of these condensed consolidated statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the condensed consolidated financial statements in the period they are determined.
| F-4 |
Research and Development
Research and development expenses include payroll, employee benefits, and other headcount-related expenses associated with product development. Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code and services content. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are put into service. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. Research and development expense is included as an operating expense.
Debt with Detachable Stock Purchase Warrants and Beneficial Conversion Features
The proceeds received from debt issued with detachable stock purchase warrants is allocated between the notes and the warrants, based upon the relative fair values of the two securities. The difference between the proceeds allocated to the notes and the face value of the notes is recognized as beneficial conversion feature and reflected as a discount from the convertible notes with a corresponding credit to additional paid-in capital. This beneficial conversion feature together with the value of the warrants is amortized to interest expense over the term of the debt instrument, using the effective interest method.
Risks and Uncertainties
The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements and technologies and limited operating history.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at the reporting unit level annually as of December 31, or more frequently if events or changes in circumstances indicate that impairment may exist.
Effective November 28, 2012, the Company adopted ASU 2011-08, which allows the Company to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This step serves as the basis for determining whether it is necessary to perform the two-step goodwill impairment test. The two-step test first compares the fair value of the reporting unit to its carrying value. If the fair value exceeds the carrying value, no impairment exists, and the second step is not performed. If the fair value is less than the carrying value, the second step is performed to compute the amount of the impairment by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The adoption did not have a material impact on the condensed consolidated financial statements.
The Company evaluated its goodwill for impairment on December 31, 2014, and concluded there was no impairment as of that date.
Intangible Assets
The Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each asset. Finite-lived intangible assets primarily consist of software development capitalized. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles have useful lives ranging from 1 to 10 years. No events or changes in circumstances indicate that impairment existed as of December 31, 2014.
Recently Issued Accounting Pronouncements
There have been no new accounting pronouncements during the three months ended March 31, 2015 that we believe would have a material impact on our financial position or results of operations.
| F-5 |
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of March 31, 2015, the Company has no revenue, and has an accumulated deficit of $3,146,169. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 – INTANGIBLE ASSETS
Intangible assets consist of the following as of March 31, 2015 and December 31, 2014:
| March 31, 2015 | December 31, 2014 | |||||||
| Development costs | $ | 77,000 | $ | 77,000 | ||||
| Trademarks | 19,438 | 19,438 | ||||||
| Intangible assets | 96,438 | 96,438 | ||||||
| Accumulated amortization | (72,722 | ) | (66,305 | ) | ||||
| $ | 23,716 | $ | 30,133 | |||||
Development costs are amortized over 3 years. Amortization expense was $7,031 and $0 for the three months ended March 31, 2015 and 2014, respectively.
Trademarks were deemed to have indefinite lives and are not amortized but are tested for impairment. As of March 31, 2015, the Company concluded there was no impairment.
The Company’s amortizable intangible asset is expected to be fully amortized by June 30, 2015. Amortization is estimated to be:
| June 30, 2015 | $ | 4,278 | |||
| Total | $ | 4,278 |
Note 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As of March 31, 2015 and December 31, 2014, accounts payable and accrued expenses consist of the following:
| March 31, 2015 | December 31, 2014 | |||||||
| Accounts payable | $ | 186,801 | $ | 163,343 | ||||
| Accrued wages | 126,095 | 81,095 | ||||||
| Accrued expenses | 30,000 | 28,250 | ||||||
| Accrued interest | 15,651 | 4,753 | ||||||
| Total | $ | 358,547 | $ | 277,441 | ||||
Note 5 – CONVERTIBLE NOTES
Between October 26 and December 9, 2014, the Company entered into several convertible note agreements totaling $400,000. Terms of the convertible note include interest at the rate of ten percent per annum, compounded annually payable upon maturity with exercise price of $1 per share and the right to convert the note automatically at the next equity financing or upon the event of a corporate transaction prior to full payment of a note or prior to the time when a note may be converted with interest.
In February and March 2015, the Company entered into convertible note agreements totaling $125,000. Terms of the convertible note include interest at the rate of ten percent per annum, compounded annually payable upon maturity with exercise price of $1 per share and the right to convert the note automatically at the next equity financing or upon the event of a corporate transaction prior to full payment of a note or prior to the time when a note may be converted with interest.
| F-6 |
In connection with the issuance of these notes, the Company issued warrants that were recorded as a debt discount at an initial aggregate value of $208,850. The fair value of the beneficial conversion feature of the notes were determined to be $ 255,150. The value of these warrants and beneficial conversion features, along with the value of previously issued warrants, was amortized over the life of the loan.
