UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2008
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number 000-52297
Assure Data, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 06-1678089
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6680 Yosemite, Dallas, Texas 75214
(Address of principal executive offices)
(972) 963-0007
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 is an accelerated filer, or a
non-accelerated filer:
Large accelerated filed [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act: Yes [ ] No [X ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required
to be filed by Section l2, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer's classes of common
equity, as of August 15, 2008: 1,640,000 shares of common stock.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
ASSURE DATA, INC.
BALANCE SHEETS
June 30, December 31,
2008 2007
--------- ---------
(Unaudited) (Audited)
Assets
Current assets:
Cash $ 10,662 $ --
Accounts receivable 12,075 5,589
--------- ---------
Total current assets 22,737 5,589
--------- ---------
Total assets $ 22,737 $ 5,589
========= =========
Liabilities and Stockholders' Deficit
Current liabilities:
Bank Overdraft $ -- $ 795
Accounts payable and accrued expenses 5,000 11,012
Note payable - related party 26,961 6,961
Deferred revenue 10 66
Payroll liabilities 2,243 20,788
--------- ---------
Total current liabilities 34,214 39,622
--------- ---------
Stockholders' deficit
Common stock: $.001 par value. Authorized: 100,000,000
shares; issued and outstanding: 1,640,000 1,640 1,640
Additional paid-in capital 375,207 375,207
Accumulated deficit (388,324) (410,880)
--------- ---------
Total stockholders' deficit (11,477) (34,033)
--------- ---------
Total liabilities and stockholders' defictit $ 22,737 $ 5,589
========= =========
The accompanying notes are an integral part of these
unaudited financial statements
2
ASSURE DATA, INC.
Consolidated Statements of Operations
Three Months Three Months Six Months Six Months
June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Revenues $ 62,037 $ 12,504 $ 107,180 $ 35,537
Cost of revenues 8,954 7,785 15,834 16,284
----------- ----------- ----------- -----------
Gross profit 53,083 4,719 91,346 19,253
----------- ----------- ----------- -----------
Operating expenses:
General and administrative 31,670 34,155 68,790 70,570
----------- ----------- ----------- -----------
Total operating expenses 31,670 34,155 68,790 70,570
----------- ----------- ----------- -----------
Income from operations 21,413 (29,436) 22,556 (51,317)
Other income:
Interest income -- 17 -- 142
----------- ----------- ----------- -----------
Net income $ 21,413 $ (29,419) $ 22,556 $ (51,175)
=========== =========== =========== ===========
Basic and diluted income (loss) per share $ (0.01) $ (0.02) $ (0.01) $ 0.03
=========== =========== =========== ===========
Weighted average number of shares
outstanding - basic and diluted 1,640,000 1,640,000 1,640,000 1,640,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these
consolidated financial statements
3
ASSURE DATA, INC.
Consolidated Statements of Cash Flows
Six Months Six Months
Ended Ended
June 30, 2008 June 30, 2007
(Unaudited) (Unaudited)
-------- --------
Cash flows from operating activities:
Net income (loss) $ 22,556 $(51,175)
Adjustments to reconcile net income (loss) to
net cash provide by (used in) operating
activities:
Depreciation -- 2,508
Changes in assets and liabilities:
Accounts receivable (6,486) 15,710
Accounts payable and accrued expenses (24,557) 1,322
Deferred revenue (56) (481)
-------- --------
Net cash provided by (used in)
operating activities (8,543) (32,116)
-------- --------
Cash flows from investing activities:
Net proceeds from issuance of common stock -- --
Common stock offering costs -- --
-------- --------
Net cash provided by
investing activities -- --
-------- --------
Cash flows from financing activities:
Proceeds from notes payable to related party 20,000 --
Net cash provided by (used in) -------- --------
Financing activities 20,000 --
-------- --------
Net increase in cash 11,457 (32,116)
Cash at beginning of period (795) 49,770
-------- --------
Cash at end of period $ 10,662 $ 17,654
======== ========
The accompanying notes are an integral part of these
consolidated financial statements
4
ASSURE DATA, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
(Unaudited)
ORGANIZATION
Assure Data, Inc. (the "Company") is a Nevada Corporation which was formed in
November 2002 and commenced operations in April 2003. The Company provides fully
automated remote data backup services for small to medium sized businesses.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and with the instructions to Form l0-Q. Accordingly, they do not include all the
information and disclosures required for annual financial statements. These
financial statements should be read in conjunction with the financial statements
and related footnotes for the year ended December 31, 2007, included in the
Annual Report filed on Form l0-KSB for the year then ended.
