Attached files
file | filename |
---|---|
8-K - Thwapr, Inc. | v179918_8k.htm |
EX-3.1 - Thwapr, Inc. | v179918_ex3-1.htm |
EX-99.2 - Thwapr, Inc. | v179918_ex99-2.htm |
EX-10.4 - Thwapr, Inc. | v179918_ex10-4.htm |
EX-10.5 - Thwapr, Inc. | v179918_ex10-5.htm |
EX-10.8 - Thwapr, Inc. | v179918_ex10-8.htm |
EX-10.7 - Thwapr, Inc. | v179918_ex10-7.htm |
EX-10.9 - Thwapr, Inc. | v179918_ex10-9.htm |
EX-10.6 - Thwapr, Inc. | v179918_ex10-6.htm |
EX-10.4(A) - Thwapr, Inc. | v179918_ex10-4a.htm |
EX-99.3 - Thwapr, Inc. | v179918_ex99-3.htm |
Exhibit
99.1
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
FINANCIAL
STATEMENTS
SEPTEMBER
30, 2009
THWAPR,
INC.
CONTENTS
PAGE
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
1
|
BALANCE
SHEETS
|
2
|
STATEMENTS
OF OPERATIONS
|
3
|
STATEMENTS
OF CASH FLOWS
|
4
|
STATEMENTS
OF SHAREHOLDERS' EQUITY
|
5
|
NOTES
TO FINANCIAL STATEMENTS
|
6-11
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
Thwapr,
Inc.
We have
reviewed the accompanying balance sheet of Thwapr, Inc. (a development stage
Company) (the “Company”) as of September 30, 2009 and December 31, 2008, the
related statements of operations for the three months and nine months ended
September 30, 2009 and 2008, and the period from March 14, 2007 (date of
inception) through September 30, 2009, the statements of cash flows for the nine
months ended September 30, 2009 and 2008, and for the period from March 14, 2007
through September 30, 2009 and the statements of shareholders’ equity for the
period from March 14, 2007 through September 30, 2009. These financial
statements are the responsibility of the Company’s management.
We
conducted our review in accordance with the standards established by the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on
our review, we are not aware of any material modifications that should be made
to the accompanying interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
Rose,
Snyder & Jacobs
A
Corporation of Public Accountants
Encino,
California
February
15, 2010
- 1
-
HWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
(Unaudited)
|
||||||||
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 14,876 | $ | 356 | ||||
Prepaid
expenses
|
1,003 | - | ||||||
TOTAL
CURRENT ASSETS
|
15,879 | 356 | ||||||
PROPERTY
AND EQUIPMENT, net
|
19,303 | - | ||||||
OTHER
ASSETS
|
||||||||
Deposits
|
- | 900 | ||||||
TOTAL
ASSETS
|
$ | 35,182 | $ | 1,256 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$ | 85,923 | $ | 75,222 | ||||
Accounts
payable to shareholders
|
2,201 | 51,124 | ||||||
TOTAL
CURRENT LIABILITIES
|
88,124 | 126,346 | ||||||
SHAREHOLDERS'
EQUITY (DEFICIT):
|
||||||||
Preferred
stock, $0.0001 par value, 20,000,000 shares authorized, 15,729,212 and 0
shares issued and outstanding
|
1,574 | - | ||||||
Common
stock, $0.0001 par value, 180,000,000 shares authorized, 168,500 and
14,735,712 shares issued and outstanding
|
17 | 1,474 | ||||||
Additional
paid-in capital
|
3,287,167 | 1,219,002 | ||||||
Subscription
receivable
|
(350,000 | ) | - | |||||
Deficit
accumulated during the development stage
|
(2,991,700 | ) | (1,345,566 | ) | ||||
TOTAL
SHAREHOLDERS' EQUITY (DEFICIT)
|
(52,942 | ) | (125,090 | ) | ||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
|
$ | 35,182 | $ | 1,256 |
Prepared
without audit.
See
report of independent registered public accounting firm and notes to financial
statements.
- 2
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS (Unaudited)
FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 AND THE
PERIOD
FROM
MARCH 14, 2007 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2009
March 14, 2007
|
||||||||||||||||||||
For the Three Months Ended
|
For the Nine Months Ended
|
(Date of Inception)
|
||||||||||||||||||
September 30,
|
September 30,
|
through
|
||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
September 30, 2009
|
||||||||||||||||
REVENUE
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
COST
OF SALES
|
- | - | - | - | - | |||||||||||||||
GROSS
PROFIT
|
- | - | - | - | - | |||||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||||||
Accounting
and legal services
|
35,325 | - | 102,929 | 18,262 | 152,045 | |||||||||||||||
Consulting
fees to Synthetica
|
144,000 | 105,300 | 444,000 | 307,800 | 1,157,000 | |||||||||||||||
Marketing
expenses
|
16,000 | 6,000 | 24,930 | 17,705 | 56,985 | |||||||||||||||
Other
consulting fees
|
254,336 | 35,250 | 545,589 | 84,390 | 658,379 | |||||||||||||||
Rent
|
15,000 | - | 35,000 | - | 35,000 | |||||||||||||||
Taxes
|
- | - | 800 | 800 | 2,486 | |||||||||||||||
Technology
development
|
216,107 | 73,031 | 417,715 | 196,626 | 797,241 | |||||||||||||||
Website
development
|
2,500 | 10,573 | 5,970 | 16,573 | 34,543 | |||||||||||||||
Other
operating expenses
|
33,556 | 2,216 | 69,227 | 14,761 | 98,047 | |||||||||||||||
TOTAL
OPERATING EXPENSES
|
716,824 | 232,370 | 1,646,160 | 656,917 | 2,991,726 | |||||||||||||||
LOSS
FROM OPERATIONS
|
(716,824 | ) | (232,370 | ) | (1,646,160 | ) | (656,917 | ) | (2,991,726 | ) | ||||||||||
OTHER
INCOME:
|
||||||||||||||||||||
Interest
income
|
26 | - | 26 | - | 26 | |||||||||||||||
NET
LOSS
|
$ | (716,798 | ) | $ | (232,370 | ) | $ | (1,646,134 | ) | $ | (656,917 | ) | $ | (2,991,700 | ) | |||||
Basic
and diluted loss per share
|
$ | (0.21 | ) | $ | (0.02 | ) | $ | (0.15 | ) | $ | (0.05 | ) | ||||||||
Weighted
average shares outstanding
|
3,374,650 | 14,547,234 | 11,263,889 | 14,398,705 |
Prepared
without audit.
