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EX-31.1 - CERTIFICATION - Blink Technologies, Inc.f10q1210ex31i_epunk.htm
EX-32.1 - CERTIFICATION - Blink Technologies, Inc.f10q1210ex32i_epunk.htm
EX-32.2 - CERTIFICATION - Blink Technologies, Inc.f10q1210ex32ii_epunk.htm
EX-31.2 - CERTIFICATION - Blink Technologies, Inc.f10q1210ex31ii_epunk.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 
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
 
ePunk, Inc.
(formerly Truesport Alliances & Entertainment, Ltd.)
(formerly Sewell Ventures, Inc.)
 (Exact name of registrant as specified in Charter)

 
Nevada
 
333-147394
 
26-1395403
(State or other jurisdiction of
incorporation or organization)
 
(Commission File No.)
 
(IRS Employee Identification No.)

34105 Pacific Coast Highway
Dana Point, CA 92629
 (Address of Principal Executive Offices) 

 
(949) 429-7868
 (Issuer Telephone number) 
 
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 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 (§232.405 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 larger accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)
 
Large accelerated filer            o
Accelerated filer o
 Non-accelerated filer             o
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 o No x

There were 25,058,534 shares of common stock outstanding as of August __, 2011.  The shares of common stock outstanding reflect the 100:1 reverse split effected by a majority of the shareholders on June 20, 2011 and subsequent issuance of 24,750,000 shares on July 8, 2011.  The registrant’s common stock is listed under the symbol “PUNK.OB”.

 
 

 
 
ePunk, Inc.
(formerly Truesport Alliances & Entertainment, Ltd.)
(formerly Sewell Ventures, Inc.)
FORM 10-Q
TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION
     
Item 1.
Financial Statements
 
 
Unaudited Consolidated Balance Sheets as of December 31, 2010 and September 30, 2010
1
 
Unaudited Consolidated Statements of Operations for the Three Months Ended December 31, 2010 and 2009
2
 
Unaudited Consolidated Statement of Stockholders’ Deficit for the Three Months Ended December 31, 2010
3
 
Unaudited Consolidated Statements of Cash Flows
for the Three Months Ended  December 31, 2010 and 2009
4
 
Unaudited Notes to the Consolidated Financial Statements
5
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
17
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
22
Item 4.
Control and Procedures
22
     
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
25
Item 1A.
Risk Factors
25
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
Item 3.
Defaults Upon Senior Securities
25
Item 4.
Removed and Reserved
25
Item 5.
Other Information
25
Item 6.
Exhibits
25
Signatures
 
26

 
 

 
 
Item 1.  Financial Statements.
 
ePunk, Inc.
           
(formerly Truesport Alliances & Entertainment, Ltd.)
           
(formerly Sewell Ventures, Inc.)
           
Unaudited Consolidated Balance Sheets
 
             
   
December 31,
   
September 30,
 
   
2010
   
2010
 
ASSETS
           
Current assets:
           
Cash
  $ -     $ -  
Assets of discontinued operations (Note B)
    873,761       909,954  
                 
Total current assets
    873,761       909,954  
                 
Total assets
  $ 873,761     $ 909,954  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Related party convertible notes payable - current  (Note C)
    351,490       167,037  
Liabilities of discontinued operations (Note B)
    1,404,133       1,296,659  
                 
Total current liabilities
    1,755,623       1,463,696  
Related party convertible notes payable (Note C)
    -       180,500  
                 
Total liabilities
    1,755,623       1,644,196  
                 
Commitments and contingencies
               
                 
Stockholders' deficit (Note D):
               
Preferred stock, $0.0001 par value; 25,000,000 authorized; none issued and outstanding
    -       -  
Common stock, $0.0001 par value; 100,000,000 shares authorized; issued and outstanding 308,534 at December 31, 2010 and September 30, 2010.
    31       31  
Additional paid-in capital
    693,218       693,218  
Accumulated deficit
    (1,575,111 )     (1,427,491 )
Total stockholders' deficit
    (881,862 )     (734,242 )
Total liabilities and stockholder's deficit
  $ 873,761     $ 909,954  
                 
The accompanying notes are an integral part of these financial statements
 
 
 
1

 
 
ePunk, Inc.
           
(formerly Truesport Alliances & Entertainment, Ltd.)
           
(formerly Sewell Ventures, Inc.)
           