As of March 31, 2015 and December 31, 2014 outstanding convertible notes payable consisted of the following:
| March 31, 2015 | December 31, 2014 | |||||||
| Convertible notes, due October – December 2019 | 400,000 | 400,000 | ||||||
| Convertible notes, due January - March 2020 | 125,000 | - | ||||||
| Total | $ | 525,000 | $ | 400,000 | ||||
| Current portion | - | - | ||||||
| Long term portion | 525,000 | 400,000 | ||||||
| Less Beneficial conversion feature | (238,171 | ) | (214,106 | ) | ||||
| Less debt discount | (195,281 | ) | (176,393 | ) | ||||
| $ | 91,548 | $ | 9,501 | |||||
For the three months ended March 31, 2015 and 2014, interest expenses for the convertible loans net of discounts for warrants and beneficial conversion feature was $21,048 and $0, respectively.
Note 6 – STOCK WARRANT
In connection with the issuance of the $400,000 convertible notes, the Company issued warrants to all the convertible loan holders to purchase an aggregate of 80,000 shares of common stock. The warrants have a conversion price of $1 per share and expires 5 years from the date of the convertible loan. The fair value of the warrants was estimated at $180,550 using a Black-Scholes model with the following assumptions: expected volatility of 165.83% to 171.12%, risk free interest of 1.57% to 1.64%, expected life of 5 years and no dividends. The fair value of the warrants was recorded as equity and a debt discount and will be amortized to interest expense over the term of the loan.
In connection with the issuance of the $125,000 convertible notes, the Company issued warrants to all the convertible note holders to purchase an aggregate of 25,000 shares of common stock. The warrants have a conversion price of $1 per share and expire 5 years from the date of the convertible loan. The fair value of the warrants was estimated at $59,950 using a Black-Scholes model with the following assumptions: expected volatility of 161.75% to 164.60%, risk free interest of 1.28% to 1.61%, expected life of 5 years and no dividends. The fair value of the warrants was recorded as equity and a debt discount and will be amortized to interest expense over the term of the loan.
As of March 31, 2015 and December 31, 2014 outstanding stock warrants consisted of the following:
| March 31, 2015 | December 31, 2014 | |||||||
| Beginning balance | $ | 176,393 | $ | - | ||||
| Warrants grants | 28,300 | 180,550 | ||||||
| Debt discount amortization | (9,412 | ) | (4,157 | ) | ||||
| $ | 195,281 | $ | 176,393 | |||||
| F-7 |
| Weighted | |||||||||||||
| Weighted | Average | ||||||||||||
| Average | Remaining | ||||||||||||
| Number of | Exercise | Contractual | |||||||||||
| Warrants | Price | Term | |||||||||||
| Balance outstanding, December 31, 2014 | 80,000 | $ | 1.00 | 4.88 | |||||||||
| Granted | 25,000 | $ | 1.00 | 4.92 | |||||||||
| Exercised | - | - | - | ||||||||||
| Forfeited/expired | - | - | - | ||||||||||
| Balance outstanding, March 31, 2015 | 105,000 | $ | 1.00 | 4.71 | |||||||||
| Exercisable, March 31, 2015 | 105,000 | $ | 1.00 | 4.71 | |||||||||
Note 7 – STOCK COMPENSATION
On December 18, 2014, the Board of Directors of the Company appointed Mr. David R. Wells, to serve as the Company’s Interim Chief Financial Officer. As compensation for his services, the Company agreed to issue Mr. Wells 450,000 restricted shares of common stock on the date that is 90 days from the date of the employment agreement, and an additional 100,000 restricted shares of common stock to be issued on a quarterly basis in arrears commencing on March 31, 2015 through the end of the initial employment term on December 31, 2016. During the three months ended March 31, 2015, $1,375,000 in fair value was recognized under this award. During the three months ended March 31, 2015, no shares have been issued under this agreement.
Note 8 – RELATED PARTY TRANSACTIONS
During the three months ended March 31, 2015 and 2014, the Company contracted services from a related company controlled by shareholders and officers of this Company. Contracted services included development and technology costs and administrative services that amounted to $76,791 and $85,946, respectively.
Note 9 – STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock
The Company has 5,000,000 shares Preferred Stock authorized at a par value of $0.001 and there are no outstanding as of March 31, 2015 and December 31, 2014.
