Attached files
file | filename |
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EX-32.1 - Qornerstone Inc. | v209881_ex32-1.htm |
EX-31.2 - Qornerstone Inc. | v209881_ex31-2.htm |
EX-32.2 - Qornerstone Inc. | v209881_ex32-2.htm |
EX-31.1 - Qornerstone Inc. | v209881_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A-1
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended October 31,
2009.
or
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
|
For the
transition period from to
to ___________________
Commission
File Number : 000-52945
TECHMEDIA ADVERTISING,
INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
98-0540833
|
(State
or other jurisdiction of incorporation or
organization) |
(I.R.S.
Employer Identification No.)
|
c/o
62 Upper Cross Street,
#04-01 Singapore
(Address
of principal executive offices)
|
058353
(Zip
Code)
|
011-65-65323001
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x
Yes ¨ No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
¨
Yes ¨ No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
|
Non-accelerated
filer
|
¨ (Do not check if
a smaller reporting company)
|
Smaller
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
¨
Yes x No
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
¨
Yes ¨ No
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 47,294,000 shares of $0.001
par value common stock as of December 11, 2009.
TABLE OF
CONTENTS
EXPLANATORY
NOTE
|
3
|
USE
OF NAMES
|
3
|
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
|
3
|
PART
I – FINANCIAL INFORMATION
|
3
|
Item
1. Financial Statements
|
3
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
4
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
|
9
|
Item
4T. Controls and Procedures.
|
9
|
PART
II - OTHER INFORMATION
|
9
|
Item
1. Legal Proceedings
|
9
|
Item
1A. Risk Factors
|
9
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
10
|
Item
3. Defaults upon Senior Securities
|
10
|
Item
4. Submission of Matters to a Vote of Security Holders
|
10
|
Item
5. Other Information
|
10
|
Item
6. Exhibits
|
10
|
2
EXPLANATORY
NOTE
On
December 10, 2010, the Board of Directors of the Company determined that the
unaudited consolidated financial statements for the period ended October 31,
2009, should be restated as a result of material misstatements. The
determination to restate the unaudited consolidated financial statements was
made in connection with management’s assessment of accounting errors it
discovered in connection with the preparation of the audited consolidated
financial statements for the year ended July 31, 2010. For the period
ended October 31, 2009, the Company recorded stock-based compensation related to
stock options issued to employees and non-employees at a value of $2.22 per
share of common stock underlying each stock option when the fair market value of
such underlying shares should have been valued at $1.00 per share resulting in
an overstatement of expense and additional paid-in capital of $343,022 for the
period. Management also determined that for the same period a payment
for consulting services in the amount of $93,808 was incorrectly reported as an
offset to additional paid-in capital, and should have been reported as a
consulting fee expense in the unaudited consolidated financial statements
resulting in an understatement of expense by $93,808. Lastly,
reclassifications of depreciation expense of $6 and consulting fees of $175,000
from management fees were also made to correct the presentation of such
expenses. Such reclassifications did not have an impact on the net
(loss) for the period. The Company corrected the errors by decreasing
additional paid-in capital by $249,214, stock-based compensation expense by
$343,022, and increased consulting fees by $93,808. The adjustments
had an impact of decreasing the net (loss) for the period by
$249,214. (Loss) per share – basic and diluted for the period
decreased from $(0.03) per share to $(0.02) per share.
USE
OF NAMES
In this
quarterly report, the terms “TechMedia,” “Company,” “we,” or “our,” unless the
context otherwise requires, mean TechMedia Advertising, Inc. and its
subsidiaries.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
quarterly report on Form 10-Q and other reports that we file with the SEC
contain statements that are considered forward-looking
statements. Forward-looking statements give the Company’s current
expectations, plans, objectives, assumptions or forecasts of future
events. All statements other than statements of current or historical
fact contained in this quarterly report, including statements regarding the
Company’s future financial position, business strategy, budgets, projected costs
and plans and objectives of management for future operations, are
forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “anticipate,” “estimate,”
“plans,” “potential,” “projects,” “ongoing,” “expects,” “management believes,”
“we believe,” “we intend,” and similar expressions. These statements
are based on the Company’s current plans and are subject to risks and
uncertainties, and as such the Company’s actual future activities and results of
operations may be materially different from those set forth in the forward
looking statements. Any or all of the forward-looking statements in
this quarterly report may turn out to be inaccurate and as such, you should not
place undue reliance on these forward-looking statements. The Company
has based these forward-looking statements largely on its current expectations
and projections about future events and financial trends that it believes may
affect its financial condition, results of operations, business strategy and
financial needs. The forward-looking statements can be affected by
inaccurate assumptions or by known or unknown risks, uncertainties and
assumptions due to a number of factors, including:
·
|
dependence
on key personnel;
|
·
|
competitive
factors;
|
·
|
the
operation of our business; and
|
·
|
general
economic conditions in the United States and
India.
|
These
forward-looking statements speak only as of the date on which they are made, and
except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. In addition, we cannot assess the
impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements contained in this quarterly report.
PART
I – FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
These
unaudited financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the SEC instructions to Form 10-Q. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the interim
period ended October 31, 2009, are not necessarily indicative of the results
that can be expected for the full year.
3
TECHMEDIA
ADVERTISING, INC.
(A
DEVELOPMENT STAGE COMPANY)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
Restated
Consolidated Financial Statements-
|
|
Consolidated
Balance Sheets as of October 31, 2009, and July 31, 2008
|
F-2
|
Consolidated
Statements of Operations and Comprehensive (Loss) for the
Three Months Ended October 31, 2009, and 2008, and Cumulative
from Inception
|
F-3
|
Consolidated
Statements of Cash Flows for the Three Months
Ended October 31, 2009, and 2008, and Cumulative from
Inception
|
F-4
|
Notes
to Consolidated Financial Statements October 31, 2009, and
2008
|
F-5
|
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS (RESTATED) (NOTES 2 AND 3)
AS
OF OCTOBER 31, 2009, AND JULY 31, 2008
(Unaudited)
October 31,
|
July 31,
|
|||||||
2009
|
2009
|
|||||||
(Restated)
|
||||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 2,206,074 | $ | 2,784,198 | ||||
Accounts
receivable - Related Parties
|
||||||||
Note
Note receivable
|
- | 350,000 | ||||||
Advance
|
85,000 | 85,000 | ||||||
Interest
|
- | 1,545 | ||||||
Total
accounts receivable - Related parties
|
85,000 | 436,545 | ||||||
Prepaid
consulting fees and rent expense
|
106,874 | 93,808 | ||||||
Total
current assets
|
2,397,948 | 3,314,551 | ||||||
Property
and Equipment:
|
||||||||
Computer
equipment and peripherals
|
7,445 | 3,000 | ||||||
7,445 | 3,000 | |||||||
Less
- Accumulated depreciation and amortization
|
(1,494 | ) | (750 | ) | ||||
Net
property and equipment
|
5,951 | 2,250 | ||||||
Other
Assets:
|
||||||||
Deferred
acquisition costs
|
- | 13,000 | ||||||
Goodwill
|
6,717 | - | ||||||
Total
other assets
|
6,717 | 13,000 | ||||||
Total
Assets
|
$ | 2,410,616 | $ | 3,329,801 | ||||
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable - Trade
|
$ | 19,191 | $ | 3,658 | ||||
Accrued
liabilities
|
53,067 | 20,529 | ||||||
Due
to Director and stockholder
|
19,475 | 500 | ||||||
Total
current liabilities
|
91,733 | 24,687 | ||||||
Total
liabilities
|
91,733 | 24,687 | ||||||
Commitments
and Contingencies
|
||||||||
Stockholders'
Equity:
|
||||||||
Common
stock, par value $0.001 per share; 1,100,000,000 shares authorized;
47,294,000 and 44,919,000 shares issued and outstanding in October 2009,
and July 2009, respectively
|
47,294 | 44,919 | ||||||
Additional
paid-in capital
|
3,271,422 | 1,234,006 | ||||||
Common
stock subscribed
|
- | 2,275,000 | ||||||
Accumulated
other comprehensive (loss)
|
(746 | ) | - | |||||
(Deficit)
accumulated during the development stage
|
(999,087 | ) | (248,811 | ) | ||||
Total
stockholders' equity
|
2,318,883 | 3,305,114 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 2,410,616 | $ | 3,329,801 |
The
accompanying notes to consolidated financial statements are
an
integral part of these consolidated balance sheets.