Unaudited Consolidated Statements of Operations
           
For the Three Months Ended December 31, 2010 and 2009
 
             
   
Three Months Ended
 
   
December 31,
 
   
2010
   
2009
 
Net sales
  $ -     $ -  
Cost of sales
    -       -  
Gross margin
    -       -  
                 
Operating expenses
               
General and administrative
    3,400       298  
      3,400       298  
Operating (loss)
    (3,400 )     (298 )
Non-operating (expense) income:
               
Interest expense
    (4,467 )     -  
      (4,467 )     -  
Loss from continuing operations before income taxes
    (7,867 )     (298 )
Income tax provision (benefit)
    -       -  
Loss from continuing operations
    (7,867 )     (298 )
Loss from discontinued operations
    (139,753 )     (14,346 )
Net Loss
  $ (147,620 )   $ (14,644 )
                 
Net income (loss) per common share:
               
Basic:
               
   Income (loss) from continuing operations
  $ (0.03 )   $ (0.00 )
   Income (loss) from discontinued operations
    (0.45 )     (0.07 )
   Net income (loss) per share
  $ (0.48 )   $ (0.07 )
                 
Weighted average common shares outstanding basic
    308,534       216,000  
                 
                 
The accompanying notes are an integral part of these financial statements
 
                 
 
 
2

 
 
ePunk, Inc.
                                   
(formerly Truesport Alliances & Entertainment, Ltd.)
                               
(formerly Sewell Ventures, Inc.)
                                   
Unaudited Consolidated Statement of Stockholder's Equity
                         
For the Three Months Ended December 31, 2010
                               
                                     
               
Additional
   
Stock
         
Total
 
   
Common stock
   
paid-in
   
Subscriptions
   
Accumulated
   
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
Receivable
   
Deficit
   
Deficit
 
 Balance, September 30, 2010
    308,534     $ 31     $ 693,218     $ -     $ (1,427,491 )   $ (734,242 )
                                                 
 Net loss
    -       -       -       -       (147,620 )     (147,620 )
 Balance, December 31, 2010
    308,534     $ 31     $ 693,218     $ -     $ (1,575,111 )   $ (881,862 )
                                                 
                                                 
The accompanying notes are an integral part of these financial statements
 
 
 
3

 
 
ePunk, Inc.
           
(formerly Truesport Alliances & Entertainment, Ltd.)
           
(formerly Sewell Ventures, Inc.)
           
Unaudited Consolidated Statements of Cash Flows
           
For the Three Months Ended December 31, 2010 and 2009
 
             
   
Three Months Ended
 
   
December 31,
 
   
2010
   
2009
 
Cash flows from operating activities:
           
Net loss from continuing operations
  $ (7,867 )   $ (298 )
Income (loss) from discontinued operations
    (139,753 )     (14,346 )
Income (loss) from continuing operations
    (147,620 )     (14,644 )
Reconciliation to net cash provided by (used in)
               
   continuing operations:
               
Depreciation and amortization
    -       -  
Changes in certain assets and liabilities:
               
Accrued interest payable
    4,467       -  
Net cash provided (used) by operating activities of continuing operations
    (3,400 )     (298 )
Net cash provided (used) by operating activities of discontinued operations
    (13,265 )     243,630  
Net cash provided (used) by operating activities
    (16,665 )     243,332  
Cash flows from investing activities:
               
Capital expenditures, net
    -       -  
Loans to related parties
    -       -  
Net cash provided (used) by investing activities of continuing operations
    -       -  
Net cash provided (used) by investing activities of discontinuing operations
    15,854       (189,240 )
Net cash provided (used) by investing activities
    15,854       (189,240 )
Net cash provided by financing activities:
               
Proceeds from the issuance of common stock
    -       -  
Borrowings on convertible notes payable - related parties
    -       -  
Net cash provided (used) by financing activities from continuing operations
    -       -  
Net cash provided (used) by financing activities from discontinued operations
    -       164,020  
Net cash provided (used) by financing activities
    -       164,020  
Net increase in cash
    (811 )     218,112  
Cash - beginning of period
    -       -  
Cash of discontinued operations - beginning of period
    2,815       4,624  
Less cash of discontinued operations - end of period
    (2,004 )     (222,736 )
Cash - end of period
  $ -     $ -  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
               
CASH PAID DURING THE YEAR FOR:
               
Income taxes
  $ -     $ -  
Interest
  $ -     $ -  
                 
The accompanying notes are an integral part of these financial statements
 
                 
 
 
4

 
 
ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
Note A-Organization and Summary Of Significant Accounting Policies

Organization
ePunk, Inc. (the “Company”)(formerly Truesport Alliances & Entertainment, Ltd.) (formerly Sewell Ventures, Inc.) was incorporated under the laws of the State of Delaware on April 27, 2007 to search for investment opportunities.

