In January 2009, the Company filed a certificate of amendment to its amended and restated certificate of incorporation. Pursuant to this amendment, the Company increased the authorized number of shares of its common stock from 700,000,000 to 4,000,000,000.
In February 2009, the Company filed a certificate of amendment to its amended and restated certificate of incorporation. Pursuant to this amendment, the Company accomplished the following:
1. The Company’s corporate name was changed to “ubroadcast, inc.”
2. The Company’s common stock was reverse split on a 1-for-32 basis.
3. The Company’s authorized number of shares of common stock was reduced from 4,000,000,000 to 700,000,000; the Company continues to have 50,000,000 shares of preferred stock authorized; the par value of all of our capital stock continues to be $.001 per share.
Note 4. Acquisition of ubroadcast, Inc. (UBI)
On January 26, 2009, pursuant to an agreement and plan of merger, the Company acquired 100% of the common stock of UBI, in a combination that has been accounted for as a reverse-acquisition, by issuing a total of 80,000,000 shares of its common stock. In addition, the Company issued 500,000 shares of its common stock in payment of a finder’s fee in connection with the UBI acquisition.
The number shares issued by the Company in the acquisition of UBI was determined through arm’s-length negotiations. The valuation of the shares issued by the Company was determined by employing the following process: (1) the number of shares of UBI common stock outstanding at the time of acquisition was 15,226,000 shares; (2) the most recent sales price of UBI shares in private sales to third parties was $.25 per share in cash; (3) with that information, the Company determined that $.25 per share constituted a “fair” valuation of UBI on a per share basis; (4) next, the Company established a tentative enterprise value for UBI of $3,806,500; (5) however, due to the lack of a trading market for the UBI common stock and the fact that the common stock of the Company that was used to acquire UBI was not registered, it was determined to be appropriate to apply a further “restricted share” discount to the tentative enterprise value of UBI;(6) thus, the Company applied a standard restricted share discount of 50% to the tentative enterprise value for UBI of $3,806,500, which yielded a valuation for UBI of $1,903,250.
The final step in the valuation of UBI started with an analysis of UBI’s financial projections, as prepared by UBI prior to the Company’s acquisition of UBI. Based on our analysis of UBI’s financial projections viz-à-viz the calculated $1,903,250 enterprise value, it was determined that the likelihood of the Company’s earning at least $1,903,250 over the next three years is high. Thus, it was concluded that the recorded enterprise value for UBI, $1,903,250, is fair, and the amount of good will recorded, $1,246,608, represents the amount the purchase price exceeds the value of the net assets of UBI.
In connection with the Company’s acquisition of UBI, there occurred a change in control of the Company. The business plan of UBI has been adopted by the Company’s board of directors and it will pursue the development of the “ubroadcast.com” web site and related activities.
Founded in 2006, in San Diego, California, UBI developed proprietary software, with which anyone can host a live interactive radio show on the Internet. During the second quarter of 2009, the Company plans to launch “ubroadcast TV”, which will allow users to produce live television shows, in addition to radio.
ubroadcast.com is a blend of user-generated content and the Company’s own original programming, in a high-quality Internet application. The Company believes its has created a way to “bridge the gap” between Internet and traditional network radio and television. The Company’s browser-based software allows anyone to host a live and interactive radio or television show on the Internet, in high-quality format.
Through ubroadcast.com, the Company offers a synthesized advertising platform that traditional Internet video sites and traditional network television and radio are unable to deliver independently and a viral delivery mechanism that advertisers and sponsors seek. The Company’s operating platform is designed to allow simultaneous broadcasting by thousands of channels at any one time.
As a result of the acquisition of UBI, $1,246,608 of good will was recognized, all of which is expected to be deducted for tax purposes.
Note 4. Capital Stock
Stock Issued for Salary and Retention Bonus
In January 2009, the Company issued 5,000,000 shares of common stock in payment of all accrued salary of one of the Company’s officers of $75,000 and as a retention bonus in the amount of $85,000. This transaction was completed in conjunction with the acquisition of UBI.