F-2
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE
(LOSS) (RESTATED) (NOTES 2 AND 3)
FOR
THE THREE MONTHS ENDED OCTOBER 31, 2009, AND 2008, AND
CUMULATIVE
FROM INCEPTION (JANUARY 30, 2007)
THROUGH
OCTOBER 31, 2009
(Unaudited)
Three Months Ended
|
Cumulative
|
|||||||||||
October 31,
|
From
|
|||||||||||
2009
|
2008
|
Inception
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
Revenues
|
$ | - | $ | - | $ | - | ||||||
Expenses:
|
||||||||||||
General
and administrative-
|
||||||||||||
Stock-based
compensation
|
241,570 | - | 241,570 | |||||||||
Legal
and accounting fees
|
132,672 | 1,500 | 135,222 | |||||||||
Management
fee
|
20,012 | 374 | 23,088 | |||||||||
Consulting
fee
|
368,866 | - | 368,866 | |||||||||
Salary
|
66,006 | - | 66,006 | |||||||||
Travel
|
62,235 | - | 62,235 | |||||||||
Professional
fee
|
28,695 | - | 28,695 | |||||||||
Office
supplies & expenses
|
30,917 | - | 31,071 | |||||||||
Others
|
21,873 | - | 29,349 | |||||||||
Office
rent
|
11,581 | 672 | 11,581 | |||||||||
Depreciation
and amortization
|
744 | 425 | 744 | |||||||||
Advertising
fee
|
660 | - | 660 | |||||||||
Total
general and administrative expenses
|
985,831 | 2,971 | 999,087 | |||||||||
(Loss)
from Operations
|
(985,831 | ) | (2,971 | ) | (999,087 | ) | ||||||
Other
Income (Expense)
|
- | - | - | |||||||||
Provision
for income taxes
|
- | - | - | |||||||||
Net
(Loss)
|
$ | (985,831 | ) | $ | (2,971 | ) | $ | (999,087 | ) | |||
Comprehensive
(Loss):
|
||||||||||||
Foreign
currency translation
|
(268 | ) | - | (746 | ) | |||||||
Total
Comprensive (Loss)
|
$ | (986,099 | ) | $ | (2,971 | ) | $ | (999,833 | ) | |||
(Loss)
Per Common Share:
|
||||||||||||
(Loss)
per common share - Basic and Diluted
|
$ | (0.02 | ) | $ | (0.00 | ) | ||||||
Weighted
Average Number of Common Shares
|
||||||||||||
Outstanding
- Basic and Diluted
|
46,970,902 | 43,120,000 |
The
accompanying notes to consolidated financial statements are
an
integral part of these consolidated statements.
F-3
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS (RESTATED) (NOTE 2)
FOR
THE THREE MONTHS ENDED OCTOBER 31, 2009, AND 2008, AND
CUMULATIVE
FROM INCEPTION (JANUARY 30, 2007)
THROUGH
OCTOBER 31, 2009 (NOTE 3)
(Unaudited)
Three
Months Ended
|
Cumulative
|
|||||||||||
October
31,
|
From
|
|||||||||||
2009
|
2008
|
Inception
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
Operating
Activities:
|
||||||||||||
Net
(loss)
|
$ | (985,831 | ) | $ | (13,528 | ) | $ | (999,087 | ) | |||
Adjustments
to reconcile net (loss) to net cash
(used in) operating
activities:
|
||||||||||||
Stock-based
compensation
|
241,570 | - | 241,570 | |||||||||
Depreciation
and amortization
|
744 | 283 | 1,494 | |||||||||
Common
stock issued for consulting services
|
16,667 | - | 16,667 | |||||||||
Recapitalization
from reverse merger
|
235,555 | - | 235,555 | |||||||||
Changes
in assets and liabilities-
|
||||||||||||
Accounts
receivable
|
- | - | - | |||||||||
Prepaid
consulting fees and rent
|
(20,292 | ) | 499 | (147,113 | ) | |||||||
Accounts
payable - Trade
|
15,533 | 75 | 19,191 | |||||||||
Accrued
liabilities
|
13,605 | (1,750 | ) | 53,067 | ||||||||
Net
Cash (Used in) Operating Activities
|
(482,449 | ) | (14,421 | ) | (578,656 | ) | ||||||
Investing
Activities:
|
||||||||||||
Cash
acquired in business combination
|
200,161 | - | - | |||||||||
Website
development costs
|
- | (5,100 | ) | (5,100 | ) | |||||||
Purchase
of computers and peripherals
|
(286 | ) | - | (7,445 | ) | |||||||
Net
Cash (Used in) Investing Activities
|
199,875 | (5,100 | ) | (12,545 | ) | |||||||
Financing
Activities:
|
||||||||||||
Issuance
of common stock for cash
|
- | - | 3,662,250 | |||||||||
Due
from TechMedia Singapore - Related Party
|
- | - | (85,000 | ) | ||||||||
Loan
to TechMedia India - Related Party
|
(85,000 | ) | - | (435,000 | ) | |||||||
Payments
of finder's fee
|
(227,500 | ) | - | (362,425 | ) | |||||||
Due
to Director and stockholder
|
17,696 | - | 18,196 | |||||||||
Net
Cash (Used in) Provided by Financing Activities
|
(294,804 | ) | - | 2,798,021 | ||||||||
Effect
of Exchange Rate Changes on Cash and Cash Equivalents
|
(746 | ) | - | (746 | ) | |||||||
Net
(Decrease) Increase in Cash and Cash Equivalents
|
(578,124 | ) | (19,521 | ) | 2,206,074 | |||||||
Cash
and Cash Equivalents - Beginning of Period
|
2,784,198 | 38,131 | - | |||||||||
Cash
and Cash Equivalents - End of Period
|
$ | 2,206,074 | $ | 18,610 | $ | 2,206,074 | ||||||
Supplemental
Disclosure of Cash Flow Information:
|
- | |||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
$ | - | $ | - | ||||||||
Income
taxes
|
$ | - | $ | - |
In
January 2009, the former Director, president, and stockholder of the Company
waived the repayment of a loan and forgave the Company of the $14,600 debt. The
amount of forgiven debt of the repayment of $14,600 was considered as an
addition to paid-in capital in the accompanying balance sheet as of July 31,
2009.
On
September 17, 2009, the Company issued 100,000 shares to a consulting company
for certain financial advisory and research services which will be performed
over a one-year period. The services were valued at $100,000.
The
accompanying notes to consolidated financial statements are
an integral part of these consolidated
statements
F-4
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
(1) Summary
of Significant Accounting Policies
Basis
of Presentation and Organization
TechMedia
Advertising, Inc. (formerly “Ultra Care, Inc.”) (“TechMedia” or the “Company”)
is a Nevada corporation in the development stage. The Company was
incorporated on January 30, 2007. The original business plan of the
Company was to service the healthcare industry and provide prospective employers
with reliable recruitment, screening, and placement services by developing an
innovative web-based service to match foreign-based nurses who are looking to
work in the United States and Canada with healthcare employers located in the
United States and Canada. The Company adopted a new business plan in
2009. The new business plan of the Company entails the entry into the
streaming digital media advertising business in India through an operating
entity established in that country. The accompanying consolidated
financial statements of were prepared from the accounts of the Company and its
wholly owned subsidiaries under the accrual basis of accounting.
In
addition, in March 2007, the Company commenced a capital formation activity
through a Private Placement Offering (“PPO”), exempt from registration under the
Securities Act of 1933, to raise up to $38,000 through the issuance 16,720,000
shares (post forward stock split) of its common stock, par value $0.001 per
share, at an offering price of approximately $0.002 per share. As of
July 31, 2007, the Company closed the PPO and received proceeds of
$38,000.
Further,
on November 7, 2007, the Company filed a Registration Statement on Form SB-2
with the SEC to register 16,720,000 shares (post forward stock split) of its
common stock for selling stockholders. The Registration Statement was
declared effective by the SEC on November 30, 2007. The Company will
not receive any of the proceeds of this registration activity once the shares of
common stock are sold.
On
January 28, 2009, the Company filed Articles of Merger in the State of Nevada
with its wholly owned subsidiary, TechMedia Advertising, Inc., in order to
affect a name change from Ultra Care, Inc. to TechMedia Advertising,
Inc. The name change was effective with the State of Nevada and FINRA
on February 17, 2009.
On July
27, 2009, the Company entered into a share exchange agreement (the “Exchange
Agreement”) with TechMedia Advertising Mauritius (“TM Mauritius”) and all of the
shareholders of TM Mauritius (the “Sellers”), whereby, at closing, the Company
will acquire all of the issued and outstanding shares in the capital of TM
Mauritius from the Sellers in exchange for the issuance of 24,000,000 shares of
Common Stock to the Sellers on a pro rata basis in accordance with each Seller’s
percentage ownership in TM Mauritius. TM Mauritius is the sole
beneficial owner TechMedia Advertising (India) Private Limited (“TM India”), a
company organized under the laws of India, which is engaged in the initial
stages of selling outdoor advertising on billboards and digital signs in India
located in high traffic locations. Such locations range from
transportation vehicles, commercial buildings, to supermarkets and restaurants,
by forming a partnership with media space owners.
F-5
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
TM
Mauritius was incorporated pursuant to the laws of Mauritius on March 11,
2009. At the time of closing of the Exchange Agreement, the Company
will be the sole shareholder of TM Mauritius. On June 22, 2009, TM
Mauritius acquired sole beneficial ownership of TM India through an exchange of
four ordinary shares of capital stock of TM Mauritius for 1,000 shares of
paid-up capital stock of TM India.