In the opinion of the management of Assure Data, Inc. (the "Company"), all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Company's financial position as of June 30, 2008, and the results of
operations and cash flows for the six-month period ending June 30, 2008 have
been included. The results of operations for the six-month period ended June 30,
2008 are not necessarily indicative of the results to be expected for the full
year. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report filed on Form
l0-KSB as filed with the Securities and Exchange Commission for the year ended
December 31, 2007.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid temporary cash investments with an
original maturity of three months or less to be cash equivalents. The Company
maintains its cash in bank accounts at high credit quality financial
institutions. The balances at times may exceed federally insured limits.
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements, in conformity with the generally
accepted accounting principles, 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.
REVENUE RECOGNITION
The Company charges its customers an initial set-up fee which is refundable for
a 30 day period. The revenues from set-up fees are deferred and, upon expiration
of the refund period, recognized over the expected period of performance, which
management has estimated to be three years. In the event a customer contract is
cancelled, any remaining deferred set-up fee revenue is recognized in the period
of cancellation.
The Company charges its customers monthly fees for its services based on the
provisions of each customer's contract. The monthly fees consist of a base fee,
a volume based data transfer fee and a volume based data storage fee. Revenues
are recognized in the month the services are provided.
The revenues from set-up fees and monthly fees are recognized based on the
Company's determination that the criteria provided in SEC Staff Accounting
Bulletin 104 - Revenue Recognition have been met. These criteria include that
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the seller's price to the buyer is fixed or determinable and
collectibility is reasonably assured. The Company determines that these criteria
have been met by entering into written contracts with its customers that
specifically state the fees for set-up and monthly services. Set-up fees are
invoiced after the actual set-up has been performed. Monthly fees are invoiced
based on the actual usage during a particular month. Collectibility of revenues
has not been an issue as of December 31, 2007. However, if the set-up fees have
not been paid, monthly service would not be initiated. If the monthly service
fees were not paid, the monthly service would be discontinued.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable assets related to
those on a quarterly basis for impairment whenever circumstances and situations
change such that there is an indication that the carrying amounts may not be
recovered. At June 30, 2008, the Company does not believe that any impairment
has occurred.
5
INCOME TAXES
Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires the recognition of deferred tax assets and
liabilities to reflect the future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. Measurement of
the deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of
the Company's assets and liabilities result in a deferred tax asset, SFAS No.
109 requires an evaluation of the probability of being able to realize the
future benefits indicated by such assets. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some or the
entire deferred tax asset will not be realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standard No. 107 `Disclosures about Fair Value
of Financial Instruments' (SFAS 107) requires the disclosure of fair value
information about financial instruments whether or not recognized on the balance
sheet, for which it is practicable to estimate the value. Where quoted market
prices are not readily available, fair values are based on quoted market prices
of comparable instruments. The carrying amount of cash, accounts payable and
accrued expenses approximate fair value because of the short maturity of those
instruments.
EARNINGS (LOSS) PER COMMON SHARE
The Company reports loss per common share in accordance with Statement of
Financial Accounting Standards ("SFAS") no. 128, "Earnings per Share". We have
no common stock equivalents as of June 30, 2008.
STOCK BASED COMPENSATION
The Company adopted SFAS No. 123R, "Share Based Payments." SFAS No. 123R
requires companies to expense the value of employee stock options and similar
awards and applies to all outstanding and vested stock-based awards.
In computing the impact, the fair value of each option is estimated on the date
of grant based on the Black-Scholes options-pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards. The assumptions used in calculating the fair value of
share-based payment awards represent management's best estimates, but these
estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and the Company uses different
assumptions, the Company's stock-based compensation expense could be materially
different in the future. In addition, the Company is required to estimate the
expected forfeiture rate and only recognize expense for those shares expected to
vest. In estimating the Company's forfeiture rate, the Company analyzed its
historical forfeiture rate, the remaining lives of unvested options, and the
amount of vested options as a percentage of total options outstanding. If the
Company's actual forfeiture rate is materially different from its estimate, or
if the Company reevaluates the forfeiture rate in the future, the stock-based
compensation expense could be significantly different from what we have recorded
in the current period. Applying SFAS No. 123R had no impact on the Company's
financial statements for the six months ended June 30, 2008.
RELATED PARTY TRANSACTIONS
During the six months ended June 30, 2008 an officer of the company loaned the
company an additional $20,000. The note is non interest bearing and is due on
demand.