Stock Issued as Finder’s Fees
In January 2009, the Company issued 500,000 shares of common stock in payment of a finder’s fee associated with the Company’s acquisition of UBI, which shares were valued at $65,000. In March 2009, the Company issued 300,000 shares of common stock in payment of a finder’s fee, which shares were valued at $27,000.
Stock Issued for Cash
During the three months ended March 31, 2009, the Company issued a total of 1,705,000 shares of common stock for cash in the total amount of $34,100.
Stock Issued for Services
During the three months ended March 31, 2009, the Company issued a total of 1,000,000 shares of common stock in payment of $10,000 of professional services. Also, the Company issued a total of 443,750 shares of common stock in payment of consulting services, which shares were valued at $33,750.
Note. 5 Subsequent Events
Stock Issued for Cash
In April 2009, the Company issued a total of 775,000 shares of common stock for cash in the total amount of $10,500.
Employment Agreements
In April 2009, the Company entered into employment agreements with two of its officers, pursuant to which each will be paid a monthly salary of $11,000. Each of these agreements has a term of three years. Also in April 2009, the Company entered into an amended and restated employment agreement with one of its officers. This officer was issued 7,000,000 shares of Company common stock, in payment of approximately $325,000 in future salary that would have been owed to him over the 30 months ending in July 2011. Under his employment agreement, as amended, this officer will be paid a monthly salary of $11,000. This agreement has a term of three years.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Background
On January 26, 2009, pursuant to an agreement and plan of merger, we acquired 100% of the common stock of ubroadcast, Inc., a Nevada corporation (“UBI”), in a combination that has been accounted for as a reverse-acquisition, by issuing a total of 80,000,000 shares of our common stock. In addition, we issued 500,000 shares of our common stock in payment of a finder’s fee in connection with the UBI acquisition.
The number shares issued by us in the acquisition of UBI was determined through arm’s-length negotiations. The valuation of the shares issued by us was determined by employing the following process: (1) the number of shares of UBI common stock outstanding at the time of acquisition was 15,226,000 shares; (2) the most recent sales price of UBI shares in private sales to third parties was $.25 per share in cash; (3) with that information, we determined that $.25 per share constituted a “fair” valuation of UBI on a per share basis; (4) next, we established a tentative enterprise value for UBI of $3,806,500; (5) however, due to the lack of a trading market for the UBI common stock and the fact that our common stock used to acquire UBI was not registered, it was determined to be appropriate to apply a further “restricted share” discount to the tentative enterprise value of UBI;(6) thus, we applied a standard restricted share discount of 50% to the tentative enterprise value for UBI of $3,806,500, which yielded a valuation for UBI of $1,903,250.
The final step in the valuation of UBI started with an analysis of UBI’s financial projections, as prepared by UBI prior to our acquisition of UBI. Based on our analysis of UBI’s financial projections viz-à-viz the calculated $1,903,250 enterprise value, it was determined that the likelihood of our earning at least $1,903,250 over the next three years is high. Thus, it was concluded that the recorded enterprise value for UBI, $1,903,250, is fair, and the amount of good will recorded, $1,246,608, represents the amount the purchase price exceeds the value of the net assets of UBI.
In connection with our acquisition of UBI, there occurred a change in control of our company. The business plan of UBI has been adopted by our board of directors and we will pursue the development of the “ubroadcast.com” web site and related activities
Founded in 2006, in San Diego, California, UBI developed proprietary software, with which anyone can host a live interactive radio show on the Internet. During the second quarter of 2009, the Company plans to launch “ubroadcast TV”, which will allow users to produce live television shows, in addition to radio.
ubroadcast.com is a blend of user-generated content and its own original programming, in a high-quality Internet application. We believes we have created a way to “bridge the gap” between Internet and traditional network radio and television. Our browser-based software allows anyone to host a live and interactive radio or television show on the Internet, in high-quality format.
Through ubroadcast.com, we offer a synthesized advertising platform that traditional Internet video sites and traditional network television and radio are unable to deliver independently and a viral delivery mechanism that advertisers and sponsors seek. Our operating platform is designed to allow simultaneous broadcasting by thousands of channels at any one time.
