Attached files
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EX-32.2 - Organic Sales & Marketing Inc | v211475_ex32-2.htm |
EX-31.1 - Organic Sales & Marketing Inc | v211475_ex31-1.htm |
EX-32.1 - Organic Sales & Marketing Inc | v211475_ex32-1.htm |
EX-31.2 - Organic Sales & Marketing Inc | v211475_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
One)
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended December 31, 2010
¨ TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Transition Period from _______ to _______
Commission file number
0-3338
ORGANIC SALES AND MARKETING,
INC.
(Exact
Name of small business issuer as specified in its Charter)
Delaware
|
33-1069593
|
|
(State
or other Jurisdiction of Incorporation or Organization)
|
(IRS
Employer Identification
No.)
|
114 Broadway, Raynham, MA
02767
(Address
of Principal Executive Office)
(508)
823-1117
(Registrant’s
telephone number including area code)
Check
whether the issuer (1) 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.
Yes x No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller public
company.
x Smaller
Reporting Company
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No
x
The
number of shares of outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date was 13,860,722 shares of common stock,
par value $.0001, issued and outstanding as of February 8, 2011.
Organic
Sales and Marketing, Inc.
Form
10-Q
Table
of Contents
|
Page
|
||||
Part
I - Financial Information
|
||||
Item
1
|
Financial
Statements
|
3
|
||
Item
2
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
11
|
||
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
11
|
||
Item
4
|
Controls
and Procedures
|
12
|
||
Part
II - Other Information
|
||||
Item
1
|
Legal
Proceedings
|
12
|
||
Item
1A
|
Risk
Factors
|
12
|
||
Item
6
|
Exhibits
|
15
|
||
Signatures
|
16
|
2
Part
1. Financial Information
Item
1. Financial
Statements.
The
accompanying financial statements are unaudited for the interim periods, but
include all adjustments (consisting only of normal recurring adjustments), which
we consider necessary for the fair presentation of results for the three months
ended December 31, 2010 and December 31, 2009.
Moreover,
these financial statements do not purport to contain complete disclosure in
conformity with the U.S. generally accepted accounting principles and should be
read in conjunction with our audited financial statements at, and for the fiscal
year ended September 30, 2010 as contained in Registrant’s Form 10-K
filing.
3
Organic
Sales and Marketing, Inc.
Financial
Statements for the Three Months Ended
December
31, 2010 (unaudited) and 2009 (unaudited)
4
CONTENTS
|
|
Balance
Sheets
|
6
|
Statements
of Operations
|
8
|
Statements
of Cash Flows
|
9
|
Notes
to the Financial Statements
|
10
|
5
ORGANIC
SALES AND MARKETING, INC.
Balance
Sheets
ASSETS
December 31,
|
September 30,
|
|||||||
2010
|
2010
|
|||||||
(Unaudited)
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 24,881 | $ | 46,237 | ||||
Accounts
receivable, net
|
23,341 | 22,939 | ||||||
Inventories
|
80,691 | 90,797 | ||||||
Prepaid
expense
|
4,235 | 16,160 | ||||||
Total
Current Assets
|
133,148 | 176,133 | ||||||
PROPERTY
AND EQUIPMENT, NET
|
3,690 | 4,481 | ||||||
OTHER
ASSETS
|
||||||||
Deposits
|
200 | 200 | ||||||
Total
Other Assets
|
200 | 200 | ||||||
TOTAL
ASSETS
|
$ | 137,038 | $ | 180,814 |
The
accompanying notes are an integral part of these financial
statements.
6
ORGANIC
SALES AND MARKETING, INC.