TM India
was incorporated pursuant to the laws of India on December 27,
2007. Since its incorporation, TM India has been involved in
investigating, researching, and establishing relationships in the media industry
in India.
On August
6, 2009, the Exchange Agreement closed and as a result, TM Mauritius became a
wholly owned subsidiary of the Company. As a result of the closing of
the Exchange Agreement, the Sellers collectively own 24,000,000 shares of common
stock of the Company as follows: 9,600,000 shares of common stock are owned by
OneMedia Limited (21.4 percent of the issued and outstanding); 7,200,000 shares
of common stock of the Company are owned by Ternes Capital Ltd. (16.0 percent of
the issued and outstanding); and 7,200,000 shares of common stock of the Company
are owned by Johnny Lian Tian Yong (16.0 percent of the issued and outstanding),
which constitutes in aggregate 53.4 percent of the issued and outstanding shares
of common stock of the Company.
Subsequent
to the closing of the Exchange Agreement, the business of the Company is
conducted through its subsidiary, TM Mauritius, which is pursuing its
advertising business plan through a new joint venture company in India, as well
as through TM India.
On June
15, 2009, TM Mauritius was assigned TechMedia Advertising Singapore Pte. Ltd.’s
rights and obligations under the Summary of Terms of Investment with respect to
a joint venture arrangement for operating the business of installing,
commissioning, maintaining and commercializing mobile digital advertising
platforms in public commuter transports such as buses and trains in India (the
“JV Business”), which was entered into between TechMedia Advertising Singapore
Pte. Ltd., a company incorporated under the laws of Singapore, and Peacock Media
Ltd. (“PML”), a company incorporated under the laws of India, on December 19,
2008.
On
October 22, 2009, the Company through its wholly owned subsidiary, TM Mauritius,
entered into a Joint Venture Development and Operating Agreement (the “JV
Agreement”) with PML. In accordance with the JV Agreement, TM Mauritius and PML
will form a new private India company (the “JV Company”) where TM Mauritius will
own 85% and PML will own 15%. The JV Company will operate the business of
displaying mobile digital advertising platforms in public transportation
vehicles such as long-distance buses and trains in India (the “Business”). The
newly-fitted buses and trains will display third party commercial contents and
advertisements for a fee.
F-6
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
Unaudited
Interim Consolidated Financial Statements
The
accompanying consolidated financial statements of the Company as of October 31,
2009, and July 31, 2009, and for the three months ended October 31, 2009, and
2008, and cumulative from inception are unaudited. However, in the
opinion of management, the accompanying consolidated financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Company’s consolidated financial position as of
October 31, 2009, July 31, 2009, and the results of its operations and its cash
flows for the three months ended October 31, 2009, and 2008. These
results are not necessarily indicative of the results expected for the fiscal
year ending July 31, 2010. The accompanying consolidated financial
statements and notes thereto do not reflect all disclosures required under
accounting principles generally accepted in the United States of
America. Refer to the Company’s audited financial statements as of
July 31, 2009, filed with the SEC on October 20, 2009, for additional
information, including significant accounting policies.
Cash and Cash
Equivalents
For
purposes of reporting within the statements of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.
Revenue
Recognition
The
Company is in the development stage and has yet to realize revenues from planned
operations. Once the Company has commenced planned operations, it
will recognize revenues when completion of its advertising services has occurred
provided there is persuasive evidence of an agreement, acceptance has been
approved by its customers, the fee is fixed or determinable based on the
completion of stated terms and conditions, and collection of any related
receivable is probable.
Property and
equipment
Property
and equipment are recorded at historical cost. Minor additions and
renewals are expensed in the year incurred. Major additions and
renewals are capitalized and depreciated over their estimated useful
lives. When property and equipment are retired or otherwise disposed
of, the cost and accumulated depreciation or amortization are removed from the
accounts and any resulting gain or loss is included in the results of operations
for the respective period. The Company uses the straight-line method
of depreciation. The estimated useful life of property and equipment
is as follows:
Computer
equipment and peripherals
|
3
years
|
F-7
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
Income
(Loss) Per Common Share
Basic
income (loss) per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted income (loss) per share is
computed similar to basic loss 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. There were no dilutive financial
instruments issued or outstanding for the three months ended October 31, 2009,
and 2008.
Deferred
Offering Costs
The
Company defers as other assets the direct incremental costs of raising capital
until such time as the offering is completed. At the time of the
completion of the offering, the costs are charged against the capital
raised. Should the offering be terminated, deferred offering costs
are charged to operations during the period in which the offering is
terminated. As of October 31, 2009, and July 31, 2009, the Company
had not incurred any deferred offering costs.
Deferred
Acquisition Costs
The
Company defers as other assets the direct incremental costs of acquiring a
company until such time as the acquisition is completed. At the time
of the completion of the acquisition, the costs are charged against the goodwill
of the acquired company. Should the acquisition be terminated,
deferred acquisition costs are charged to operations during the period in which
the agreement is terminated. As of October 31, 2009, and July 31,
2009, the Company recorded $0 and $13,000 of deferred acquisition costs,
respectively.
Income
Taxes
The
Company accounts for income taxes pursuant to SFAS No. 109, Accounting for Income Taxes
(“SFAS No. 109”). Under SFAS No. 109, deferred tax assets and
liabilities are determined based on temporary differences between the bases of
certain assets and liabilities for income tax and financial reporting
purposes. The deferred tax assets and liabilities are classified
according to the financial statement classification of the assets and
liabilities generating the differences.
The
Company maintains a valuation allowance with respect to deferred tax
assets. The Company establishes a valuation allowance based upon the
potential likelihood of realizing the deferred tax asset and taking into
consideration the Company’s financial position and results of operations for the
current period. Future realization of the deferred tax benefit
depends on the existence of sufficient taxable income within the carryforward
period under the Federal tax laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in
income in the year of the change in estimate.
F-8
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
Concentration of
Risk
As of
October 31, 2009, and July 31, 2009, the Company maintained its cash accounts at
two commercial banks. The balance in each account was subject to FDIC
coverage up to $250,000.
Fair
Value of Financial Instruments
The
Company estimates the fair value of financial instruments using the available
market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair
value may not be indicative of the amounts the Company could realize in a
current market exchange. As of October 31, 2009, and July 31, 2009,
the carrying value of the Company’s financial instruments approximated fair
value due to the short-term maturity of these instruments.
Common Stock Registration
Expenses
The
Company considers incremental costs and expenses related to the registration of
equity securities with the SEC, whether by contractual arrangement as of a
certain date or by demand, to be unrelated to original issuance
transactions. As such, subsequent registration costs and expenses are
reflected in the accompanying consolidated financial statements as general and
administrative expenses, and are expensed as incurred.
Lease
Obligations
All
noncancellable leases with an initial term greater than one year are categorized
as either capital or operating leases. Asset recorded under capital
leases are amortized according to the methods employed for property and
equipment or over the term of the related lease, if shorter.
Estimates
The
accompanying consolidated financial statements are prepared on the basis of
accounting principles generally accepted in the United States of
America. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
October 31, 2009, and July 31, 2009, and expenses for the three months ended
October 31, 2009, and 2008, and cumulative from inception. Actual
results could differ from those estimates made by management.
F-9
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
(2) Development
Stage Activities and Going Concern
The
Company is currently in the development stage. The original business
plan of the Company was to service the healthcare industry and provide
prospective employers with reliable recruitment, screening, and placement
services by developing an innovative web-based service to match foreign-based
nurses who are looking to work in the United States and Canada with healthcare
employers located in the United States and Canada. The Company
adopted a new business plan in 2009. The new business plan of the
Company entails the entry into the streaming digital media advertising business
in India through an operating entity established in that country.
During
the period from January 30, 2007, through October 31, 2009, the Company was
organized and incorporated, conducted various capital formation activities
through the sale of its common stock, completed a software development activity,
and entered into an Exchange Agreement for the acquisition of all of the issued
and outstanding shares in the capital of TM Mauritius. On November 7,
2007, the Company filed a Registration Statement on Form SB-2 with the SEC to
register 16,720,000 shares (post forward stock split) of its common stock for
selling stockholders. The Registration Statement was declared
effective by the SEC on November 30, 2007. The Company will not
receive any of the proceeds of this registration activity once the shares of
common stock are sold. The Company also intends to conduct additional
capital formation activities through the issuance of its common stock and to
further conduct its operations.
While
management of the Company believes that the Company will be successful in its
planned operating activities under its new business plan, there can be no
assurance that it will be successful in the development of its planned
advertising services such that it will generate sufficient revenues to earn a
profit or sustain its operations.
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. The
Company has not established any source of revenue to cover its operating costs,
and as such, has incurred an operating loss since inception. Further,
as of October 31, 2009, and July 31, 2009, the cash resources of the Company
were insufficient to meet its planned business objectives. These and
other factors raise substantial doubt about the Company’s ability to continue as
a going concern. The accompanying consolidated financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the Company to
continue as a going concern.