On December 16, 2009, the Company acquired Seven Base Consulting, LLC, d.b.a. “7Base” a privately owned Nevada limited liability company (“7Base”), pursuant to an Acquisition Agreement (the “Exchange”). 7Base was organized under the laws of the State of Nevada on October 17, 2008. 7Base is a diversified company engaged in the business of designing, manufacturing, selling, distributing, and licensing to others the right to resell high quality, branded apparel, sporting goods, fitness equipment, merchandise, training centers and events under their own brand image. In addition, 7Base generates additional revenues through the sale of consulting, media, and entertainment services related to the mixed martial arts industry. Upon consummation of the Exchange, the Registrant adopted the business plan of 7Base.

Pursuant to the terms of the Exchange, the Company acquired 7Base in exchange for an aggregate of 20,000,000 newly issued shares (the “Exchange Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), resulting in an aggregate of 29,200,000 shares of the Company common stock issued and outstanding. As a result of the Exchange, 7Base became a wholly-owned subsidiary of the Company. The Company shares were issued to the members of 7Base on a pro rata basis, on the basis of the membership interests of 7Base held by such 7Base members at the time of the Exchange. 

As a result of the ownership interests of the former shareholders of 7Base, for financial statement reporting purposes, the merger between the Company and 7Base was treated as a reverse acquisition with 7Base deemed the accounting acquirer and the Company deemed the accounting acquiree under the purchase method of accounting in accordance with paragraph 805-40-05-2 of the FASB Accounting Standards Codification. The reverse merger was deemed a capital transaction and the net assets of 7Base (the accounting acquirer) were carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of 7Base which are recorded at historical cost. The equity of the Company is the historical equity of 7Base retroactively restated to reflect the number of shares issued by the Company in the transaction.

On January 15, 2010, the Issuers name was changed with the State of Delaware from Sewell Ventures, Inc. to Truesport Alliances, Ltd., and on January 29, 2010, the Company changed its state of incorporation to the State of Nevada and restated the articles of incorporation changing the name to Truesport Alliances & Entertainment, Ltd.

On April 22, 2011, the Company and Seven Base Consulting, LLC entered into an Agreement and Plan of Reorganization whereby the Company divested all Seven Base Consulting, LLC business related assets, liabilities and rights to the operation of the Seven Base Consulting, LLC business to Seven Base Consulting, LLC in exchange for the return of 9,000,000 shares of Truesport Alliances & Entertainment, Ltd. Common stock held by Seven Base Consulting, LLC members.  As a result of this transaction all the Company’s assets were transferred and the Company kept certain notes payable totaling approximately $359,000.  Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 205-20, Discontinued Operations, our fiscal year 2010 financial statement amounts have been reclassified to reflect the impact of the discontinued operations of our 7Base business activities, which was the sole focus of the Company during 2010.  Unless otherwise noted, the information provided within our MD&A reflects only the continued operations of our business.

 
5

 
 
ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
Note A-Organization and Summary Of Significant Accounting Policies (Continued)

Organization (Continued)

On June 15, 2011, Excelsior Management, LLC, (“Seller”) as agent for the beneficial owners of a total of twenty million two hundred and eighty five thousand one hundred sixty seven (20,285,167) shares of common stock (the “Common Shares”),  of Truesport Alliances & Entertainment, Ltd. (now known as ePunk, Inc.), (the “Company”), entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Richard Jesse Gonzales, Justin Matthew Dornan, and Frank J. Drechsler (collectively referred to as the “Purchaser”) for the sale and purchase of the Common Shares.  As a result of the execution of the Stock Purchase Agreement, the Seller sold, 65.75% of the issued and outstanding shares of common stock of the Company to the Purchaser in exchange for $23,451.97.  Concurrently with the closing of the Stock Purchase Agreement, Scott Ence, resigned from his positions as the Company’s President, Chief Executive Officer, Treasurer, Secretary, and Chairman of the Board of Directors and Brent Stuchlik resigned from his position as a Director of the Company.  On June 20, 2011 a majority of the shareholders of the Company approved the appointment of Richard Jesse Gonzales, Justin Matthew Dornan, and Frank J. Drechsler to the Board of Directors. In addition, at such time, Richard Jesse Gonzales was appointed the Company’s President and Chief Executive Officer, Justin Matthew Dornan as Treasurer, and Frank J. Drechsler as Secretary.  None of the appointed directors or officers entered into an employment agreement with the Company, nor will any be compensated for their services as officers or directors of the Company.