See
report of independent registered public accounting firm and notes to financial
statements.
- 3
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS (Unaudited)
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 AND THE PERIOD
FROM
MARCH 14, 2007 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2009
March 14, 2007
|
||||||||||||
For the Nine Months Ended
|
(Date of Inception)
|
|||||||||||
September 30,
|
through
|
|||||||||||
2009
|
2008
|
September 30, 2009
|
||||||||||
CASH
FLOW FROM OPERATING ACTIVITIES
|
||||||||||||
Net
loss
|
$ | (1,646,134 | ) | $ | (656,917 | ) | $ | (2,991,700 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Stock-based
compensation
|
420,222 | - | 420,222 | |||||||||
Depreciation
|
2,924 | - | 2,924 | |||||||||
Change
in assets - (increase) decrease:
|
||||||||||||
Prepaid
expenses
|
(1,003 | ) | - | (1,003 | ) | |||||||
Deposits
|
900 | (900 | ) | - | ||||||||
Change
in liabilities - increase (decrease):
|
||||||||||||
Accounts
payable and accrued expenses
|
(48,923 | ) | 36,264 | 26,299 | ||||||||
Accounts
payable to shareholders
|
10,701 | - | 61,825 | |||||||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(1,261,313 | ) | (621,553 | ) | (2,481,433 | ) | ||||||
CASH
FLOW FROM INVESTING ACTIVITIES
|
||||||||||||
Payments
for purchases of property and equipment
|
(22,227 | ) | - | (22,227 | ) | |||||||
NET
CASH USED IN INVESTING ACTIVITIES
|
(22,227 | ) | - | (22,227 | ) | |||||||
CASH
FLOW FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds
from sale of common stock, net
|
1,298,060 | 298,800 | 2,518,536 | |||||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
1,298,060 | 298,800 | 2,518,536 | |||||||||
NET
INCREASE (DECREASE) IN CASH
|
14,520 | (322,753 | ) | 14,876 | ||||||||
CASH
AT BEGINNING OF PERIOD
|
356 | 321,512 | - | |||||||||
CASH
(OVERDRAFT) AT END OF PERIOD
|
$ | 14,876 | $ | (1,241 | ) | $ | 14,876 | |||||
SUPPLEMENTARY DISCLOSURE:
|
||||||||||||
Income
taxes paid in cash
|
$ | 936 | $ | 1,550 | $ | 2,486 |
Prepared
without audit.
See
report of independent registered public accounting firm and notes to financial
statements.
- 4
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF SHAREHOLDERS' EQUITY (Unaudited)
FOR THE
PERIOD FROM MARCH 14, 2007 (DATE OF INCEPTION)
THROUGH
SEPTEMBER 30, 2009
Additional
|
||||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid in
|
Subscription
|
Accumulated
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Receivable
|
Deficit
|
Total
|
|||||||||||||||||||||||||
BALANCE,
MARCH 14, 2007 (Date of Inception)
|
- | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
Issuance
of shares to founders
|
- | - | 4,285,712 | 429 | (429 | ) | - | - | - | |||||||||||||||||||||||
Issuance
for cash ($0.07 per share)
|
- | - | 10,000,000 | 1,000 | 770,676 | - | - | 771,676 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (454,014 | ) | (454,014 | ) | ||||||||||||||||||||||
BALANCE,
DECEMBER 31, 2007
|
- | - | 14,285,712 | 1,429 | 770,247 | - | (454,014 | ) | 317,662 | |||||||||||||||||||||||
Issuance
for cash ($1.00 per share)
|
- | - | 450,000 | 45 | 448,755 | - | - | 448,800 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (891,552 | ) | (891,552 | ) | ||||||||||||||||||||||
BALANCE,
DECEMBER 31, 2008
|
- | - | 14,735,712 | 1,474 | 1,219,002 | - | (1,345,566 | ) | (125,090 | ) | ||||||||||||||||||||||
Issuance
for cash ($1.00 per share)
|
- | - | 705,000 | 71 | 704,929 | - | - | 705,000 | ||||||||||||||||||||||||
Issuance
of warrants
|
- | - | - | - | 70,000 | - | - | 70,000 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (301,095 | ) | (301,095 | ) | ||||||||||||||||||||||
BALANCE,
MARCH 31, 2009
|
- | - | 15,440,712 | 1,545 | 1,993,931 | - | (1,646,661 | ) | 348,815 | |||||||||||||||||||||||
Issuance
for cash ($1.00 per share)
|
- | - | 288,500 | 29 | 288,471 | - | - | 288,500 | ||||||||||||||||||||||||
Issuance
of warrants
|
- | - | - | - | 158,147 | - | - | 158,147 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (628,241 | ) | (628,241 | ) | ||||||||||||||||||||||
BALANCE,
JUNE 30, 2009
|
- | - | 15,729,212 | 1,574 | 2,440,549 | - | (2,274,902 | ) | 167,221 | |||||||||||||||||||||||
Exchange
of common shares to preferred shares
|
15,729,212 | 1,574 | (15,729,212 | ) | (1,574 | ) | - | - | - | - | ||||||||||||||||||||||
Issuance
for cash ($4.00 per share)
|
- | - | 168,500 | 17 | 654,543 | (350,000 | ) | - | 304,560 | |||||||||||||||||||||||
Issuance
of warrants
|
- | - | - | - | 192,075 | - | - | 192,075 | ||||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | - | (716,798 | ) | (716,798 | ) | ||||||||||||||||||||||
BALANCE,
SEPTEMBER 30, 2009
|
15,729,212 | $ | 1,574 | 168,500 | $ | 17 | $ | 3,287,167 | $ | (350,000 | ) | $ | (2,991,700 | ) | $ | (52,942 | ) |
Prepared
without audit.