As a result of the acquisition of UBI, $1,246,608 of good will was recognized, all of which is expected to be deducted for tax purposes.
Critical Accounting Policies
While we believe that the factors considered provide a meaningful basis for the accounting policies applied in the preparation of the condensed consolidated financial statements, we cannot guarantee that our estimates and assumptions will be accurate. If such estimates and assumptions prove to be inaccurate, we may be required to make adjustments to these estimates in future periods.Litigation and Tax Assessments. Should we become involved in lawsuits, we intend to assess the likelihood of any adverse judgments or outcomes of any of these matters as well as the potential range of probable losses. A determination of the amount of accrual required, if any, for these contingencies will be made after careful analysis of each matter. The required accrual may change from time to time, due to new developments in any matter or changes in approach (such as a change in settlement strategy) in dealing with these matters.
Additionally, in the future, we may become engaged in various tax audits by federal and state governmental authorities incidental to our business activities. We anticipate that we will record reserves for any estimated probable losses for any such proceeding.
Stock-Based Compensation. We account for stock-based compensation based on the provisions of Statement of Financial Accounting Standards No. 123. In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment, (FAS-123R). This statement replaces FAS-123, Accounting for Stock-Based Compensation, supercedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FAS-95, Statement of Cash Flows. FAS-123R requires companies to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees and to record compensation cost for all stock awards granted after the required effective date and for awards modified, repurchased or cancelled after that date. The scope of FAS-123R encompasses a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans.
Newly issued accounting standards. On January 1, 2009, we adopted SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” (SFAS 160). SFAS No. 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This standard defines a non-controlling interest, previously called a minority interest, as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS No.160 requires, among other items, that a non-controlling interest be included in the consolidated statement of financial position within equity separate from the parent’s equity; consolidated net income to be reported at amounts inclusive of both the parent’s and non-controlling interest’s shares and, separately, the amounts of consolidated net income attributable to the parent and non-controlling interest all on the consolidated statement of operations; and if a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value. The presentation and disclosure requirements of SFAS No. 160 were applied retrospectively. Other than the change in presentation of non-controlling interests, the adoption of SFAS No. 160 had no impact on the Financial Statements.
In April 2009, the FASB issued FSP FAS No. 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (FSP FAS No. 141(R)-1). This pronouncement amends SFAS No. 141-R to clarify the initial and subsequent recognition, subsequent accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP SFAS No. 141(R)-1 requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value, as determined in accordance with SFAS No. 157, if the acquisition-date fair value can be reasonably estimated. If the acquisition-date fair value of an asset or liability cannot be reasonably estimated, the asset or liability would be measured at the amount that would be recognized in accordance with FASB Statement No. 5, “Accounting for Contingencies” (SFAS No. 5), and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss.” FSP SFAS No. 141(R)-1 became effective for the Registrants as of January 1, 2009. As the provisions of FSP FAS No. 141(R)-1 are applied prospectively to business combinations with an acquisition date on or after the guidance became effective, the impact on our financials cannot be determined until the transactions occur.
In April 2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS No. 157-4), which provides additional guidance for applying the provisions of SFAS No. 157. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. This FSP requires an evaluation of whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. If there has, transactions or quoted prices may not be indicative of fair value and a significant adjustment may need to be made to those prices to estimate fair value. Additionally, an entity must consider whether the observed transaction was orderly (that is, not distressed or forced). If the transaction was orderly, the obtained price can be considered a relevant observable input for determining fair value. If the transaction is not orderly, other valuation techniques must be used when estimating fair value. FSP FAS No. 157-4 must be applied prospectively for interim periods ending after June 15, 2009. The application of this standard will not have a material impact on our financial statements.
In April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board (APB) No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” (SFAS No. 107) and APB Opinion No. 28, “Interim Financial Reporting,” respectively, to require disclosures about fair value of financial instruments in interim financial statements, in addition to the annual financial statements as already required by SFAS No. 107. FSP FAS No. 107-1 and APB No. 28-1 will be required for interim periods ending after June 15, 2009. As FSP FAS No. 107-1 and APB No. 28-1 provides only disclosure requirements; the application of this standard will not have a material impact on our financial statements.