(3)
|
Restatement
|
On
December 10, 2010, the Board of Directors of the Company determined that the
unaudited consolidated financial statements for the period ended October 31,
2009, should be restated as a result of material misstatements. The
determination to restate the unaudited consolidated financial statements was
made in connection with management’s assessment of accounting errors it
discovered in connection with the preparation of the audited consolidated
financial statements for the year ended July 31, 2010. For the period
ended October 31, 2009, the Company recorded stock-based compensation related to
stock options issued to employees and non-employees at a value of $2.22 per
share of common stock underlying each stock option when the fair market value of
such underlying shares should have been valued at $1.00 per share resulting in
an overstatement of expense and additional paid-in capital of $343,022 for the
period. Management also determined that for the same period a payment
for consulting services in the amount of $93,808 was incorrectly reported as an
offset to additional paid-in capital, and should have been reported as a
consulting fee expense in the unaudited consolidated financial statements
resulting in an understatement of expense by $93,808. Lastly,
reclassifications of depreciation expense of $6 and consulting fees of $175,000
from management fees were also made to correct the presentation of such
expenses. Such reclassifications did not have an impact on the net
(loss) for the period. The Company corrected the errors by decreasing
additional paid-in capital by $249,214, stock-based compensation expense by
$343,022, and increased consulting fees by $93,808. The adjustments
had an impact of decreasing the net (loss) for the period by
$249,214. (Loss) per share – basic and diluted for the period
decreased from $(0.03) per share to $(0.02) per share.
F-10
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
(4)
|
Change
in Management
|
On
September 9, 2008, Mr. Clifford Belgica resigned as the Company’s President,
Chief Executive Officer, and Director. On the same date, Mr. Denver
Melchor resigned as the Company’s Treasurer, Secretary, Chief Financial Officer,
and Director. The Company appointed Mr. Van Clayton A. Pagaduan to
the offices of President, Treasurer, Secretary, and Chief Financial
Officer. The former officers and Directors also sold their interests
in the Company of 26,400,000 shares (post forward stock split) of common stock
to Mr. Van Clayton A. Pagaduan, which resulted in a change of beneficial
ownership in securities.
On
January 15, 2009, Mr. Van Clayton A. Pagaduan resigned from the offices of
President, Treasurer, Secretary, Chief Financial Officer, and
Director. On same date, Mr. Alan Goh was appointed as President,
Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and a
Director of the Company. Mr. Pagaduan also sold his interest in the
Company of 26,400,000 shares (post forward stock split) of common stock to Mr.
Goh, which resulted in a change of beneficial ownership in
securities.
On August
6, 2009, and in accordance with the Exchange Agreement, Mr. Alan Goh, the
current President, CEO, CFO, Secretary and Treasurer and a Director, resigned as
the Company’s President, CEO, CFO and Treasurer (remaining as the Secretary and
a Director) and Mr. Johnny Lian Tian Yong was appointed as the President, CEO,
Chairman and a director of the Company. Mr. Ratner Vellu was also
appointed as a Director of the Company, and Mr. William Goh Han Tiang was
appointed as the Treasurer and a Director of the Company. However,
the appointment of Messrs. Johnny Lian Tian Yong, Ratner Vellu and William Goh
Han Tiang as Directors of the Company, will not become effective until August
14, 2009, which is 10 days after the filing date of a Schedule 14F-1 Information
Statement with the Securities and Exchange Commission and the transmission of
notification to all shareholders of record of common stock of the Company who
would be entitled to vote at a meeting for election of Directors.
F-11
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
(5)
|
Loan
from Related Party
|
As of
October 31, 2009, a loan from an individual who is an employee of a subsidiary
of the Company amounted to $19,475 (October 31, 2008 - $0). The loan
was provided for working capital purposes, and is unsecured, non-interest
bearing, and has no terms for repayment.
(6)
|
Common
Stock
|
The
Company was originally authorized to issue 50,000,000 shares of $0.001 par value
common stock. All shares of common stock have equal voting rights,
are non-assessable, and have one vote per share. Voting rights are
not cumulative and, therefore, the holders of more than 50 percent of the common
stock could, if they choose to do so, elect all of the Directors of the
Company.
Effective
February 17, 2009, the Company completed a twenty-two (22) for one (1) forward
stock split of its authorized, issued, and outstanding common
stock. As a result, the authorized capital of the Company has
increased from 50,000,000 shares of common stock with a par value of $0.001 to
1,100,000,000 shares of common stock with a par value of $0.001, and
correspondingly, its issued and outstanding capital increased from 1,960,000
shares of common stock to 43,120,000 shares of common stock. The
accompanying consolidated financial statements and related notes thereto have
been adjusted accordingly to reflect this forward stock split.
On
January 30, 2007, the Company issued 26,400,000 (post forward stock split)
shares of its common stock to its Directors and officers at par value for cash
proceeds of $12,000.
In March
2007, the Company commenced a capital formation activity through a PPO, exempt
from registration under the Securities Act of 1933, to raise up to $38,000
through the issuance 16,720,000 (post forward stock split) shares of its common
stock, par value $0.001 per share, at an offering price of approximately $0.002
per share. As of July 31, 2007, the Company fully subscribed the PPO,
and received proceeds of $38,000. The Company accepted subscriptions
from 38 foreign, non-affiliated investors.
In
addition, on November 7, 2007, the Company filed a Registration Statement on
Form SB-2 with the SEC to register 16,720,000 (post forward stock split) shares
of its common stock for selling stockholders. The Registration
Statement was declared effective by the SEC on November 30, 2007. The
Company will not receive any of the proceeds of this registration activity once
the shares of common stock are sold.
On June
8, 2009, the Company issued 145,000 shares of its common stock to four
individuals due to the closing of the private placement of its common stock at
$0.75 per share for total gross proceeds of $108,750.
On June
8, 2009, the Company issued 1,654,000 shares of its common stock to 11
individuals and entities due to the closing of the private placement of its
common stock at $0.75 per unit for total gross proceeds of
$1,240,500.
F-12
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
In
connection with the issuance of the 145,000 shares and the 1,654,000 shares of
its common stock, described above, the Company paid a finder’s fee of $134,925
to an unrelated third party.
On July
27, 2009, the Company entered into an Exchange Agreement with TM Mauritius, a
company organized under the laws of Mauritius, and all the Sellers of TM
Mauritius, whereby the Company agreed to acquire all of the issued and
outstanding shares in the capital of TM Mauritius from the Sellers in exchange
for the issuance of 24,000,000 shares of Common Stock of the Company to the
Sellers on a pro rata basis in accordance with each Seller’s percentage
ownership in TM Mauritius. The Exchange Agreement is set to close on
or before August 5, 2009. As of July 31, 2009, the Exchange Agreement
has not been closed and no shares related to the Exchange Agreement had been
issued.
Concurrently
with the closing of the Exchange Agreement, by a letter agreement entered into
on July 30, 2009 (the “Letter Agreement”), between the Company and Alan Goh, Mr.
Alan Goh agreed to cancel 24,000,000 shares of the 26,400,000 shares of common
stock of the Company registered in his name. As of July 31, 2009, the
Exchange Agreement has not been closed and Mr. Alan Goh had not cancelled his
24,000,000 shares.
On August
12, 2009, the Company issued 2,275,000 shares of common stock to 37 individuals
due to the closing of private placement at $1.00 per unit for total gross
proceeds of $2,275,000. Each unit consists of one share of common
stock of the Company, and one-half of one share purchase warrant, with each
whole warrant entitling the holder to purchase one additional share of the
Company’s common stock at $2.00 per warrant share until two years from the date
of issuance of the share purchase warrants. The Company paid a finder’s
fee of $227,500 to an unrelated third party.
On
September 17, 2009, the Company issued 100,000 shares to Emissary Capital Group,
LLC (“Emissary Capital”) in accordance with the terms of the Financial Advisory
Agreement, dated September 2, 2009, entered into between the Company and
Emissary Capital. Emissary Capital will provide certain financial
advisory and research services for the Company. The fair value of the
services was valued at $100,000.
As of
October 31, 2009, there were 47,294,000 shares of common stock issued and
outstanding.
(7)
|
Common
Stock Options
|
On August
31, 2009, the Board of Directors unanimously approved and adopted a stock option
and incentive plan (the “2009 Stock Option and Incentive Plan”). The purpose of
the 2009 Stock Option and Incentive Plan is to advance the directors’ interests
and the shareholders’ interests by affording the Company’s key personnel an
opportunity for investment in the Company and the incentive advantages inherent
in stock ownership in the Company. Pursuant to the provisions of the 2009 Stock
Option and Incentive Plan, stock options, stock awards, cash awards or other
incentives (the “Stock Options and Incentives”) will be granted only to our key
personnel, generally defined as a person designated by the Board of Directors
upon whose judgment, initiative and efforts we may rely including any director,
officer, employee, consultant or advisor of the Company.
F-13
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
On August
31, 2009, the Board of Directors unanimously approved and granted in aggregate
1,900,000 stock options to certain directors, officers and consultants of the
Company having an exercise price of $2.22 per share and an expiry date of five
years from the date of grant. These stock options have vesting provisions of 10%
on the date of grant and 10% on the last day of each month thereafter beginning
on September 30, 2009.