On June 20, 2011, the board of directors and a majority of the shareholders of the Company approved the name change of the Company from TrueSport Alliance & Entertainment, Ltd. to ePunk, Inc. On June 20, 2011, the Company amended Article 1 of its Articles of Incorporation to change the Company’s name to ePunk, Inc.

On June 20, 2011, the shareholders and the board of directors of ePunk authorized a 100 for 1 reverse stock split. FINRA approved the reverse split on June 28, 2011 and declared the reverse split effective as of July 5, 2011.

On June 30, 2011, The board and majority of the shareholders of the Company approved the issuance of 24,750,000 shares of common stock (post reverse split) in exchange for 100% of the issued and outstanding capital stock of Punk Industries, Inc. causing Punk Industries, Inc. to become a wholly owned subsidiary of the Company.  Punk Industries, Inc. was formed in February 2011 to develop off-road vehicle distribution.  The Merger will be accounted for as a “reverse merger,” as the stockholders of Punk Industries, Inc. owned a majority of the outstanding shares of ePunk, Inc. common stock immediately following the Merger.  Punk Industries, Inc. was deemed to be the acquirer in the reverse merger.  Consequently, the assets and liabilities and the historical operations of Punk Industries prior to the Merger will be reflected in the financial statements at the historical cost basis of Punk Industries, Inc.  Our consolidated financial statements after completion of the Merger will include the assets and liabilities of both ePunk, Inc. and Punk Industries, Inc., the historical operations of Punk Industries, Inc. and our ePunk, Inc. operations from the Effective Date of the Merger.  We will account for the merger under recapitalization accounting whereby the equity of the acquiring enterprise (Punk Industries, Inc.) will be presented as the equity of the combined enterprise and the capital stock account of the acquiring enterprise is adjusted to reflect the par value of the outstanding stock of the legal acquirer (ePunk, Inc.) after giving effect to the number of shares issued in the business combination.  Shares retained by the legal acquirer (ePunk, Inc.) are reflected as an issuance as of the reverse merger date (June 30, 2011) for the historical amount of the net assets of the acquired entity.
 
 
6

 

ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009


Note A-Organization and Summary Of Significant Accounting Policies (Continued)
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern.  In the course of funding development activities and sales initiatives, the Company has sustained operating losses and has an accumulated deficit of $1,575,111 and $1,427,491 at December 31, 2010 and September 30, 2010, respectively.  In addition, the Company has negative working capital of $881,862 and $553,742 at December 31, 2010 and September 30, 2010, respectively.

The Company has and will continue to use significant capital to commercialize its products.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of their common stock.  There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Accounting estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.  Cash and cash equivalents may at times exceed federally insured limits.  To minimize this risk, the Company places its cash and cash equivalents with high credit quality institutions.

Accounts Receivable
Accounts receivable are reported at the customers' outstanding balances.  The Company does not have a history of significant bad debt and has not recorded any allowance for doubtful accounts.  Interest is not accrued on overdue accounts receivable.  The Company evaluates receivables on a regular basis for potential reserve.

Fixed assets
Fixed assets are stated at cost.  Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed.  At the time fixed assets are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts.  Gains or losses from retirements or sales are credited or charged to income.

Depreciation of fixed assets is provided on the straight-line method over the estimated useful lives of the assets.    The estimated useful lives used are 3 years for computer equipment, office equipment and software.  Accelerated methods of depreciation of fixed assets are used for income tax purposes.

Revenue recognition policy
Revenue for our services is recognized when all of the following criteria are satisfied: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectibility is reasonably assured; and (iv) services have been performed.

Deferred Revenue: Revenue is deferred for any undelivered elements and is recognized upon product delivery or when the service has been performed.
 
 
7

 

ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009


Note A-Organization and Summary Of Significant Accounting Policies (Continued)

Sales and marketing costs
 
Sales and marketing expenses include advertising expenses, seminar expenses, commissions and personnel expenses for sales and marketing.  Marketing and advertising costs to promote the Company's products and services are expensed in the period incurred.

Fair Value of Financial Instruments
The Company’s financial instruments include cash and accounts receivable. The carrying amount of these financial instruments has been estimated by management to approximate fair value.

 “Disclosures about Fair Value of Financial Instruments,” requires disclosures of information regarding the fair value of certain financial instruments for which it is practicable to estimate the value. For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale of liquidation.