SALE OF COMMON STOCK
No sale of common stock took place during the six months ended June 30, 2008.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 2008, the FASB issued FASB Statement No. 161, which amends and expands
the disclosure requirements of FASB Statement No. 133 with the intent to provide
users of financial statements with an enhanced understanding of; how and why an
entity uses derivative instruments, how the derivative instruments and the
related hedged items are accounted for and how the related hedged items affect
an entity's financial position, performance and cash flows. This Statement is
effective for financial statements for fiscal years and interim periods
beginning after November 15, 2008. Management believes this Statement will have
no impact on the financial statements of the Company once adopted.
Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the consolidated financial
statements upon adoption.
6
Item 2 Management's Discussion and Analysis and Plan of Operations
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO OF THE COMPANY, CONTAINED ELSEWHERE IN
THE FORM 10-KSB.
When used in this discussion, the words "expect(s)", "feel(s)", "believe(s)",
"will", "may", "anticipate(s)" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, and are urged to carefully review and consider the
various disclosures elsewhere in this Form 10-QSB. The provision of Section 27A
of the Securities Act of 1933 and Section 21 of the Securities and Exchange Act
of 1934 shall apply to any forward looking information in this Form 10-Q.
General
Assure Data began operations in 2003 offering data backup services. We obtained
$100,000 of initial funding from a private placement in mid-2003. In September
of 2005 the Company completed a public offering in which 600,000 shares of
common stock were sold resulting in proceeds of $300,000 before offering costs
were paid. In March of 2006 we completed a private placement of 40,000 shares
resulting in proceeds of $20,000 before offering costs. The following is a
summary of our financial results and condition for the six months ended June 30,
2008 and 2007.
For the six months ended June 30, 2008 compared to the six months ended June 30,
2007, revenues increased from $35,537 to $107,180, an increase of $71,643. The
changes in revenues were due to an increase in the overall billings for services
requested by our customers. For the six months ended June 30, 2008 compared to
the six months ended June 30, 2007, cost of revenues decreased from $16,284 to
$15,834 a decrease, of $450. The cost of revenue decrease was due to using our
employees to provide services to our customers and requiring less use of
consultants providing services on behalf the Company. For the six months ended
June 30, 2008 compared to the six months ended June 30, 2007, gross profit
increased from $19,253 to $91,346, an increase of $72,093. This increase was due
to customers expanding the amount of data being backed up, and the resulting
increase in monthly service charges, as well as customers increasing requests
for other services. For the six months ended June 30, 2008 compared to the six
months ended June 31, 2007, general and administrative expenses decreased from
$70,570 to $68,790. Selling, general and administrative remained constant due to
the accounting fees, legal fees and payroll expense remaining the same.
We estimate the continuing costs of being a public company to be $35,000 during
2008. These costs are being paid from revenues generated by services to
customers and loans from an officer of the company. For the six months ended
June 30, 2008 compared to the six months ended June 30, 2007, total operating
expenses decreased from $70,570 to $68,790. The operating expenses remained
basically constant due to no change in payroll, accounting or legal expenses.
Service charges are not a constant set fee for most customers. Costs for
bandwidth, other internet related fees, and marketing costs are not fixed. Both
revenue and associated costs change each month. For the six months ended June
30, 2008 compared to the six months ended June 30, 2007, net income increased
from a loss of $51,175 to a gain of $22,556.
Comparisons
Comparison of the six months ended June 30, 2008 and 2007:
Revenues increased $71,643 for the six months ended June 30, 2008 from $35,537
to $107,180. This increase is attributed to an increase in the monthly billings
for backup services, and the overall billings for additional services requested
by our customers.
For the six months ended June 30, 2008 compared to the six months ended June 30,
2007, cost of revenues decreased from $16,284 to $15,834 a decrease of $450. The
cost of revenue decrease was due to reducing the use of consulting services.
Gross profit increased to $91,346 for the six months ended June 30, 2008 from
$19,253 for the comparable 2007 period. This increase of $72,093 was due to
additional billing to existing customers, the addition of new customers, and
billing of additional services requested by our customers.
Operating expenses decreased from $70,570 for the six months ended June 30, 2007
to $68,790 for the six months ended June 30, 2008. The operating expenses
remained basically constant due to no change in payroll, accounting or legal
expenses.
7
Liquidity
As of June 30, 2008, the Company's cash position was $10,662. All of our cash
needs have been met from the results of our limited operations, proceeds from
notes payable and the sale of our equity securities. Our cash flow statement and
statement of operations are essentially the same.