In April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP FAS No. 115-2 and FAS No. 124-2), which amends SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” and SFAS No. 124, “Accounting for Certain Investments Held by Not-for-Profit Organizations”. This standard establishes a different other-than-temporary impairment indicator for debt securities than previously prescribed. If it is more likely than not that an impaired security will be sold before the recovery of its cost basis, either due to the investor’s intent to sell or because it will be required to sell the security, the entire impairment is recognized in earnings. Otherwise, only the portion of the impaired debt security related to estimated credit losses is recognized in earnings, while the remainder of the impairment is recorded in other comprehensive income and recognized over the remaining life of the debt security. In addition, the standard expands the presentation and disclosure requirements for other than-temporary-impairments for both debt and equity securities. FSP FAS No. 115-2 and FAS No. 124-2 must be applied prospectively for interim periods ending after June 15, 2009. The application of this standard will not have a material impact on our financial statements.
Results of Operations - First Quarter 2009 vs. First Quarter 2008
Revenues. We generated nominal revenues during the First Quarter 2009, all of which were from Internet click-through advertising on our ubroadcast.com web site. In April 2009, we began to generate monthly revenues from our newly formed “BriteVoice” Voice Network division. For April 2009, we generated approximately $90,000 in revenues, but did not earn a profit thereon. In addition to revenues we expect to derive from our soon-to-be-launched “ubroadcast TV” web site, we expect that our BriteVoice division’s revenues will increase each quarter for the remainder of 2009, although we cannot predict whether we will earn a profit from any of our operations for all of 2009. We did not have any revenue during the First Quarter 2008.
Expenses. Our operating expenses during the First Quarter 2009 were $472,333 compared to $-0- for the First Quarter 2008. This difference in operating results is due to our increased business activities during the current period compared to the prior period. Our non-cash operating expenses, which include stock issued for services, finder’s fees, accrued salaries and bonuses, totalled $295,750 for the First Quarter 2008 compared to $-0- for the First Quarter 2008.
Until we obtain operating capital, it can be expected that we will issue shares of our common stock to third-parties in payment of services rendered on our behalf.
Financial Condition
We have incurred losses from inception of $31,517,450 and we have not possessed an abundance of capital. During the First Quarter 2009, the completion of our “ubroadcast TV” web site was slowed, due to our lack of capital and, overall, we operated with little available cash. At March 31, 2009, we had a working capital deficit of $597,088 and we remain substantially illiquid. We are seeking capital with which to complete our business objectives and we cannot assure you that we will be successful in this regard.
Our Capital Needs
We believe that we will be able to sustain our current level of operations for the next twelve months. We anticipate our capital needs will be met through the sale of shares for cash, exercise of certain outstanding options and issuance of shares for services. However, to achieve our complete business objectives, we must obtain at least $1,000,000. To date, we have not received a commitment for capital in any amount and we cannot assure you that we will be able to obtain any capital. Should we fail to obtain such financing, our plan of business would likely be unsuccessful and we may be forced to cease operations.
Capital Expenditures
During the First Quarter 2009, we expended $17,324 on software services. During the First Quarter 2008, we made no capital expenditures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4T. Controls and Procedures.
Our Chief Executive Officer and Acting Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 have concluded that, as of the end of the fiscal quarter covered by this report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and such information is accumulated and communicated to management, including the Chief Executive Officer and Acting Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosures.
There was no change in our internal control over financial reporting during the quarter ended March 31, 2009, that has materially affected, or is reasonably likely to materially affect, our company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently involved in any legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None which have not been previously reported.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to our shareholders, during the three months ended March 31, 2009.
Item 5. Other Information.
None.
Item 6. Exhibits.
| 31.1 * | | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 * | | Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 * | | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.1 * | | Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
In accordance with the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. |
Date: May 20, 2009. | UBROADCAST, INC. |
| Jason Sunstein, Executive Vice President and Acting Chief Financial Officer | |