Balance
Sheets (Continued)
LIABILITIES AND STOCKHOLDERS'
(DEFICIT)
December 31,
|
September 30,
|
|||||||
2010
|
2010
|
|||||||
(Unaudited)
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable-trade
|
$ | 538,848 | $ | 523,598 | ||||
Accounts
payable-related party
|
22,943 | 19,098 | ||||||
Accrued
expenses
|
5,004 | 5,444 | ||||||
Accrued
interest payable
|
97,844 | 85,347 | ||||||
Line
of credit
|
62,632 | 67,387 | ||||||
Notes
payable - related parties
|
454,394 | 439,334 | ||||||
Total
Current Liabilities
|
1,181,665 | 1,140,208 | ||||||
Total
Liabilities
|
1,181,665 | 1,140,208 | ||||||
COMMITMENTS
|
- | - | ||||||
STOCKHOLDERS'
(DEFICIT)
|
||||||||
Common
stock, $0.0001 par value; 100,000,000 shares authorized, 13,839,494 and
13,709,494 shares issued and outstanding, respectively
|
1,384 | 1,371 | ||||||
Additional
paid-in capital
|
6,587,953 | 6,493,112 | ||||||
Accumulated
(Deficit)
|
(7,633,964 | ) | (7,453,877 | ) | ||||
Total
Stockholders' (Deficit)
|
(1,044,627 | ) | (959,394 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
$ | 137,038 | $ | 180,814 |
The
accompanying notes are an integral part of these financial
statements.
7
Statements
of Operations
For the Three Months Ended
|
||||||||
December 31,
|
||||||||
2010
|
2009
|
|||||||
REVENUES
|
||||||||
Product
sales, net
|
$ | 26,931 | $ | 42,974 | ||||
Radio
advertising
|
4,500 | 4,845 | ||||||
Total
Revenues
|
31,431 | 47,819 | ||||||
COST
OF SALES
|
26,125 | 39,257 | ||||||
GROSS
PROFIT
|
5,306 | 8,562 | ||||||
OPERATING
EXPENSES
|
||||||||
Advertising
expense
|
30,760 | 19,190 | ||||||
Payroll
and compensation expense
|
73,133 | 59,589 | ||||||
Selling
expense
|
12,048 | 21,161 | ||||||
General
and administrative
|
34,353 | 43,390 | ||||||
Legal
and accounting
|
36,226 | 53,962 | ||||||
Total
Operating Expenses
|
186,520 | 197,292 | ||||||
LOSS
FROM OPERATIONS
|
(181,214 | ) | (188,730 | ) | ||||
OTHER
INCOME (EXPENSE)
|
||||||||
Interest income
|
- | 277 | ||||||
Interest
expense
|
(13,873 | ) | (17,033 | ) | ||||
Other
income
|
15,000 | - | ||||||
Total
Other Income (Expense)
|
1,127 | (16,756 | ) | |||||
NET
LOSS BEFORE INCOME TAXES
|
(180,087 | ) | (205,486 | ) | ||||
INCOME
TAX EXPENSE
|
- | - | ||||||
NET
LOSS
|
$ | (180,087 | ) | $ | (205,486 | ) | ||
LOSS
PER SHARE-
|
||||||||
Basic
and Diluted
|
$ | (0.01 | ) | $ | (0.02 | ) | ||
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING-
|
||||||||
Basic
and Diluted
|
13,802,646 | 10,117,055 |
The
accompanying notes are an integral part of these financial
statements.
8
ORGANIC
SALES AND MARKETING, INC.
Statements
of Cash Flows
For
the Three Months Ended
|
||||||||
December
31,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
loss
|
$ | (180,087 | ) | $ | (205,486 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
expense
|
791 | 1,225 | ||||||
Shares
issued for services rendered
|
- | - | ||||||
Valuation
of options and warrants granted
|
81,854 | 55,883 | ||||||
Change in operating assets and
liabilities:
|
||||||||
Accounts
receivable-trade
|
(402 | ) | (9,555 | ) | ||||
Inventories
|
10,106 | 19,092 | ||||||
Prepaid
expense
|
11,925 | (13,467 | ) | |||||
Accounts
payable-trade
|
15,250 | (36,252 | ) | |||||
Accounts
payable-related party
|
3,845 | 9,872 | ||||||
Cash
overdraft
|
- | 31,929 | ||||||
Accrued
expenses
|
(440 | ) | 318 | |||||
Accrued
interest payable
|
12,497 | 12,892 | ||||||
Net
Cash Used in Operating Activities
|
(44,661 | ) | (133,549 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
- | - | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from issuance of common stock
|
13,000 | 30,000 | ||||||
Payments
on line of credit
|
(4,755 | ) | (3,680 | ) | ||||
Proceeds
from notes payable - related party
|
16,000 | 110,000 | ||||||
Payments
on notes payable - related party
|
(940 | ) | - | |||||
Net
Cash Provided by Financing Activities
|
23,305 | 136,320 | ||||||
NET
INCREASE (DECREASE) IN CASH
|
(21,356 | ) | 2,771 | |||||
CASH,
BEGINNING OF PERIOD
|
46,237 | 24,547 | ||||||
CASH,
END OF PERIOD
|
$ | 24,881 | $ | 27,318 | ||||
SUPPLEMENTAL
DISCLOSURES:
|
||||||||
Cash
paid for interest
|
$ | 7,776 | $ | 4,142 | ||||
Cash
paid for taxes
|
$ | - | $ | - | ||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Valuation
of options and warrants granted
|
$ | 81,854 | $ | 55,883 |
The
accompanying notes are an integral part of these financial
statements.