The fair
value of each option granted has been estimated on the date of grant using the
Black-Scholes pricing model, using the following assumptions:
October
31, 2009
|
October
31, 2008
|
|||||||
Five
Year Risk Free Interest Rate
|
2.39 | % | - | |||||
Dividend
Yield
|
0.00 | % | - | |||||
Volatility
|
70.96 | % | - | |||||
Average
Expected Term (Years to Exercise)
|
5 | - |
A summary
of the status of options granted as of October 31, 2009 is as
follows:
For The Period Ended
October 31, 2009
|
||||||||
Shares
|
Weighted
Average
Exercise
Price
|
|||||||
Outstanding
at August 31, 2009
|
- | - | ||||||
Granted
|
1,900,000 | $ | 2.22 | |||||
Exercised
|
- | - | ||||||
Forfeited
|
- | - | ||||||
Expired
|
- | - | ||||||
Outstanding
at October 31, 2009
|
1,900,000 | $ | 2.22 | |||||
Exercisable
at October 31, 2009
|
570,000 | $ | 2.22 |
F-14
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
A summary
of the status of options outstanding as of October 31, 2009, is presented
below:
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Range
of
Exercise
prices
|
Number
Outstanding
|
Weighted
Average
Remaining
Life
(Years)
|
Weighted
Average
Exercise
Price
|
Number
exercisable
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||
$ | 2.22 | 1,900,000 | 4.83 | $ | 2.22 | 570,000 | $ | 2.22 |
The
weighted average grant date fair value of options granted during the three
months ended October 31, 2009, was $0.42. The compensation
expense for the three months ended October 31, 2009, totaled
$241,570.
(8)
|
Income
Taxes
|
The
provision (benefit) for income taxes for the three months ended October 31,
2009, and 2008, was as follows (using a 15 percent effective Federal income tax
rate):
Three Months Ended
|
||||||||
October 31,
|
||||||||
2009
|
2008
|
|||||||
Current
Tax Provision:
|
||||||||
Federal-
|
||||||||
Taxable
income
|
$ | - | $ | - | ||||
Total
current tax provision
|
$ | - | $ | - | ||||
Deferred
Tax Provision:
|
||||||||
Federal-
|
||||||||
Loss
carryforwards
|
$ | 147,875 | $ | 446 | ||||
Change
in valuation allowance
|
(147,875 | ) | (446 | ) | ||||
Total
deferred tax provision
|
$ | - | $ | - |
The
Company had deferred income tax assets as of October 31, 2009, and July 31,
2009, as follows:
As of
|
As of
|
|||||||
October 31,
|
July 31,
|
|||||||
2009
|
2009
|
|||||||
Loss
carryforwards
|
$ | 149,863 | $ | 37,322 | ||||
Less
- Valuation allowance
|
(149,863 | ) | (37,322 | ) | ||||
Total
net deferred tax assets
|
$ | - | $ | - |
F-15
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
As of
October 31, 2009, the Company had net operating loss carryforwards for income
tax reporting purposes of approximately $999,087 (July 31, 2009 - $248,811) that
may be offset against future taxable income. The net operating loss
carryforwards will begin to expire in the year 2029. Current tax laws
limit the amount of loss available to be offset against future taxable income
when a substantial change in ownership occurs or a change in the nature of the
business. Therefore, the amount available to offset future taxable
income may be limited.
No tax
benefit has been reported in the accompanying consolidated financial statements
for the realization of loss carryforwards, as the Company believes there is high
probability that the carryforwards will not be utilized in the foreseeable
future. Accordingly, the potential tax benefits of the loss
carryforwards are offset by a valuation allowance of the same
amount.
(9)
|
Related
Party Transactions
|
As
described in Note 5, on January 30, 2007, the Company issued 26,400,000 shares
(post forward stock split) of its common stock to its Directors and officers at
par value for cash proceeds of $12,000. As described in Note 3, on
September 9, 2008, these Directors and officers resigned from the
Company. These former officers and Directors sold their interests in
the Company amounting to 26,400,000 shares (post forward stock split) of common
stock to the newly appointed Director and officer of the Company.
As
described in Note 4, as of October 31, 2009, the Company owed $0 (October 31,
2008 - $14,600) to an individual who is a former Director, president, and
stockholder of the Company. The loan was provided for working capital
purposes; and was unsecured, non-interest bearing, and had no terms for
repayment. In January 2009, the former Director, president, and
stockholder of the Company waived this loan and forgave the Company of the
$14,600 debt.
On April
27, 2009, the Company and TM India signed a loan agreement. TechMedia
agreed to loan to TM India the principle amount of up to $1,000,000 for the
purpose of financing the company with such funds being used to equip buses in
India under the business arrangement between the company and Peacock Media
Ltd. The loan is bearing an annual interest rate at 3 percent and
will be due and payable one year from the date of agreement. On
August 6, the Company becomes the owner of TM India through TM Mauritius, such
loan were treated as an inter-corporate loan. As of October 31, 2009,
TechMedia had transferred $450,000 to TM India.
The
Company also loaned to TechMedia Advertising Singapore Pte. Ltd., a related
party entity, the amount of $85,000 for working capital
purposes. This loan is unsecured, non-interest bearing, and has no
terms for repayment.
On
October 22, 2009, the Company entered into a Corporate Consulting Services
Agreement with Johnny Lian Tian Yong having an effective date of September 1,
2009, whereby Mr. Lian will act as the President and CEO of the Company, assist
the Company with establishing and maintaining proper internal financial controls
and procedures, provide managerial advice and assist the Company with its
management and business operations, policy development and reporting
requirements for a term of two years ending September 1, 2011 in exchange for
the Company paying Mr. Lian US$12,000 per month payable on the last day of each
month.
F-16
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
In
addition, on October 22, 2009, the Company entered into a Corporate Consulting
Services Agreement with William Goh Han Tiang having an effective date of
September 1, 2009, whereby Mr. Goh will act as the Company’s Treasurer, assist
the Company’s President, CEO and principal accounting officer with establishing
and maintaining proper internal financial controls and procedures, provide
managerial advice and assist the Company with its management and business
operations, policy development and reporting requirements for a term of two
years ending September 1, 2011 in exchange for the Company paying Mr. Goh
US$8,000 per month payable on the last day of each month.
Furthermore,
on October 22, 2009, the Company entered into a Consulting Services Agreement
with Ratner Vellu having an effective date of September 1, 2009, whereby Mr.
Vellu will assist the Company in its business development and provide consulting
services to the Company in the areas of corporate finance and development
strategy for a term of two years ending September 1, 2011 in exchange for the
Company paying Mr. Vellu US$8,000 per month payable on the last day of each
month.
On
November 30, 2009, the Company entered into a Corporate Consulting Services
Agreement with Cher (Alan) Kian Goh having an effective date of October 1, 2009,
whereby Mr. Alan Goh will act as the Secretary of the Company and will provide
various consulting services to the Company as the Company’s board of directors
reasonably requests for a term of two years ending October 1, 2011, in exchange
for the Company paying Mr. Alan Goh US$3,500 per month payable on the last day
of each month.
(10)
|
Commitments
and Contingencies
|
On July
27, 2009, the Company entered into an Exchange Agreement with TM Mauritius, and
all the shareholders of TM Mauritius as Sellers, whereby the Company agreed to
acquire all of the issued and outstanding shares in the capital of TM Mauritius
from the Sellers in exchange for the issuance of 24,000,000 shares of Common
Stock of the Company to the Sellers on a pro rata basis in accordance with each
Seller’s percentage ownership in TM Mauritius.
On
September 17, 2009, the Company issued 100,000 shares to Emissary Capital in
accordance with the terms of the Financial Advisory Agreement, dated September
2, 2009, entered into between the Company and Emissary
Capital. Emissary Capital will provide certain financial advisory and
research services for the Company. The fair value of the services was
valued at $100,000.
On
October 22, 2009, the Company through its wholly owned subsidiary, TM Mauritius,
entered into a Joint Venture Development and Operating Agreement (the “JV
Agreement”) with PML. In accordance with the JV Agreement, TM Mauritius and PML
will form a new private India company (the “JV Company”) where TM Mauritius will
own 85% and PML will own 15%. The JV Company will operate the business of
displaying mobile digital advertising platforms in public transportation
vehicles such as long-distance buses and trains in India (the “Business”). The
newly-fitted buses and trains will display third party commercial contents and
advertisements for a fee.
F-17
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
Under the
JV Agreement, PML will assign to the JV Company the exclusive rights to use the
license to operate the Business on 10,392 long distance buses within the Tamil
Nadu State, where PML has a 5 year exclusive license. The initial Board of
Directors of the JV Company will be comprised of two nominees from PML, Messrs.