See
report of independent registered public accounting firm and notes to financial
statements.
- 5
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
1.
|
ORGANIZATION
AND BASIS OF PRESENTATION
|
Organization and Nature of
Operations
Thwapr,
Inc. (the “Company”) was formed on March 14, 2007. The purpose of the Company is
to develop software and the corresponding user interface that will allow mobile
phone users to send videos and pictures captured on their phones to other mobile
phone users regardless of device, platform or carrier. The Company plans to
derive revenues from advertising on its website and imbedded into the videos as
well as selling premium services to its customers. The Company expects to launch
the service in a test market in late 2010 but does not expect to have revenues
until such time that a significant number of users have signed up for and are
using the service.
Basis of
Presentation
The
accompanying unaudited financial statements of Thwapr, Inc. have been prepared
pursuant to the rules of the Securities and Exchange Commission (“SEC”). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such rules and
regulations. These unaudited financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto for the
year ended December 31, 2008. In the opinion of management, the accompanying
unaudited financial statements reflect all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of the results for the
periods presented.
The
results of operations presented for the three months and nine months ended
September 30, 2009 are not necessarily indicative of the results to be expected
for the year ending December 31, 2009 or for any other interim
periods.
Development Stage
Activities
Since
inception the Company has not conducted any revenue producing business
operations. All of the operating results and cash flows reported in the
accompanying financial statements from March 14, 2007 through September 30, 2009
are considered to be those related to the development stage activities and
represent the 'cumulative from inception' amounts required to be reported
pursuant to Statements of Financial Accounting Standards (“SFAS”) No. 7,
“Development Stage Enterprises.” The Company is focusing its efforts in two
areas during the development stage. First, the Company is devoting substantial
time and resources to software development related to the service it intends to
provide. Second, the Company will spend significant time and resources testing
the software against a variety of cell phone models, platforms and
carriers.
Capital
Structure
In July
2009, the Company amended and restated its Certificate of Incorporation to
change its name to Thwapr, Inc., and to increase its authorized number of shares
to 200,000,000 of which 180,000,000 shares shall be common and 20,000,000 shall
be preferred stock. Concurrently, the Company entered into an Exchange Offer
Agreement (“Offering”) with all the then shareholders of the Company. Pursuant
to the Offering, shareholders at that time exchanged all of their respective
shares of common stock of the Company for shares of Series A Preferred Stock of
the Company at a ratio of 1 share of Series A Preferred Stock for each share of
Common Stock.
Prepared
without audit.
See
report of independent registered public accounting firm
- 6
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
1.
|
ORGANIZATION
AND BASIS OF PRESENTATION
(Continued)
|
The
shares of Series A Preferred Stock shall automatically convert into shares of
Common Stock at a ratio of 9 shares of Common Stock for each share of Series A
Preferred Stock upon the following events:
|
(a)
|
the
three year anniversary of the Offering and the Company obtains at least
10,000,000 active registered users,
or
|
|
(b)
|
upon
the occurrence of a change of
control.
|
The
Series A Preferred Stock holders are voting on an as-converted
basis.
Subsequently,
the Company began an offering to sell 2,500,000 shares of common stock at an
offering price of $4.00 per share for an aggregate offering amount of
$10,000,000. In November 2009, the Company retroactively re-priced the stock
offering to $1.25 per share and, as a result, issued additional shares to
investors who had previously purchased Common Stock so that the number of shares
they hold is equal to the amount of money invested divided by $1.25, with
partial shares rounded up. The effect of this re-pricing is an increase to the
number of shares of common stock sold from 168,500 to 539,200. In addition, for
every ten shares of common stock purchased the stockholder received one warrant
convertible into one share of common stock for five years at a price of $1.25
per share. The weighted average number of shares outstanding used to compute the
loss per share reflects the effect of the re-pricing.
Going
Concern
The
Company has sustained operating losses and negative cash flows from operations
since its inception. The accompanying financial statements have been prepared on
a going concern basis of accounting, which contemplates continuity of
operations, realization of assets and liabilities and commitments in the normal
course of business. The accompanying financial statements do not reflect any
adjustments that might result if the Company is unable to continue as a going
concern. The Company’s ability to continue as a going concern and the
appropriateness of using the going concern basis is dependent upon, among other
things, additional cash infusions. Management is seeking investors and believes
that raising capital will allow the Company to pursue the development of its
software and business model. However, there can be no assurance that the Company
will be able to raise sufficient capital to fully implement its business
model.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Cash and Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
Property and
Equipment
Property
and equipment are stated at cost. Depreciation of computer and equipment and
furniture and fixtures is computed on the straight-line basis over the estimated
useful lives of the assets as follows:
Computer
and equipment
|
3
years
|
Furniture
and fixtures
|
5
years
|
Prepared
without audit.
See
report of independent registered public accounting firm
- 7
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Management uses its historical
records and knowledge of its business in making estimates. Accordingly, actual
results could differ from those estimates.
Fair Value of Financial
Instruments
The
carrying amount of certain financial instruments, including cash and cash
equivalents and accounts payable and accrued expenses, approximates fair value
due to the relatively short maturity of such instruments.