9
ORGANIC
SALES AND MARKETING, INC.
Notes
to the Financial Statements
December
31, 2010 (Unaudited)
Note 1 – Basis of Financial
Statement Presentation
The
accompanying unaudited financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim financial statements include normal
recurring adjustments and reflects all adjustments, which in the opinion of
management, are necessary for a fair presentation of such financial statements.
Although management believes the disclosures and information presented are
adequate to make the information not misleading, it is suggested that these
interim financial statements be read in conjunction with the Company’s audited
financial statements and notes thereto included in its September 30, 2010 Form
10K filing. Operating results for the three months ended December 31, 2010 are
not necessarily indicative of the results that may be expected for the fiscal
year ending September 30, 2011.
Note 2 – Significant
Transactions
Notes
Payable – Related Party
Advances
by the CEO to the Company of $16,000 during quarter ending December 31, 2010
have been added to an outstanding promissory note. As of
December 31, 2010 total principal owed on the note was $254,642 and accrued
interest owed was $11,108.
Equity
Transactions
On May 1,
2010 the Company commenced a private stock offering, whereby it authorized the
issuance of 5,000,000 shares of its common stock for a total raise of
$500,000. As of December 31, 2010 $105,005 of the $500,000 was raised
and 1,050,050 shares of common stock were issued.
Stock
Options
During
the period 4,000 options granted. Total outstanding common stock
options as of December 31, 2010 were 2,333,145. Total exercisable
were 1,890,641 at a weighted average exercise price of $0.53.
Note 3 – Going
Concern
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company is poorly capitalized and has had
recurring operating losses, negative cash flows from operations and recurring
negative working capital for the past several years and is dependent upon
financing to continue operations. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. It is management's plan to continue to implement their
strategy of acquiring new customers and accepting reorders from existing
customers. As the Company's revenues become more established, management expects
to report net income. With the expansion of sales, management believes that the
Company will eventually generate positive cash flow from operations. In the
interim, management believes that shortfalls in cash flow will be satisfied with
funds raised from bridge loans, convertible debt and additional private stock
offerings that are in compliance with Securities and Exchange Commission rules
and regulations governing the same.
Note 4 – Subsequent
Events
Subsequent
to December 31, 2010 and through the date that the financial statements were
issued the Company issued an additional 20,000 shares of common stock as part of
the ongoing private stock offering, for an additional $2,000 of the
$500,000.
Organic
Sales and Marketing, Inc. has evaluated subsequent events for the period
December 31, 2010 through the date that the financial statements were issued and
concluded there were no other events or transactions occurring during this
period that required recognition of disclosure in its financial
statements.
10
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
Liquidity
and Capital Resources
Cash was
$24,881 at December 31, 2010 compared to $46,237 as of FYE September 30, 2010 or
a decrease of $21,356. Net Cash Used in Operating Activities decreased by 67% or
$88,888 from the prior fiscal year end. The net loss of the Company
of $180,087 during the first quarter of the current fiscal year is offset, in
part, by stock issuances for cash and options granted during the period in the
amount of $94,841. Net Cash Provided by Financing Activities was
$23,305 during the current quarter compared to $136,320 during the same period
in the prior year or a decrease of $113,015 or 83%. This was
partially due to decreased proceeds from issuance of common stock, but mainly
due to a significant decrease in borrowings from related parties.
Results
of Operations
Three
Months Ended December 31, 2010 Compared to the Three Months Ended December 31,
2009
Revenues
for the quarter totaled $31,431 compared to $47,819 for the same period in the
prior year. The decrease in sales is mainly due to the company’s efforts to
discontinue unprofitable product lines and a decrease in the threat of H1N1 and
Flu virus which in the previous year to date contributed to significant
percentage of sales in the Company’s hand sanitizer
products. Gross profit was stable around 20% in both
periods.