Sandeep Chawla and Kuljit Suri, and three nominees from TMM, Messrs. Johnny
Lian, Ratner Vellu and William Goh. The Company will on a commercially
reasonable best effort basis raise up to US$25,000,000 which it anticipates
lending in certain tranches through TMM to the JV Company over the first 5 years
of the JV Company’s business, which is the initial intended working capital
required to install, commission, maintain and commercialize mobile digital
advertising platforms onto buses and trains and operate the Business. Out of the
US$25,000,000, US$5,000,000 is to be set aside as a contingency fund for the JV
Company’s working capital needs. During the first year of incorporation of the
JV Company, TM Mauritius is to advance US$12,270,000 to the JV Company with the
first US$1,000,000 to be provided by October 31, 2009 and a subsequent amount of
US$4,000,000 to be provided as soon as certain expenses have been incurred by
PML and certified by TM Mauritius. Additional amounts of US$1,932,500 are to be
advanced by TM Mauritius to the JV Company on a yearly basis thereafter,
however, the Board of the JV Company may determine to reduce or eliminate such
additional capital contributions by TM Mauritius depending on the amount of
revenues produced by the JV Company available to satisfy the required working
capital.
(11)
|
Recent
Accounting Pronouncements
|
In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement 133”
(“SFAS No. 161”). SFAS No. 161 enhances required disclosures
regarding derivatives and hedging activities, including enhanced disclosures
regarding how: (a) an entity uses derivative instruments; (b)
derivative instruments and related hedged items are accounted for under SFAS No.
133, “Accounting for
Derivative Instruments and Hedging Activities”; and (c) derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. Specifically, SFAS No. 161
requires:
|
-
|
disclosure
of the objectives for using derivative instruments in terms of underlying
risk and accounting designation;
|
|
-
|
disclosure
of the fair values of derivative instruments and their gains and losses in
a tabular format;
|
|
-
|
disclosure
of information about credit-risk-related contingent features;
and
|
|
-
|
cross-reference
from the derivative footnote to other footnotes in which
derivative-related information is
disclosed.
|
F-18
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
SFAS No.
161 is effective for fiscal years and interim periods beginning after November
15, 2008. Earlier application is encouraged. The
management of TechMedia does not expect the adoption of this pronouncement to
have a material impact on its financial statements.
In May
2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). SFAS No. 162 is
intended to improve financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with U.S. generally
accepted accounting principles (“GAAP”) for nongovernmental
entities.
Prior to
the issuance of SFAS No. 162, GAAP hierarchy was defined in the American
Institute of Certified Public Accountants (“AICPA”) Statement on Auditing
Standards, “The Meaning of
Present Fairly in Conformity with Generally Accept Accounting Principles”
(“SAS No. 69”). SAS No. 69 has been criticized because it is directed
to the auditor rather than the entity. SFAS No. 162 addresses these
issues by establishing that the GAAP hierarchy should be directed to entities
because it is the entity (not the auditor) that is responsible for selecting
accounting principles for financial statements that are presented in conformity
with GAAP.
The
sources of accounting principles that are generally accepted are categorized in
descending order as follows:
a)
|
FASB
Statements of Financial Accounting Standards and Interpretations, FASB
Statement 133 Implementation Issues, FASB Staff Positions, and American
Institute of Certified Public Accountants (AICPA) Accounting Research
Bulletins and Accounting Principles Board Opinions that are not superseded
by actions of the FASB.
|
b)
|
FASB
Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
Accounting Guides and Statements of
Position.
|
c)
|
AICPA
Accounting Standards Executive Committee Practice Bulletins that have been
cleared by the FASB, consensus positions of the FASB Emerging Issues Task
Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts
(EITF D-Topics).
|
d)
|
Implementation
guides (Q&As) published by the FASB staff, AICPA Accounting
Interpretations, AICPA Industry Audit and Accounting Guides and Statements
of Position not cleared by the FASB, and practices that are widely
recognized and prevalent either generally or in the
industry.
|
SFAS No.
162 is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendment to its authoritative
literature. It is only effective for nongovernmental entities;
therefore, the GAAP hierarchy will remain in SAS No. 69 for state and local
governmental entities and federal governmental entities. The
management of TechMedia does not expect the adoption of this pronouncement to
have a material impact on its financial statements.
F-19
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
In May
2008, the FASB issued FASB Statement No. 163, “Accounting for Financial Guarantee
Insurance Contracts” (“SFAS No. 163”). SFAS No. 163 clarifies
how FASB Statement No. 60, “Accounting and Reporting by
Insurance Enterprises” (“SFAS No. 60”), applies to financial guarantee
insurance contracts issued by insurance enterprises, including the recognition
and measurement of premium revenue and claim liabilities. It also
requires expanded disclosures about financial guarantee insurance
contracts.
The
accounting and disclosure requirements of SFAS No. 163 are intended to improve
the comparability and quality of information provided to users of financial
statements by creating consistency. Diversity exists in practice in
accounting for financial guarantee insurance contracts by insurance enterprises
under SFAS No. 60, “Accounting
and Reporting by Insurance Enterprises.” That diversity
results in inconsistencies in the recognition and measurement of claim
liabilities because of differing views about when a loss has been incurred under
FASB Statement No. 5, “Accounting for Contingencies”
(“SFAS No. 5”). SFAS No. 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial
obligation. It also requires disclosure about (a) the risk-management
activities used by an insurance enterprise to evaluate credit deterioration in
its insured financial obligations and (b) the insurance enterprise’s
surveillance or watch list.
SFAS No.
163 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal years,
except for disclosures about the insurance enterprise’s risk-management
activities. Disclosures about the insurance enterprise’s
risk-management activities are effective the first period beginning after
issuance of SFAS No. 163. Except for those disclosures, earlier
application is not permitted. The management of TechMedia does not
expect the adoption of this pronouncement to have material impact on its
financial statements.
On May
22, 2009, the FASB issued FASB Statement No. 164, “Not-for-Profit Entities: Mergers and
Acquisitions” (“SFAS No. 164”). Statement 164 is intended to
improve the relevance, representational faithfulness, and comparability of the
information that a not-for-profit entity provides in its financial reports about
a combination with one or more other not-for-profit entities, businesses, or
nonprofit activities. To accomplish that, this Statement establishes
principles and requirements for how a not-for-profit entity:
|
a.
|
Determines
whether a combination is a merger or an
acquisition.
|
|
b.
|
Applies
the carryover method in accounting for a
merger.
|
|
c.
|
Applies
the acquisition method in accounting for an acquisition, including
determining which of the combining entities is the
acquirer.
|
|
d.
|
Determines
what information to disclose to enable users of financial statements to
evaluate the nature and financial effects of a merger or an
acquisition.
|
This
Statement also improves the information a not-for-profit entity provides about
goodwill and other intangible assets after an acquisition by amending FASB
Statement No. 142, Goodwill
and Other Intangible Assets, to make it fully applicable to
not-for-profit entities.
F-20
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
Statement
164 is effective for mergers occurring on or after December 15, 2009, and
acquisitions for which the acquisitions date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2009. Early application is prohibited. The management of
TechMedia does not expect the adoption of this pronouncement to have material
impact on its financial statements.
On May
28, 2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“SFAS No.
165”). Statement 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be
issued. Specifically, Statement 165 provides:
|
1.
|
The
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial
statements.
|
|
2.
|
The
circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial
statements.
|
|
3.
|
The
disclosures that an entity should make about events or transactions that
occurred after the balance sheet
date.
|
In
accordance with this Statement, an entity should apply the requirements to
interim or annual financial periods ending after June 15, 2009. The
management of TechMedia does not expect the adoption of this pronouncement to
have material impact on its financial statements.
On June
9, 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets- an amendment of FASB Statement No, 140” (“SFAS
No.166”).
SFAS
No.166 revises the derecognization provision of SFAS No. 140 “Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities” and will
require entities to provide more information about sales of securitized
financial assets and similar transactions, particularly if the seller retains
some risk with respect to the assets.
It also
eliminates the concept of a "qualifying special-purpose entity."
This
statement is effective for financial asset transfers occurring after the
beginning of an entity's first fiscal year that begins after November 15,
2009. Management of TechMedia does not expect the adoption of this
pronouncement to have a material impact on its financial
statements.
In June
2009, the FASB issued SFAS 167 "Amendments to FASB Interpretation
No. 46(R)." SFAS No.167 amends certain requirements of FASB
Interpretation No. 46(R), “Consolidation of Variable Interest
Entities” to improve financial reporting by companies involved with
variable interest entities and to provide additional disclosures about the
involvement with variable interest entities and any significant changes in risk
exposure due to that involvement. A reporting entity will be required
to disclose how its involvement with a variable interest entity affects the
reporting entity's financial statements.
F-21
TECHMEDIA
ADVERTISING, INC. AND SUBSIDIARIES
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (RESTATED)
OCTOBER
31, 2009, AND 2008
(Unaudited)
This
Statement shall be effective as of the beginning of each reporting entity’s
first
annual
reporting period that begins after November 15, 2009. The management
of TechMedia does not expect the adoption of this pronouncement to have a
material impact on its financial statements.