Common Stock
The Company has 75,000,000 shares of Common Stock authorized at a par value of $0.001 as of March 31, 2015 and December 31, 2014. There were 45,554,498 shares issued and outstanding as of March 31, 2015 and December 31, 2014.
Dividend Policy
The Company has not yet adopted a policy regarding the payment of dividends and no dividends have been declared.
Note 10 – SUBSEQUENT EVENTS
On April 3, 2015, Mr. Olivier Chaine provided notice that he was resigning from his positions as the Chief Operating Officer, Chief Marketing Officer and as a director of FlikMedia, Inc. (the “Company”), effective as of April 30, 2015.
| F-8 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis compares our results of operations for the three months ended March 31, 2015 to three months ended March 31, 2014. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto.
Note About Forward-Looking Statements
This Quarterly Report on Form 10-Q includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts. Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 under Item 1A “Risk Factors”, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements.
Overview
Flikdate has developed a software application to enable men and women to engage in live video social “dating” interaction on their mobile phones. The technology permits users to go on a virtual date and quickly skip – or “flik” in the parlance of the application - between multiple users. Flikdate is the world’s first real-time video speed dating platform and it anticipates generating revenue in the future from a patented technology which bills users per duration of video session.
To date, the Company has had very limited revenues. We have a severe working capital shortage and are actively seeking additional financing to provide the financial resources to market and commercialize our product and services both domestically and internationally. There can be no assurance that the Company will be successful in raising additional capital on terms attractive to it and its shareholders, if at all. Even if such capital becomes available, there can be no assurance that the Company will achieve commercial success with its products and services.
Results of Operations
Three months ended March 31, 2015 compared to three months ended March 31, 2014
The Company reported a net loss of $1,735,884 for the three months ended March 31, 2015 compared to a net loss of $91,467 in the period ended March 31, 2014. There was no revenue for either period reported.
Research and development expenditures were $76,651 for the three months ended March 31, 2015, as compared to $63,213 for the period ended March 31, 2014. The increase of $13,438 or 21%, in the three months ended March 31, 2015 is attributed to increased development work on the company’s web-based structure and additional design work to present the software.
General and administrative expenditures (excluding professional expenditures) were $1,533,371 for the three months ended March 31, 2015, compared to $15,213 for the period ended March 31, 2014, an increase of $1,518,158. The increase resulted from the increase in management fees of $1,465,000, investment bank fees of $15,000, and advertising and marketing expenses of $20,874.
Professional expenditures were $86,887 for the three months ended March 31, 2015, as compared to $13,041 for the period ended March 31, 2014, an increase of $73,846. The increase is the result of additional consulting expense of $24,099, accounting costs of $31,994, and legal costs of $15,374.
Interest expenditures were $31,944 for the three months ended March 31, 2015, compared to $0 for the period ended March 31, 2014. The increase was related to the issuance of convertible notes.
Liquidity and Capital Resources
To finance the Company’s development and operating costs, the Company has obtained funding through the issuance of convertible notes. The total amount of notes received during the three months ended March 31, 2015 was $125,000.
The Company used $230,400 of cash in funding operating activities during the three months ended March 31, 2015, compared to $118 of cash in funding operating activities during the period ended March 31, 2014. During the three months ended March 31, 2015, non-cash adjustments included $7,031 related to the depreciation and amortization, $1,381,300 for stock based compensation, $21,047 related to interest on discount on convertible debt, and net changes in operating assets and liabilities of $96,106. During the period ended March 31, 2014, non-cash adjustments included net changes in operating assets and liabilities of $91,347.
| 3 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes 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 is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives.
As required by SEC Rule 13a-15(b), our management carried out an evaluation, with the participation of our Chief Executive and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses in our disclosure controls and procedures:
1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Changes in internal controls
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 4 |
None.
As a smaller reporting company we are not required to provide the information required by this Item 1A.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered sales of equity securities that were not reported on a Current Report on Form 8-K .
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
None.
The exhibits listed on the Exhibit Index are filed as part of this report.
| No. | Description | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Chief Executive Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of Chief Financial Officer pursuant to Section 906 Certifications under Sarbanes-Oxley Act of 2002 | |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase |
| 5 |
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.
Dated: May 18, 2015
| FLIKMEDIA, INC. | ||
| By: | /s/ Nikola Bicanic | |
| Name: | Nikola Bicanic | |
| Title: | Chief Executive Officer and President | |
| (Principal Executive Officer) | ||
| 6 |