Operating
expenses decreased by 5.5% during the quarter compared to the same period in the
prior year, primarily due ongoing cost cutting measures in both selling expenses
and general and administrative costs.
Stock
Options Expense, a non-cash operating expense, for options vested during the
periods presented are included in the Operating Expenses in the following line
items:
2010
|
2009
|
|||||||
Payroll
and Compensation Expense
|
$ | 48,358 | $ | 23,465 | ||||
Legal
and Accounting
|
33,496 | 32,418 | ||||||
$ | 81,854 | $ | 55,883 |
Other
Income has increased by $15,000 due to a sales and marketing agreement with a
major vendor as discussed in the Company’s 8-K filing dated February 8th
2011.
Interest
expense decreased 18.6% in primarily due to the Notes Payable - Related Party
decreases as discussed in the footnotes to the Financial Statements included in
this filing.
Forward
Looking Statements
Please
refer to Part II, Item 7 of Form 10K for the year ended September 30, 2010,
which is incorporated by reference herein.
Item
3. Quantitative and Qualitative
Disclosures About Market Risk
We
believe that there have been no significant changes in our market risk exposures
for the three months ended December 31, 2010.
11
Item
4. Controls and
Procedures
We
maintain disclosure controls and procedures, as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), that are designed to provide reasonable assurance
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC rules and forms, and that such
information is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required financial
disclosures. Because of inherent limitations, our disclosure controls
and procedures, no matter how well designed and operated, can provide only
reasonable, and not absolute, assurance that the objectives of such disclosure
controls and procedures are met.
As of the
end of the period covered by this Report we conducted an evaluation, under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rules 13a-15(b) and
15d-15(b). Based on this evaluation, our principal executive officer
and principal financial officer concluded that our disclosure controls and
procedures were ineffective as of December 31, 2010.
There was
no change in our internal control over financial reporting during the three
months ended December 31, 2010, that materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
Part
II – Other Information
Item
1. Legal
Proceedings
Registrant
is the defendant in a lawsuit commenced by Entercom Boston LLC in Superior
Court, Suffolk, MA. (CA 10-1652E) on May 17, 2010. Plaintiff alleges that
Registrant owes approximately $64,000 for advertising and air time.
OSM has asserted a counterclaim, asserting breach of contract and other
defenses.
Registrant
has also been sued in New Bedford, MA. Civil Court, Docket no. 201033CV001618,
by Saga Communications of New England, LLC. d/b/a WZAN-AM Radio for $4,233 in
alleged unpaid advertising and air time. The suit was commenced
on October 20, 2010 and Registrant has counterclaimed for breach of
contract.
Item
1A. Risk
Factors.
Risks Related To Our
Business And Operations
· Economic or industry-wide factors
relevant to the Company:
Should
consumer interest in “organic” or “natural” products diminish or discontinue;
should there be a natural disaster that adversely impacts garden center product
sales such as extreme weather conditions throughout the United
States; should there be a shortage of suppliers in the enzyme technology that is
used in some of our products or should there be a slower than anticipated
roll-out of products to customers due to such external factors, the
Company’s ability to realize a profit and yield a positive cash flow from
operations as quickly as we anticipate could be adversely impacted.
· Material opportunities,
challenges:
Should
our suppliers not be able to deliver in the quantities the Company needs at any
given time in order to fulfill orders; should our contract
manufacturer not be able to deliver finished goods in a timely manner or suffer
any type of physical plant disaster, labor strike or shortage, it would
adversely impact the Company’s’ business. Difficult challenges may be
incurred as more competitors, who are more heavily financed than we are, enter
into the market and create pricing issues which could adversely impact the
Company’s operations.
12
Risks in short and long term
and the actions we are taking to address them:
Undercapitalization
could impose growth restraints on the Company preventing us from entering other
markets and regions, as planned. The Company will continue to
actively pursue private placement investor funding as allowed by SEC regulations
and to satisfy debt and payables with stock, stock options and/or warrants as a
means of capitalizing the Company until operations are sufficient enough to be
self-sustaining. There can be no assurance, however, that these activities will
be successful.