In June
2009, the FASB issued SFAS 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles - a
replacement of FASB Statement No. 162" ("SFAS No.168"). SFAS
No.168 establishes the FASB Accounting Standards Codification (the
"Codification") to become the single official source of authoritative,
nongovernmental US generally accepted accounting principles
(GAAP). The Codification did not change GAAP but reorganizes the
literature.
SFAS
No.168 is effective for interim and annual periods ending after September 15,
2009. The management of TechMedia does not expect the adoption of
this pronouncement to have a material impact on its financial
statements.
(12)
|
Subsequent
Events
|
On
November 26, 2009, TechMedia Advertising, Inc. (the “Company”) entered into a
Funding Equity Agreement (the “FEA”) with Excel Financial Services Inc. (“EFS”)
whereby EFS will act as the syndicator for the Company for funding of an initial
amount of US$2,000,000, with an option to increase such funding up to
US$10,000,000, on or before January 22, 2010, (the “Closing Date”), by way of
the Company issuing a convertible debenture and/or share purchase warrants (the
“Debenture”) to EFS, which Debenture shall be convertible into fully paid and
non-assessable voting and equity shares of the Company at prevailing market
conditions and the discounted price of the Company’s shares at the time of
conversion.
F-22
You
should read the following plan of operation together with our financial
statements and related notes appearing elsewhere in this quarterly
report. This plan of operation contains forward-looking statements
that involve risks, uncertainties, and assumptions. The actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors.
Overview
We were
incorporated as “Ultra Care, Inc.” in the State of Nevada on January 30,
2007. Up until January 15, 2009, we were engaged in the business of
developing an industry-leading online resource for the nursing
profession. Subsequent to January 15, 2009, we changed the focus of
our business direction to that of a company engaged in selling outdoor
advertising on billboards and digital signs in India located in high traffic
locations, which locations range from public transportation vehicles, commercial
buildings, supermarkets and restaurants, by partnering with media space
owners. By doing this, we hope to reach a large spectrum of consumers
in a wide variety of locations.
On July
27, 2009, we entered into a share exchange agreement (the “Exchange Agreement”)
with TechMedia Advertising Mauritius (“TM Mauritius”), a company organized under
the laws of Mauritius, and the shareholders of TM Mauritius, whereby on August
6, 2009, the Company acquired all of the issued and outstanding shares in the
capital of TM Mauritius in exchange for issuing 24,000,000 (post forward stock
split) shares of common stock of the Company (which 24,000,000 shares of common
stock constituted in aggregate 53.4% of the issued and outstanding shares of
common stock of the Company as of such date). TM Mauritius is the
sole shareholder of TechMedia Advertising (India) Private Limited (“TM India”),
a company organized under the laws of India, which is engaged in the development
stages of selling outdoor advertising on billboards and digital signs in India
located in high traffic locations, which locations range from transportation
vehicles, commercial buildings, supermarkets and restaurants, by partnering with
media space owners.
The
foregoing description of the Exchange Agreement does not purport to be complete
and is qualified in its entirety by reference to the Exchange Agreement, which
was filed as Exhibit 10.1 to the initial Form 8-K on July 31, 2009, and which is
incorporated herein by reference.
As of
August 6, 2009, and in accordance with the Exchange Agreement, Mr. Alan Goh, our
current Secretary and director, resigned as the Company’s President, CEO, CFO
and Treasurer and appointed Mr. Johnny Lian Tian Yong as the President, CEO,
Chairman and a director of the Company, Mr. Ratner Vellu as a director of the
Company and Mr. William Goh Han Tiang as the Treasurer and a director of the
Company. The directorship positions of Messrs. Johnny Lian Tian Yong,
Ratner Vellu and William Goh did not become effective until August 14,
2009.
Concurrently
with the closing of the Exchange Agreement, by a letter agreement entered into
on July 30, 2009 (the “Letter Agreement”), between the Company and Alan Goh, the
Company’s current Secretary and a director, Mr. Alan Goh cancelled 24,000,000
shares of the 26,400,000 shares of common stock of the Company registered in his
name. Therefore, Mr. Alan Goh now only has 2,400,000 shares of common
stock of the Company registered in his name.
The
foregoing description of the Letter Agreement does not purport to be complete
and is qualified in its entirety by reference to the Letter Agreement, which was
filed as Exhibit 10.2 to the initial Form 8-K on July 31, 2009, and which is
incorporated herein by reference.
4
The table
below illustrates the corporate structure of the Company as a result of the
completion of the Exchange Agreement:
On
October 22, 2009, the Company through its wholly owned subsidiary, TM Mauritius,
entered into a Joint Venture Development and Operating Agreement (the “JV
Agreement”) with Peacock Media Ltd. (“PML”), an India corporation.
In
accordance with the JV Agreement, TM Mauritius and PML will form a new private
India company (the “JV Company”) where TM Mauritius will own 85% and PML will
own 15%. The JV Company will operate the business of displaying
mobile digital advertising platforms in public transportation vehicles such as
long-distance buses and trains in India (the “Business”). The
newly-fitted buses and trains will display third party commercial contents and
advertisements for a fee.
Under the
JV Agreement, PML will assign to the JV Company the exclusive rights to use the
license to operate the Business on 10,392 long distance buses within the Tamil
Nadu State, where PML has a five year exclusive license. The initial
Board of Directors of the JV Company will be comprised of two nominees from PML,
Messrs. Sandeep Chawla and Kuljit Suri, two nominees from TM Mauritius, Messrs.
Ratner Vellu and William Goh and one nominee from the Company, Mr. Johnny
Lian.
The
Company will on a commercially reasonable best effort basis raise up to
US$25,000,000 which it anticipates lending in certain tranches through TM
Mauritius to the JV Company over the first five years of the JV Company’s
business, which is the initial intended working capital required to install,
commission, maintain and commercialize mobile digital advertising platforms onto
buses and trains and operate the Business. Out of the US$25,000,000,
US$5,000,000 is to be set aside as a contingency fund for the JV Company’s
working capital needs. During the first year of incorporation of the
JV Company, TM Mauritius is to advance US$12,270,000 to the JV Company with the
first US$1,000,000 to be provided by October 31, 2009, and a subsequent amount
of US$4,000,000 to be provided as soon as certain expenses have been incurred by
PML and certified by TM Mauritius. Additional amounts of US$1,932,500
are to be advanced by TM Mauritius to the JV Company on a yearly basis
thereafter, however, the Board of the JV Company may determine to reduce or
eliminate such additional capital contributions by TM Mauritius depending on the
amount of revenues produced by the JV Company available to satisfy the required
working capital.
The
Company will provide management knowledge and skills to manage the operations of
the JV Company while PML will ensure the technical platforms operate smoothly as
PML is responsible for the maintenance of the technical platforms and ensuring
they remain in good working order at all times.
Upon the
JV Company reaching profitability, the profits will be used to pay its five
directors collectively a management fee equivalent to 10% of the gross profit
per quarter subject to a minimum annual fee of US$2,000,000 for the first year,
which shall be shared equally among the directors, and the repayment of any TM
Mauritius loans, and any remaining profit will be distributed to TM Mauritius
and PML as a dividend on the basis of TM Mauritius receiving 85% and PML
receiving 15%.
5
The
foregoing description of the JV Agreement does not purport to be complete and is
qualified in its entirety by reference to the JV Agreement, which was
attached as Exhibit 10.1 to the Company’s Form 8-K filed on October
26, 2009, and which is incorporated herein by reference.
Plan
of Operations
We intend
to focus on outdoor advertising and over the next few years, our focus is
expected to be in market consolidation, forming key alliances in outdoor
advertising in India. The business of the Company will be conducted
through its subsidiary, TM Mauritius, which intends to conduct its business
through the JV Company in India as well as through TM India.
Subsequent
to entering into a joint venture with PML, we intend to raise funds to equip the
buses and trains with our mobile digital advertising platforms. We
intend to cooperate closely with PML to secure further opportunities to expand
our network in order to allow us to advertise to a larger audience.
Objectives
We have
the following objectives:
1.
|
to
raise $25,000,000 through private placement equity financings with
institutions;
|
2.
|
to
equip more than 10,000 buses with digital media technologies displaying
advertisements; and
|
3.
|
to
secure opportunities to expand our network to more than 40,000 advertising
screens.
|
Limited
Operating History; Need for Additional Capital
There is
limited historical financial information about us upon which to base an
evaluation of our performance. We are in the development stage of our
business and have not generated any revenues from operations. We
cannot guarantee we will be successful in our business
operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
possible delays in the implementation of our plan of operations, and possible
cost overruns due to price and cost increases in services.
To become
profitable and competitive, we may have to capture market share by marketing the
new advertising platform to potential clients in order to create revenue. If we
are unable to raise additional equity capital to develop our business and earn
revenues, we will have to suspend or cease operations and our investors may lose
their investment.
We have
no assurance that future financings will be available to us on acceptable
terms. If financing is not available on satisfactory terms, we may be
unable to continue, develop, or expand our operations. Equity financing could
result in additional dilution to existing shareholders.