The company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
 
Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. We have no Level 1 instruments as of December 31, 2010.

Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies and commodities. We have no Level 2 instruments as of December 31, 2010.

Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. We have no Level 3 instruments as of December 31, 2010.

Research and Development
Expenses related to present and future products are expensed as incurred.

Earnings (Loss) per common share
The Company reports both basic and diluted earnings (loss) per share.  Basic loss per share is calculated using the weighted average number of common shares outstanding in the period.  Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using the “treasury stock” method and convertible securities using the “if-converted” method.

Impairment of Long-Lived Assets
Accounting for the Impairment or Disposal of Long-Lived Assets requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may not be recovered.  The Company assesses recoverability of the carrying value of an asset by estimating the fair value of the asset.  If the fair value is less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.  The Company has never recognized an impairment charge.
 
 
8

 
 
ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
Note A-Organization and Summary Of Significant Accounting Policies (Continued)

Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined based on differences between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized.  In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.  A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition.  In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.  Income tax provisions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods.  Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Stock-Based Compensation
The Company accounts for all compensation related to stock, options or warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  We use the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees.  In calculating this fair value, there are certain assumptions that we use consisting of the expected life of the option, risk-free interest rate, dividend yield, volatility and forfeiture rate. The use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense.

We periodically issue common stock as compensation.  Pursuant to ASC 505-50-30-6 issuances are valued using the market price of the stock or value of the services rendered on the date of the related agreement, whichever is more readily determinable.  To date, common stock granted and issued for services has been issued free of obligation to the recipient and for no consideration.  The shares are valued at the price non-employees are willing to accept as payment in lieu of cash, which, historically, has been the price per share of recent sales of unregistered securities or value of debt converted to common stock.

NOTE B – DISCONTINUED OPERATIONS

On April 22, 2011, the Company and Seven Base Consulting, LLC entered into an Agreement and Plan of Reorganization whereby the Company divested all Seven Base Consulting, LLC business related assets, liabilities and rights to the operation of the Seven Base Consulting, LLC business to Seven Base Consulting, LLC in exchange for the return of 9,000,000 shares of Truesport Alliances & Entertainment, Ltd. Common stock held by Seven Base Consulting, LLC members.  As a result of this transaction all the Company’s assets were transferred and the Company kept certain notes payable totaling approximately $359,000 as of the date above.  Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 205-20, Discontinued Operations, our fiscal year 2010 financial statement amounts have been adjusted to reflect the impact of the discontinued operations of our 7Base business activities, which has been the sole focus of the Company.
 
 
9

 
 
ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
NOTE B – DISCONTINUED OPERATIONS (Continued)
 
ePunk, Inc.
                                   
(formerly Truesport Alliances & Entertainment, Ltd.)
                               
(formerly Sewell Ventures, Inc.)
                                   
Unaudited Consolidated Balance Sheets
 
   
2011
   
2010
 
   
December 31,
               
September 30,
             
   
2010
   
Adjustments
   
Total
   
2010
   
Adjustments
   
Total
 
ASSETS
                                   
Current assets:
                                   
Cash
  $ 2,004     $ (2,004 )   $ -     $ 2,815     $ (2,815 )   $ -  
Accounts receivable
    87,315       (87,315 )     -       66,855       (66,855 )     -  
Related party advances
    -       -       -       -       -       -  
Inventory
    24,914       (24,914 )     -       72,861       (72,861 )     -  
Other current assets
    4,708       (4,708 )     -       1,317       (1,317 )     -  
Assets of discontinued operations
    -       873,761       873,761       -       909,954       909,954  
                                                 
Total current assets
    118,941       754,820       873,761       143,848       766,106       909,954  
Related party notes receivable
    584,644       (584,644 )     -       576,698       (576,698 )     -  
Property, plant and equipment:
                                               
MMA gym buildouts
    103,021       (103,021 )     -       103,021       (103,021 )     -  
Furniture and equipment
    21,144       (21,144 )     -       21,144       (21,144 )     -  
Leasehold improvements
    22,875       (22,875 )     -       22,875       (22,875 )     -  
Computers and equipment
    18,507       (18,507 )     -       18,507       (18,507 )     -  
Construction in progress
    -       -       -       23,800       (23,800 )     -  
                                                 
      165,547       (165,547 )     -       189,347       (189,347 )     -  
Less accumulated depreciation
    (32,669 )     32,669       -       (26,300 )     26,300       -  
      132,878       (132,878 )     -       163,047       (163,047 )     -  
Deferred royalty expenses
    37,298       (37,298 )     -       26,361       (26,361 )     -  
Total assets
  $ 873,761     $ -     $ 873,761     $ 909,954     $ -     $ 909,954  
                                                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
                                               