Technology
Development
Technology
development costs are charged to expense when incurred. These costs primarily
include the costs associated with the development and testing of video and
picture sharing technology. During the three months ended September 30, 2009 and
2008, technology development costs amounted to $216,107 and $73,031,
respectively. During the nine months ended September 30, 2009 and 2008,
technology development costs amounted to $417,715 and $196,626, respectively.
From March 14, 2007 (inception) through September 30, 2009, technology
development costs amounted to $797,241.
Income
Taxes
The
Company accounts for income taxes under the liability method in accordance with
SFAS No. 109, “Accounting for Income Taxes.” Under this standard, deferred
income tax liabilities and assets are determined based on the difference between
the financial statement and tax bases of assets and liabilities using the
enacted tax rates expected to be in effect for the year in which the differences
are expected to reverse. Deferred income tax assets are reduced by a valuation
allowance when the Company is unable to make the determination that it is more
likely than not that some portion or all of the deferred income tax asset will
be realized.
Earnings (Loss) per
Share
Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding.
Diluted earnings per share is computed similar to basic earnings per share
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive. Common
equivalent shares are excluded from the computation if their effect is
anti-dilutive.
Prepared
without audit.
See
report of independent registered public accounting firm
- 8
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
3.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment consists of the following:
September 30,
2009
|
December 31,
2008
|
|||||||
Computer
equipment
|
$ | 17,757 | $ | - | ||||
Furniture
and fixtures
|
4,470 | - | ||||||
22,227 | - | |||||||
Accumulated
depreciation
|
(2,924 | ) | - | |||||
Property
and equipment, net
|
$ | 19,303 | $ | - |
4.
|
RELATED
PARTY TRANSACTIONS
|
Payments for Consulting
Services
Principals
of Synthetica Holdings, LLC (“Synthetica”), a former shareholder of the Company,
provide general management services to the Company in the form of a Chairman,
CEO and CFO. Amounts were paid to Synthetica principals for services rendered as
executives and directors of the Company. During the three months ended September
30, 2009 and 2008, amounts paid to Synthetica principals totaled $151,200 and
$94,500, respectively. During the nine months ended September 30, 2009 and 2008,
amounts paid to Synthetica principals totaled $494,600 and $307,800,
respectively. From March 14, 2007 through September 30, 2009, the Company paid
$1,157,000 to Synthetica principals. In addition, the principals of Synthetica
pay expenses on behalf of the Company. The principals of Synthetica will be
reimbursed for such costs. The balance due to the principals of Synthetica for
reimbursement of expenses amounted to $2,201 at September 30, 2009.
5.
|
INCOME
TAXES
|
The
Company has adopted Financial Accounting Standards Board (“FASB”) Interpretation
No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109”. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial statements
in accordance with FASB Statement 109, "Accounting for Income Taxes", and
prescribes a recognition threshold of more likely than not and a measurement
process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. In making this assessment, a
company must determine whether it is more likely than not that a tax position
will be sustained upon examination, based solely on the technical merits of the
position and must assume that the tax position will be examined by taxing
authorities. The Company is subject to examination for all years it has filed
income tax returns. The Company’s net operating loss carryforwards are subject
to IRS examination until they are fully utilized and such tax years are closed.
The Company’s policy is to include interest and penalties related to
unrecognized tax benefits within the provision for income taxes. The Company’s
review of prior year tax positions using the criteria and provisions presented
in FIN 48 did not result in a material impact on the Company’s financial
position or results of operations.
Prepared
without audit.
See
report of independent registered public accounting firm
- 9
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
6.
|
COMMITMENTS
AND CONTINGENCIES
|
Contracts and
Agreements
The
Company has a contract with one vendor to develop the software and the
corresponding user interface that will allow mobile phone users to send videos
and pictures captured on their phone to other mobile phone users. The contract
can be terminated by the Company with a 15-day notice or by the vendor with a
30-day notice.
The
Company has a consulting agreement with another vendor regarding the development
of a mobile phone application prototype. The contract can be terminated by the
Company with a 2-week notice. The completion of the project will cost
approximately $90,000 of which $35,000 was accrued for by the Company as of
September 30, 2009.
The
Company has an agreement with another vendor who provides hosted video
transcoding services and other related services and deliverables. Either party
may terminate the agreement with a 30-day notice. Total fee for the services is
a minimum of $42,000 for 12 months. The Company accrued $12,000 of service fees
as of September 30, 2009.
7.
|
WARRANT
AGREEMENTS
|
On March
1, 2009, the Company issued warrants to consultants to purchase 70,000 shares at
$1.00 per share.
The
Company used the Black-Scholes option pricing model for estimating the fair
value of the warrants at $70,000 with the following assumptions: average
expected life of 10 years; average risk-free interest rate of 1.82%; dividend
yield of 0%; and expected volatility of 200%.
There are
70,000 shares with an exercise price of $1.00 per share that are outstanding and
exercisable at September 30, 2009 with no stated maturity date.
On April
15, 2009 and May 11, 2009 the Company issued warrants to consultants, vendors
and advisors to purchase a total of 1,170,000 at $1.00 per share. Such warrants
vest over a period of 18 months with one-third of the warrants vesting at the
end of each six month period from the date of issuance.
The
Company used the Black-Scholes option pricing model for estimating the fair
value of the warrants at $1,152,450 with the following assumptions: average
expected life of 5-3/4 years; average risk-free interest rate of 2.93%; dividend
yield of 0%; and expected volatility of 200%.
The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock issued to employees and
non-employees of the Company. These options were granted in lieu of cash
compensation for services performed.
Number of
shares
|
Exercise
Price
|
|||||||
Outstanding
at December 31, 2008
|
- | $ | - | |||||
Granted
|
1,240,000 | 1.00 | ||||||
Expired/cancelled
|
- | - | ||||||
Exercised
|
- | - | ||||||
Outstanding
at September 30, 2009
|
1,240,000 | $ | 1.00 | |||||
Exercisable
at September 30, 2009
|
70,000 | $ | 1.00 |
Prepared
without audit.