Cash used in operating activities during the six month period ended June 30,
2008 was $8,543, as compared to $32,116 for the six month period ended June 30,
2007, a decrease of $23,573. This decrease is primarily attributable to
providing expanded services to our customers allowing our company to recognize
net income for the six months ended June 30, 2008. Cash provided by financing
activities was $20,000 for the six month period ended June 30, 2008, as compared
to cash provided by financing activities of $0 for the six month period ended
June 30, 2007, an increase of $20,000. For the six months ended June 30, 2008 an
officer of the company loaned the company an additional $20,000.
We believe that, even though our auditors have expressed substantial doubt about
our ability to continue as a going concern in the Company's 10-KSB for the year
ended December 31,2007 we will have sufficient financial resources to meet our
obligations for at least the next twelve months and beyond. Assuming that we do
not increase our current capacity to provide services, our primary cash
requirements would be those associated with maintaining our current customer
base and maintaining our status as a reporting entity. We believe that on an
annual basis those costs would not exceed $35,000. Based on this belief, we
believe we will have adequate financial resources to meet our financial
obligations as we currently conduct business for at least 12 months. In
addition, we currently have the capacity to add 36 more customers with an
average monthly service charge of $250 per customer without increasing our
current monthly expenses. If all 36 customers were added this would increase our
monthly revenues by $9,000 per month. Our current customer base usage is
expanding. Customers are adding additional data to be backed up, there by
resulting in additional monthly service charges. Additionally, our customer base
is increasing their requests for related consulting services.
An officer of the company has agreed to provide additional funding as required
to meet our financial obligations.
We have a functional service with paying customers and an increasing monthly
revenue stream. We have a web site that is listed with a number of search
engines, from which we receive phone calls from potential customers as well as
`hits' that are turning into customers and potential customers. The Small
Business version of our backup services, and a Home/Personal version that can be
used by anyone with a high speed internet connection with no additional hardware
required to be installed at the user's location is now available.
Low cost office space is available and all other expenses will be monitored
closely to assure that the focus of the next phase of the business plan moves
ahead as planned.
Our continuing challenge in 2008 will be to expand our customer base and develop
a partnership for the marketing of our backup product and services.
Capital Expenditures
As our business grows, we will have to acquire additional servers to accommodate
the growing disk storage capacity. Our current equipment can handle the needs of
20-30 customers. A new server will be required for each additional 20-30
customers. We believe we will be able to add such equipment and finance it from
customer charges and will not require debt or equity financing for our
anticipated capital expenditures.
Future Obligations
We have no indebtedness or other continuing financial commitments.
Item 4T Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Mr. Lisle Assure Data's President and Chief Executive Officer,
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures as defined in Exchange Act Rule 13a-15(e). The term
"disclosure controls and procedures," as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended, (the Exchange
Act) means controls and other procedures of a company that are designed to
ensure that this information is recorded, processed, summarized, and reported
within the time periods specified in the SEC's rules and forms. Disclosure
controls and procedures include controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files
or submits under the Exchange Act is accumulated and communicated to the
company's management, including its principal executive and principal financial
officers, as appropriate to allow timely decisions regarding required
8
disclosure. Based upon their evaluation of its disclosure controls and
procedures, Assure Data's President and chief executive officer has concluded
that, as of March 31,2008 and as of the date of filing, the controls, and
procedures were effective at a reasonable assurance level and will continue to
operate as designed.
Assure Data maintains certain internal controls over financial
reporting that are appropriate, consistent with cost-benefit considerations, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
(b) Management's Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act). Our management assessed the effectiveness of our internal
control over financial reporting as of June 30, 2008. In making this assessment,
our management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework. Our management has concluded that, as of June 30, 2008, our internal
control over financial reporting is effective based on these criteria. This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this annual report.
(c) Changes in Internal Control over Financial Reporting
There were no changes in the company's internal control over financial reporting
that occurred during the period covered by this quarterly report that have
materially affected, or are reasonably likely to materially affect, the
company's internal control over financial reporting.
9
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None.
ITEM 1A. Risk Factors
As a "smaller reporting company" as defined by Item 10 of Regulation
S-K, the Company is not required to provide information required by
this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits.
Exhibits
31.1 Certification by CEO and CFO pursuant to 18 USC Section 1350
as adopted by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification by CEO and CFO pursuant to 18 USC Section 1350
as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 18, 2008
ASSURE DATA, INC.
By: /s/ Robert Lisle
-----------------------
Robert Lisle, President
10