If Sam
Jeffries were unable to host and produce the weekly talk show, this could have
an adverse impact on the show’s educational and promotional programming, which
is considered an essential part of our advertising and marketing plan. The
present co-hosts, Jim Zoppo and Layanee DeMerchant, could produce and conduct
the show in Sam Jeffries absence. In addition, Jim Zoppo is a well
respected, well known horticulturist and radio talk show host in his own
right.
Although
unlikely, interest in organics could diminish which would have an adverse effect
on the popularity of the radio show. To mitigate this possibility, “home
remedy”, “how to” and “natural and organic health-care alternative segments are
being added to the shows programming to expand listener interest and extend the
seasonality of the show. The Company also has plans to ultimately reach a
national audience by franchising the Garden Guys concept throughout the country
by having local talk shows discuss organics and lawn and gardening techniques
and problems indigenous to each of those regions.
· Reliance on Investment
Funds
We just
recently started to receive meaningful cash flow from customer
sales. We expect that for the short term future, we will still rely
on external funding sources, primarily equity capital, to finance our
operations. While we believe that increasing cash flow from customer
sales will ultimately provide adequate funds to permit us to become
self-sufficient, possibly, by the end of 2010; until then, we will continue to
require additional capital from investors. If we were unable to obtain such
funding from outside sources, we would likely be forced to reduce the level of
our operations and business failure could become a real
possibility.
· Reliance on Management
Team
As stated
above, the Company relies heavily upon a small team of full-time officers and
consultants. It has “key man” life insurance on the CEO, Samuel Jeffries that
would compensate us in the event of his demise. Sam Jeffries continued
involvement is deemed especially critical to our marketing efforts. The loss of
Sam Jeffries or one of several key officers or consultants could have an adverse
impact on the Company’s chances for success. At present, “key man” insurance
coverage is not being pursued on the other full-time officers due to
cost.
Risks Related to Ownership
of Our Stock
· Trading Market
Our stock
officially began trading on Monday, May 5, 2008 on the Over The Counter
Electronic Bulletin Board under the trading symbol; OGSM. Even with our shares
being traded publicly, there is a substantial “overhang” of outstanding shares
that would be eligible for sale under Rule 144. Such sales, if they were to
occur, could tend to suppress the market value of our shares for some
time.
13
· No Dividends in Foreseeable
Future
Our Board
of Directors determines whether to pay cash dividends on our issued and
outstanding shares. Such determination will depend upon our future earnings, our
capital requirements, our financial condition and other relevant factors. At
present, our board is not intending to declare any dividends in the foreseeable
future. Earnings, once achieved, are expected to be retained to help finance the
growth of our business and for general corporate purposes.
· Provisions of our Certificate of
Incorporation, By-laws and Delaware Law
Provisions
of our Certificate of Incorporation, By-laws and Delaware law may make it more
difficult for someone to acquire control of us or for our stockholders to remove
existing management, and might discourage a third party from offering to acquire
us, even if a change in control or in management would be beneficial to our
stockholders. For example, our Certificate of Incorporation allows us to issue
different series of shares of common stock without any vote or further action by
our stockholders and our Board of Directors has the authority to fix and
determine the relative rights and preferences of such series of common stock. As
a result, our Board of Directors could authorize the issuance of a series of
common stock that would grant to holders the preferred right to our assets upon
liquidation, the right to receive dividend payments before dividends are
distributed to the holders of other common stock and the right to the redemption
of the shares, together with a premium, prior to the redemption of other series
of our common stock.
14
Item
6. Exhibits
31.1
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Executive Officer.
|
|
31.2
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Financial Officer.
|
|
32.1
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Executive Officer.
|
|
32.2
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the
Company's Chief Financial
Officer.
|
15
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ORGANIC SALES AND MARKETING,
INC.
|
|
|||
(Registrant)
|
|
|||
February
14, 2011
|
/s/ Samuel
F.H. Jeffries
|
|||
Date
|
SAMUEL
F.H. JEFFRIES
|
|||
CEO
AND CHAIRMAN
|
||||
February
14, 2011
|
/s/ Keith D. Lowey
|
|||
Date
|
KEITH
D. LOWEY
|
|||
CHIEF
FINANCIAL
OFFICER
|
16