See
report of independent registered public accounting firm
- 10
-
THWAPR,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
8.
|
SUBSEQUENT
EVENTS
|
The
Company has performed a review of events subsequent to the balance sheet date
through February 15, 2010, the date that the financial statements were
issued.
Issuance of Convertible
Promissory Notes
On
November 2, 2009, the Board of Directors of the Company authorized the issuance
of Convertible Notes with such notes bearing interest at 5%, convertible at the
same conditions as the next major equity financing of the Company in excess of
$2.0 million. Additionally, each investor in the notes will be issued, upon
conversion of the Notes, warrants in an amount of 10% of the number of shares
obtain during conversion and such warrants would be price at the price stock
upon conversion. Also, upon a reorganization, consolidation or merger, the
Company, at its sole discretion, may convert the principal amount of the Notes
and all accrued and unpaid interest, into securities or cash, as the case may
be, at a price of $1.25 per share. As of February 15, 2010 the Company had
issued Convertible Notes aggregating $25,000.
Re-pricing of Previously
Sold Common Stock
In
November 2009, the Company retroactively re-priced their stock offering to $1.25
per share from $4.00 per share and, as a result, issued additional shares to
investors who had previously purchased common stock so that the number of shares
they hold is equal to the amount of money invested divided by $1.25, with
partial shares rounded up. The effect of the re-pricing is an increase to the
number of shares of common stock sold from 168,500 to 539,200. Additionally, for
every ten shares of common stock purchased the stockholder receives one warrant
convertible into one share of common stock for five years at a price of $1.25
per share. As of February 15, 2010, an additional 394,000 shares of common stock
had been sold at a price of $493,000.
Prepared
without audit.
See
report of independent registered public accounting firm
- 11
-
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
FINANCIAL
STATEMENTS
FOR THE
YEAR ENDED DECEMBER 31, 2008
AND THE
PERIODS
FROM
MARCH 14, 2007 (DATE OF INCEPTION)
THROUGH
DEMBER 31, 2007
AND FROM
MARCH 14, 2007
THROUGH
DECEMBER 31, 2008
MOBILE
VIDEO DEVELOPMENT, INC.
CONTENTS
PAGE
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
1
|
BALANCE
SHEETS
|
2
|
STATEMENTS
OF OPERATIONS
|
3
|
STATEMENTS
OF CASH FLOWS
|
4
|
STATEMENTS
OF SHAREHOLDERS' EQUITY (DEFICIT)
|
5
|
NOTES
TO FINANCIAL STATEMENTS
|
6-11
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders
Mobile
Video Development, Inc.
We have
audited the accompanying balance sheets of Mobile Video Development, Inc. (a
development stage Company) (the “Company”) as of December 31, 2008 and 2007 and
the related statements of operations, shareholders’ equity (deficit) and cash
flows for the year ended December 31, 2008, for the period from March 14, 2007
(date of inception) through December 31, 2007, and for the period from March 14,
2007 through December 31, 2008. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards established by the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mobile Video Development, Inc. as
of December 31, 2008 and 2007, and the results of its operations and cash flows
for the year ended December 31, 2008, for the period from March 14, 2007 through
December 31, 2007, and for the period from March 14, 2007 through December 31,
2008, in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has sustained operating losses, continues to use cash in
its operating activities and has negative working capital and an accumulated
deficit at December 31, 2008. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
those matters also are described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Rose,
Snyder & Jacobs
A
Corporation of Public Accountants
Encino,
California
April 27,
2009
- 1
-
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
AS OF
DECEMBER 31, 2008 AND 2007
December 31,
|
||||||||
2008
|
2007
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 356 | $ | 321,512 | ||||
TOTAL
CURRENT ASSETS
|
356 | 321,512 | ||||||
OTHER
ASSETS
|
||||||||
Deposits
|
900 | - | ||||||
TOTAL
ASSETS
|
$ | 1,256 | $ | 321,512 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$ | 75,222 | $ | 3,850 | ||||
Accounts
payable to shareholders
|
51,124 | - | ||||||
TOTAL
CURRENT LIABILITIES
|
126,346 | 3,850 | ||||||
SHAREHOLDERS'
EQUITY (DEFICIT):
|
||||||||
Common
stock, $0.0001 par value, 100,000,000 shares authorized, 14,735,712 and
14,285,712 shares issued and outstanding
|
1,474 | 1,429 | ||||||
Additional
paid-in capital
|
1,219,002 | 770,247 | ||||||
Deficit
accumulated during the development stage
|
(1,345,566 | ) | (454,014 | ) | ||||
TOTAL
SHAREHOLDERS' EQUITY (DEFICIT)
|
(125,090 | ) | 317,662 | |||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
|
$ | 1,256 | $ | 321,512 |
See
report of independent registered public accounting firm and notes to financial
statements.