Liquidity
and Capital Resources
Our
registered independent auditors have issued a going concern
opinion. This means that there is substantial doubt that we can
continue as an on-going business for the next 12 months unless we obtain
additional capital to pay our bills. This is because we have not
generated any revenues and no revenues are anticipated until our business is
developed, we expect to provide advertising services to clients and receive
payment from such clients for our services. There is no assurance we
will ever reach this point. Accordingly, we must raise cash from
sources other than revenues. Our only other source for cash at this
time is investments by others in the Company. We must raise cash to
implement our project and stay in business.
6
As at
October 31, 2009, the Company had current assets of $2,397,948, including cash
resources of $2,206,074 and current liabilities of $91,733 providing the Company
with a positive working capital of $2,306,215, compared with a positive working
capital of $3,289,864 for the year ended July 31, 2009.
We may
not have enough money to complete our plan of operations. If it turns
out that we have not raised enough money to complete our anticipated business
development, we will try to raise additional funds from private placements or
loans. At the present time, we are in the process of attempting to
raise additional money through a private placement and there is no assurance
that we will raise additional money in the future or that future financings will
be available to us on acceptable terms. If we require additional
money and are unable to raise it, we will have to suspend or cease
operations.
During
the three month period ended October 31, 2009, we raised proceeds from the sale
of our securities as follows:
On August
12, 2009, we issued 2,275,000 shares of our common stock to 37 individuals due
to the closing of our private placement at $1.00 per unit for total gross
proceeds of $2,275,000. Each unit consists of one share of our common
stock and one-half of one share purchase warrant, with each whole warrant
entitling the holder to purchase one additional share of our common stock at
$2.00 per warrant share until two years from the date of issuance of the share
purchase warrants.
In
relation to the closing of the $1.00 per unit offering, we paid a finder’s fee
to an entity in Singapore in the amount of $227,500.
On
November 26, 2009, the Company entered into a Funding Equity Agreement (the
“FEA”) with Excel Financial Services Inc. (“EFS”) whereby EFS will act as the
syndicator for the Company for funding of an initial amount of US$2,000,000,
with an option to increase such funding up to US$10,000,000, on or before
January 22, 2010 (the “Closing Date”), by way of the Company issuing a
convertible debenture and/or share purchase warrants (the “Debenture”) to EFS,
which Debenture shall be convertible into fully paid and non-assessable voting
and equity shares of the Company at prevailing market conditions and the
discounted price of the Company’s shares at the time of
conversion. The funding arrangement will be on a private placement
basis.
The
Debenture, which still needs to be negotiated and prepared, shall:
(1)
|
have
a maximum term of not more than five (5) years from the Closing
Date;
|
(2)
|
yield
an annual equity return of no less than fifteen percent (15%);
and
|
(3)
|
be
convertible:
|
|
(a)
|
in
whole or in part, upon written notice from EFS to the Company;
or
|
|
(b)
|
automatically
without notice for the full outstanding amount (including interest) in the
event of: (i) default by the Company under the terms of the Debenture;
(ii) immediately prior to any change or acquisition of control of the
Company; (iii) the sale of all or substantially all of the assets of the
Company.
|
In
accordance with the terms of the FEA, the Company is required to pay EFS: (1) a
good faith deposit of US$100,000, which good faith deposit shall be refunded to
the Company on the Closing Date; and (2) legal and other closing costs in the
amount of EURO88,180.00 which amount is not refundable. In addition,
the Company is required to pay EFS a closing fee of 4% on any investment funds
provided to the Company by EFS.
The
Company has agreed that it will not, directly or indirectly, until November 26,
2014, solicit or attempt to solicit investments from any associates of EFS
disclosed to the Company in writing prior to the Closing Date or termination of
the FEA (the “Restrictive Covenant”).
7
Closing
of the FEA is conditional on (among other conditions precedent): (1) the parties
mutually agreeing on the final documentation of the Debenture; (2) completion of
a feasibility study report and due diligence by EFS; and (3) satisfactory
evidence that the transaction qualifies as a “private placement”.
In the
event that the parties fail to mutually agree in good faith on the final
documentation of the Debenture by January 22, 2010, the FEA shall automatically
terminate without notice or penalty except that: (1) the Company shall indemnify
and hold harmless EFS from any claims or obligations that could arise in
connection with the FEA and Debenture; and (2) the Restrictive Covenant of the
Company shall survive termination.
The FEA
is governed by and construed in accordance with the laws of the Province of
Quebec and the federal laws of Canada applicable therein and the parties have
agreed to submit to the exclusive jurisdiction of the courts of the Province of
Quebec in the district of Montreal.
The
foregoing description of the FEA does not purport to be complete and is
qualified in its entirety by reference to the FEA, which was attached as Exhibit
10.1 to the Company’s Form 8-K filed on November 30, 2009, and which is
incorporated herein by reference.
Results
of Operation
We have
not generated any revenues to date from our operations.
Stock-based
compensation: Stock-based compensation expenses were $241,570
and nil for the three months ended October 31, 2009 and 2008, respectively as
the Company provided incentive stock options to its directors, officers and
consultants during the three month period ended October 31, 2009.
Management
fees: Management expenses were $20,012 and $374 for the three
months ended October 31, 2009 and 2008 respectively. This increase
was due to the increased activity in the Company during the three months ended
October 31, 2009, relating to the new business of the Company.
Consulting
fees: Consulting expenses were $368,866 and nil for the three
months ended October 31, 2009 and 2008 respectively. This increase
was due to the increased activity in the Company during the three months ended
October 31, 2009, relating to the new business of the Company.
Salary: Salary
expenses were $66,006 and nil for the three months ended October 31, 2009 and
2008 respectively. This increase was due to the increased activity in
the Company during the three months ended October 31, 2009, relating to the new
business of the Company.
Travel: Travel
expenses were $62,235 and nil for the three months ended October 31, 2009 and
2008 respectively. This increase was due to the increased activity in
the Company during the three months ended October 31, 2009, relating to the new
business of the Company.
Professional
fee: Professional expenses were $28,695 and nil for the three
months ended October 31, 2009 and 2008 respectively. This increase
was due to the increased activity in the Company during the three months ended
October 31, 2009, relating to the new business of the Company.
Office supplies and
expenses: Office supplies and expenses were $30,917 and nil
for the three months ended October 31, 2009 and 2008
respectively. This increase was due to the increased activity in the
Company during the three months ended October 31, 2009, relating to the new
business of the Company.
Legal and accounting
fees: Legal and accounting fees were $132,672 and $1,500 for
the three months ended October 31, 2009 and 2008, respectively. This
increase was due to the increased activity of the Company during the three
months ended October 31, 2009.
Depreciation: Depreciation
was $744 and $425 for the three months ended October 31, 2009 and 2008,
respectively.
8
Net
Loss: Net loss was $985,831 and $2,971 for the three months
ended October 31, 2009 and 2008, respectively. This increase in net
loss of $982,860 resulted primarily from an increase in stock-based compensation
expenses, legal and accounting fees, management fees, consulting fees, salary,
travel expenses, professional fees, and office supplies and expenses of the
Company during the three months ended October 31, 2009.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a
“smaller reporting company” (as defined by §229.10(f)(1)), we are not required
to provide the information required by this Item.
ITEM
4T. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end
of the period covered by this report, we have carried out an evaluation of the
effectiveness of the design and operation of our company’s disclosure controls
and procedures. Under the direction of our Chief Executive Officer,
we evaluated our disclosure controls and procedures and internal control over
financial reporting and concluded that (i) there continue to be material
weaknesses in the Company’s internal controls over financial reporting, that the
weaknesses constitute a “deficiency” and that this deficiency could result in
misstatements of the foregoing accounts and disclosures that could result in a
material misstatement to the financial statements for the current period that
would not be detected, and (ii) accordingly, our disclosure controls and
procedures were not effective as of October 31, 2009.
Changes
in Internal Controls Over Financial Reporting
There was
no change in our internal controls over financial reporting that occurred during
the period covered by this report, which has materially affected, or is
reasonably likely to materially affect, our internal controls over financial
reporting.
PART
II - OTHER INFORMATION
We are
not a party to any pending legal proceeding. We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of 5% or more of our voting securities are adverse to us or
have a material interest adverse to us.
As a
“smaller reporting company” (as defined by §229.10(f)(1)), we are not required
to provide the information required by this Item.
9
Not
applicable.
None.
No
matters have been submitted to our security holders for a vote, through the
solicitation of proxies or otherwise, during the quarterly period ended October
31, 2009.
Not
applicable.
ITEM
6. EXHIBITS
(a) Exhibit
List
31.1 Certificate
pursuant to Rule 13a-14(a)
31.2 Certificate
pursuant to Rule 13a-14(a)
32.1 Certificate
pursuant to 18 U.S.C. §1350
32.2 Certificate
pursuant to 18 U.S.C. §1350
10
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
TECHMEDIA
ADVERTISING, INC.
(Registrant)
|
|
Date: January
31, 2011
|
By:/s/
Johnny Lian Tian Yong
|
Johnny
Lian Tian Yong
|
|
President,
CEO, Chairman and Director
(Principal
Executive Officer and Principal
Financial Officer) |
11