- 2 -
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
FOR THE
YEAR ENDED DECEMBER 31, 2008 AND THE PERIODS
FROM
MARCH 14, 2007 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2007 AND
FROM
MARCH 14, 2007 THROUGH DECEMBER 31, 2008
March 14, 2007
|
March 14, 2007
|
|||||||||||
Year Ended
|
(Date of Inception)
|
(Date of Inception)
|
||||||||||
December 31,
|
through
|
through
|
||||||||||
2008
|
December 31, 2007
|
December 31, 2008
|
||||||||||
REVENUE
|
$ | - | $ | - | $ | - | ||||||
COST
OF SALES
|
- | - | - | |||||||||
GROSS
PROFIT
|
- | - | - | |||||||||
OPERATING
EXPENSES:
|
||||||||||||
Legal
services
|
18,942 | 30,174 | 49,116 | |||||||||
Website
development
|
16,573 | 12,000 | 28,573 | |||||||||
Technology
development
|
288,329 | 91,197 | 379,526 | |||||||||
Marketing
expenses
|
32,055 | - | 32,055 | |||||||||
Consulting
fees to Synthetica
|
428,600 | 284,400 | 713,000 | |||||||||
Other
consulting fees
|
56,390 | 24,400 | 80,790 | |||||||||
Taxes
|
936 | 750 | 1,686 | |||||||||
Other
operating expenses
|
49,727 | 11,093 | 60,820 | |||||||||
TOTAL
OPERATING EXPENSES
|
891,552 | 454,014 | 1,345,566 | |||||||||
LOSS
FROM OPERATIONS
|
(891,552 | ) | (454,014 | ) | (1,345,566 | ) | ||||||
NET
LOSS
|
$ | (891,552 | ) | $ | (454,014 | ) | $ | (1,345,566 | ) | |||
Basic
and diluted loss per share
|
$ | (0.06 | ) | $ | (0.03 | ) | ||||||
Weighted
average shares outstanding
|
14,474,810 | 14,285,712 |
See
report of independent registered public accounting firm and notes to financial
statements.
- 3 -
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR THE
YEAR ENDED DECEMBER 31, 2008 AND THE PERIODS
FROM
MARCH 14, 2007 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2007 AND
FROM
MARCH 14, 2007 THROUGH DECEMBER 31, 2008
March 14, 2007
|
March 14, 2007
|
|||||||||||
Year Ended
|
(Date of Inception)
|
(Date of Inception)
|
||||||||||
December 31,
|
through
|
through
|
||||||||||
2008
|
December 31, 2007
|
December 31, 2008
|
||||||||||
CASH
FLOW FROM OPERATING ACTIVITIES
|
||||||||||||
Net
loss
|
$ | (891,552 | ) | $ | (454,014 | ) | $ | (1,345,566 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Increase
in:
|
||||||||||||
Deposits
|
(900 | ) | - | (900 | ) | |||||||
Accounts
payable and accrued expenses
|
71,372 | 3,850 | 75,222 | |||||||||
Accounts
payable to shareholders
|
51,124 | - | 51,124 | |||||||||
NET
CASH USED IN
|
||||||||||||
OPERATING
ACTIVITIES
|
(769,956 | ) | (450,164 | ) | (1,220,120 | ) | ||||||
CASH
FLOW FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds
from sale of common stock, net
|
448,800 | 771,676 | 1,220,476 | |||||||||
NET
CASH PROVIDED BY
|
||||||||||||
FINANCING
ACTIVITIES
|
448,800 | 771,676 | 1,220,476 | |||||||||
NET
INCREASE (DECREASE)
|
||||||||||||
IN
CASH
|
(321,156 | ) | 321,512 | 356 | ||||||||
CASH
AT BEGINNING OF PERIOD
|
321,512 | - | - | |||||||||
CASH
AT END OF PERIOD
|
$ | 356 | $ | 321,512 | $ | 356 | ||||||
SUPPLEMENTARY
DISCLOSURE:
|
||||||||||||
Income
taxes paid in cash
|
$ | 1,550 | $ | - | $ | 1,550 |
See
report of independent registered public accounting firm and notes to financial
statements.
- 4 -
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE
YEAR ENDED DECEMBER 31, 2008 AND THE PERIOD
FROM
MARCH 14, 2007 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2007
Additional
|
||||||||||||||||||||
Common Stock
|
Paid in
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||
BALANCE,
MARCH 14, 2007 (Date of Inception)
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
Issuance
of shares to founders
|
4,285,712 | 429 | (429 | ) | - | - | ||||||||||||||
Issuance
for cash ($0.07 per share)
|
10,000,000 | 1,000 | 770,676 | - | 771,676 | |||||||||||||||
Net
loss
|
- | - | - | (454,014 | ) | (454,014 | ) | |||||||||||||
BALANCE,
DECEMBER 31, 2007
|
14,285,712 | 1,429 | 770,247 | (454,014 | ) | 317,662 | ||||||||||||||
Issuance
for cash ($1.00 per share)
|
450,000 | 45 | 448,755 | - | 448,800 | |||||||||||||||
Net
loss
|
- | - | - | (891,552 | ) | (891,552 | ) | |||||||||||||
BALANCE,
DECEMBER 31, 2008
|
14,735,712 | $ | 1,474 | $ | 1,219,002 | $ | (1,345,566 | ) | $ | (125,090 | ) |
See
report of independent registered public accounting firm and notes to financial
statements.
- 5 -
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
1.
|
ORGANIZATION
AND BASIS OF PRESENTATION
|
Organization and Nature of
Operations
Mobile
Video Development, Inc. (the “Company”) was formed on March 14, 2007. The
purpose of the Company is to develop software and the corresponding user
interface that will allow mobile phone users to send videos and pictures
captured on their phones to other mobile phone users regardless of device,
platform or carrier. The Company plans to derive revenues from advertising on
its website and imbedded into the videos as well as selling premium services to
its customers. The Company expects to launch the service in a test market in
late 2010 but does not expect to have revenues until such time that a
significant number of users have signed up for and are using the
service.
Development Stage
Activities
Since
inception the Company has not conducted any revenue producing business
operations. All of the operating results and cash flows reported in the
accompanying financial statements from March 14, 2007 through December 31, 2008
are considered to be those related to the development stage activities and
represent the 'cumulative from inception' amounts required to be reported
pursuant to Statements of Financial Accounting Standards (“SFAS”) No. 7,
“Development Stage Enterprises.” The Company is focusing its efforts in two
areas during the development stage. First, the Company is devoting substantial
time and resources to software development related to the service it intends to
provide. Second, the Company will spend significant time and resources testing
the software against a variety of cell phone models, platforms and
carriers.
Going
Concern
The
Company has sustained operating losses since its inception and has negative
working capital and an accumulated deficit. The accompanying financial
statements have been prepared on a going concern basis of accounting, which
contemplates continuity of operations, realization of assets and liabilities and
commitments in the normal course of business. The accompanying financial
statements do not reflect any adjustments that might result if the Company is
unable to continue as a going concern. The Company’s ability to continue as a
going concern and the appropriateness of using the going concern basis is
dependent upon, among other things, additional cash infusions. Management is
seeking investors and believes that raising capital will allow the Company to
pursue the development of its software and business model. However, there can be
no assurance that the Company will be able to raise sufficient capital to fully
implement its business model.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Cash and Cash
Equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Management uses its historical
records and knowledge of its business in making estimates. Accordingly, actual
results could differ from those estimates.
See
report of independent registered public accounting firm
- 6
-
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
Fair Value of Financial
Instruments
The
carrying amount of certain financial instruments, including cash and cash
equivalents and accounts payable and accrued expenses, approximates fair value
due to the relatively short maturity of such instruments.
Technology
Development
Technology
development costs are charged to expense when incurred. These costs primarily
include the costs associated with the development and testing of video and
picture sharing technology. During the year ended December 31, 2008 and the
period from March 14, 2007 (inception) through December 31, 2007, technology
development costs amounted to $288,329 and $91,197, respectively. From March 14,
2007 (inception) through December 31, 2008, technology development costs
amounted to $379,526.
Income
Taxes
The
Company accounts for income taxes under the liability method in accordance with
SFAS No. 109, “Accounting for Income Taxes.” Under this standard, deferred
income tax liabilities and assets are determined based on the difference between
the financial statement and tax bases of assets and liabilities using the
enacted tax rates expected to be in effect for the year in which the differences
are expected to reverse. Deferred income tax assets are reduced by a valuation
allowance when the Company is unable to make the determination that it is more
likely than not that some portion or all of the deferred income tax asset will
be realized.
Earnings (Loss) per
Share
The
Company utilizes SFAS No. 128, "Earnings per Share." Basic earnings per share is
computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding. Diluted earnings per share
is computed similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.
Recently Issued Accounting
Pronouncements
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles.” Management believes that the implementation of
this standard will have no material impact on the Company’s financial position
and results of operations.
In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF
03-6-1”). FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. Management is currently
assessing the impact of FSP EITF 03-6-1 on the Company’s financial position and
results of operations.
See
report of independent registered public accounting firm
- 7
-
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
In June
2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”).
EITF 07-5 provides that an entity should use a two step approach to evaluate
whether an equity-linked financial instrument (or embedded feature) is indexed
to its own stock, including evaluating the instrument’s contingent exercise and
settlement provisions. It also clarifies the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. Management is currently assessing the impact of EITF
07-5 on the Company’s financial position and results of operations.
In June
2008, the FASB ratified EITF Issue No. 08-3, “Accounting by Lessees for
Maintenance Deposits Under Lease Arrangements” (“EITF 08-3”). EITF 08-3 provides
guidance for accounting for nonrefundable maintenance deposits. It also provides
revenue recognition accounting guidance for the lessor. EITF 08-3 is effective
for fiscal years beginning after December 15, 2008. Management is currently
assessing the impact of EITF 08-3 on the Company’s financial position and
results of operations.
In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under SFAS No. 142,
“Goodwill and Other Intangible Assets”. FSP FAS 142-3 is effective for fiscal
years beginning after December 15, 2008. Management does not expect the adoption
of FSP FAS 142-3 will have a material impact on the Company’s financial position
or results of operations.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“SFAS No. 161”), an amendment of FASB Statement No.
133. SFAS No. 161 requires enhanced disclosures about a company's derivative and
hedging activities. These enhanced disclosures will discuss (a) how and why a
company uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under FASB Statement No. 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect a company's financial position, results of operations, and cash flows.
SFAS No. 161 is effective for fiscal years beginning on or after November 15,
2008, with earlier adoption allowed. The Company does not anticipate that the
adoption of this accounting pronouncement will have a material effect on the
financial statements.
In
February 2008, the FASB issued FASB Staff Position No. 157-2, “Effective Date of
FASB Statement No. 157”, which delays the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities to fiscal years beginning after
November 15, 2008. Therefore, the Company will delay application of SFAS 157 to
its nonfinancial assets and nonfinancial liabilities. Management does not
anticipate that the delayed adoption of this accounting pronouncement will have
a material effect on the Company’s financial statements.
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
141(R)”), and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51” (“SFAS 160”). These new standards will
significantly change the financial accounting and reporting of business
combination transactions and noncontrolling (minority) interests in consolidated
financial statements. SFAS 141(R) is required to be adopted concurrently with
SFAS 160 and is effective for business combination transactions for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Early adoption is prohibited.
Management expects SFAS 141(R) will have an impact on accounting for business
combinations once adopted but the effect is dependent upon acquisitions at that
time.
See
report of independent registered public accounting firm
- 8
-
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
In May
2007, the FASB issued FASB Staff Position (“FSP”) FIN No. 48-1, “Definition of
Settlement in FASB Interpretation No. 48” (“FSP FIN No. 48-1”). FSP FIN No. 48-1
provides guidance on how to determine whether a tax position is effectively
settled for the purpose of recognizing previously unrecognized tax benefits. FSP
FIN No. 48-1 is effective for fiscal years beginning after December 15, 2006 in
accordance with the initial adoption date of Interpretation 48. The adoption of
this standard did not have a significant impact on the Company’s financial
position or results of operations.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” — Including an Amendment of SFAS No.
115 (“SFAS 159”), which permits an entity to measure certain financial assets
and financial liabilities at fair value that are not currently required to be
measured at fair value. Entities that elect the fair value option will report
unrealized gains and losses in earnings at each subsequent reporting date. The
fair value option may be elected on an instrument-by-instrument basis, with a
few exceptions. SFAS 159 amends previous guidance to extend the use of the fair
value option to available-for-sale and held-to-maturity securities. The
statement also establishes presentation and disclosure requirements to help
financial statement users understand the effect of the election. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The adoption of
this standard did not have a significant impact on the Company’s financial
condition or results of operations.
3.
|
RELATED
PARTY TRANSACTIONS
|
Payment for Consulting
Services
Principals
of Synthetica Holdings, LLC (“Synthetica”), a shareholder of the Company,
provide general management services to the Company in the form of a Chairman,
CEO and CFO. Amounts paid to Synthetica principals were in lieu of salaries and
represented compensation for services rendered as executives and directors of
the Company. During the year ended December 31, 2008 and the period from March
14, 2007 (date of inception) through December 31, 2007, the amount paid to
Synthetica principals in aggregate was $377,476 and $284,400, respectively. From
March 14, 2007 through December 31, 2008, the Company paid $661,876 to
Synthetica principals. The balance due to the principals of Synthetica amounted
to $51,124 and $0 at December 31, 2008 and 2007, respectivley.
4.
|
COMMITMENTS
AND CONTINGENCIES
|
Cash
Deposits
The
Company maintains its cash at a financial institution. The account is insured by
the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000. On October 3,
2008, the FDIC temporarily increased its coverage from $100,000 to $250,000 per
depositor through December 31, 2009. The Company’s cash account, at times, may
exceed federally insured limits.
Development
Contract
The
Company has a contract with one vendor to develop the software and the
corresponding user interface that will allow mobile phone users to send videos
and pictures captured on their phone to other mobile phone users. The contract
can be terminated by the Company with a 15-day notice or by the vendor with a
30-day notice.
See
report of independent registered public accounting firm
- 9
-
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
5.
|
INCOME
TAXES
|
The
Company has adopted Financial Accounting Standards Board (“FASB”) Interpretation
No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109”. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial statements
in accordance with FASB Statement 109, "Accounting for Income Taxes", and
prescribes a recognition threshold of more likely than not and a measurement
process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. In making this assessment, a
company must determine whether it is more likely than not that a tax position
will be sustained upon examination, based solely on the technical merits of the
position and must assume that the tax position will be examined by taxing
authorities. The Company is subject to examination for all years it has filed
income tax returns. The Company’s net operating loss carryforwards are subject
to IRS examination until they are fully utilized and such tax years are closed.
The Company’s policy is to include interest and penalties related to
unrecognized tax benefits within the provision for income taxes. The Company’s
review of prior year tax positions using the criteria and provisions presented
in FIN 48 did not result in a material impact on the Company’s financial
position or results of operations.
At
December 31, 2008, the Company has net operating loss carryforwards available
for federal tax purposes, which expire from 2027 to 2028. The amount of net
operating losses which may be utilized in future years may be subject to
significant annual limitations should an ownership change occur. The Company
also has operating loss carryforwards available for California income tax
purposes, which expire from 2018 to 2019.
At
December 31, 2008 and 2007, total deferred income tax assets consist principally
of net operating loss carryforwards in amounts still to be determined. For
financial reporting purposes, a valuation allowance has been recognized in an
amount equal to such deferred income tax assets due to the uncertainly
surrounding their ultimate realization.
6.
|
SUBSEQUENT
EVENTS
|
Stock Purchase
Agreement
On March
6, 2009, Pax Clean Energy, Inc. ("Pax"), a publicly traded company, entered into
a stock purchase agreement (the "Agreement") with the Company. Pursuant to the
Agreement, PAX will acquire 100% of the issued and outstanding shares of common
stock of the Company, in exchange for the issuance of approximately 16,000,000
shares of to-be-designated Series A Convertible Preferred Stock of PAX (the
"Preferred Shares") to the shareholders of the Company (the "Exchange"). The
Preferred Shares cannot be sold, transferred, pledged, hypothecated, or
converted into shares of Pax’s common stock for a period of at least three (3)
years from the date of issuance (the "Lock-Up Period"). After the Lock-Up
Period, the Preferred Shares may be converted only if the combined Pax/Company
entity obtains a minimum of ten (10) million subscribers for the Company’s
services. The Preferred Shares will have 5:1 voting rights and a conversion rate
of 36:1.
The
Agreement between Pax and the Company is subject to certain closing conditions
("Closing Conditions") including, but not limited to:
(a)
Approval by the majority of the holders of Pax’s issued and outstanding shares
of common stock of (A) an amendment to Pax’s Certificate of Incorporation to
authorize 20,000,000 shares of blank-check preferred stock; (B) an increase in
Pax’s authorized shares of common stock to 750,000,000 shares; (C) a change of
Pax’s name to "Thwapr, Inc." to more accurately reflect the new focus of the new
resultant entity; and (D) an amendment to Pax’s Certificate of Incorporation to
allow for supermajority preferred voting rights;
See
report of independent registered public accounting firm
- 10
-
MOBILE
VIDEO DEVELOPMENT, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES TO
FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
6.
|
SUBSEQUENT
EVENTS (Continued)
|
(b) The
filing with the SEC of a Preliminary 14C Information Statement (the "Preliminary
14C") notifying non-consenting shareholders of the approval by the majority of
the holders of Pax’s issued and outstanding shares of common stock of the
actions described in Section (a) above;
(c) The
filing with the SEC of a Definitive 14C Information Statement;
(d) The
filing with the Delaware Secretary of State of an amended Certificate of
Incorporation of Pax designating blank check preferred stock; increasing the
Company's authorized shares of common stock; changing Pax’s name; and allowing
for supermajority preferred voting rights; and
(e) The
filing with the Delaware Secretary of State of a Certificate of Designation for
the Preferred Shares.
Issuance of Common
Stock
During
the first quarter of 2009, 705,000 shares of common stock were issued to an
investor for $705,000 in cash.
See
report of independent registered public accounting firm
- 11
-