Current liabilities:
                                               
Accounts payable
  $ 402,665     $ (402,665 )   $ -     $ 292,840     $ (292,840 )   $ -  
Deferred revenue
    198,311       (198,311 )     -       243,895       (243,895 )     -  
Accrued compensation
    32,817       (32,817 )     -       32,817       (32,817 )     -  
Accrued compensation - related party
    95,246       (95,246 )     -       94,118       (94,118 )     -  
Notes payable
    23,167       (23,167 )     -       22,109       (22,109 )     -  
Related party convertible notes payable - current
    206,091       (35,101 )     170,990       201,624       (34,587 )     167,037  
Other current liabilities
    72,423       (72,423 )     -       57,611       (57,611 )     -  
Liabilities of discontinued operations
            1,404,133       1,404,133               1,296,659       1,296,659  
                                                 
Total current liabilities
    1,030,720       544,403       1,575,123       945,014       518,682       1,463,696  
Notes payable to stockholders
    396,806       (396,806 )     -       392,960       (392,960 )     -  
Related party convertible notes payable
    -       -       -       180,500       -       180,500  
Deferred royalty revenue
    74,597       (74,597 )     -       52,722       (52,722 )     -  
Related party notes payable
    73,000       (73,000 )     -       73,000       (73,000 )     -  
Total liabilities
    1,575,123       -       1,575,123       1,644,196       -       1,644,196  
                                                 
Commitments and contingencies
                                               
                                                 
Stockholders' deficit
                                               
Preferred stock
    -       -       -       -       -       -  
Common stock
    31       -       31       31       -       31  
Additional paid-in capital
    693,218       -       693,218       693,218       -       693,218  
Stock subscription receivable
    -       -       -       -       -       -  
Accumulated deficit
    (1,575,111 )     -       (1,575,111 )     (1,427,491 )     -       (1,427,491 )
Total stockholders' deficit
    (881,862 )     -       (881,862 )     (734,242 )     -       (734,242 )
Total liabilities and stockholder's deficit
  $ 693,261     $ -     $ 693,261     $ 909,954     $ -     $ 909,954  
                                                 
The accompanying notes are an integral part of these financial statements
 

 
10

 
 
ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
NOTE B – DISCONTINUED OPERATIONS (Continued)

ePunk, Inc.
                                   
(formerly Truesport Alliances & Entertainment, Ltd.)
                               
(formerly Sewell Ventures, Inc.)
                                   
Unaudited Consolidated Statements of Operations
                               
For the Three Months Ended December 31, 2010 and 2009
 
   
2011
   
2010
 
   
December 31,
               
December 31,
             
   
2010
   
Adjustments
   
Total
   
2009
   
Adjustments
   
Total
 
Net sales
  $ 143,439     $ (143,439 )   $ -     $ 372,897     $ (372,897 )   $ -  
Cost of sales
    96,672       (96,672 )     -       240,561       (240,561 )     -  
Gross margin
    46,767       (46,767 )     -       132,336       (132,336 )     -  
                                                 
Operating expenses
                                               
General and administrative
    158,901       (155,501 )     3,400       93,720       (93,422 )     298  
Guaranteed payments
    -       -       -       53,260       (53,260 )     -  
      158,901       (155,501 )     3,400       146,980       (146,682 )     298  
Operating (loss)
    (112,134 )     108,734       (3,400 )     (14,644 )     14,346       (298 )
Non-operating (expense) income:
                                               
MMA club investment loss
    (23,800 )     23,800       -       -       -       -  
Amortization of beneficial conversion feature
    -       -       -       -       -       -  
Interest expense
    (11,686 )     7,219       (4,467 )     -       -       -  
      (35,486 )     31,019       (4,467 )     -       -       -  
Loss from continuing operations before income taxes
    (147,620 )     139,753       (7,867 )     (14,644 )     14,346       (298 )
Income tax provision (benefit)
    -       -       -       -       -       -  
Loss from continuing operations
    (147,620 )     139,753       (7,867 )     (14,644 )     14,346       (298 )
Loss from discontinued operations
    -       (139,753 )     (139,753 )     -       (14,346 )     (14,346 )
Net Loss
  $ (147,620 )   $ -     $ (147,620 )   $ (14,644 )   $ -     $ (14,644 )
                                      -          
Net income (loss) per common share:
                                               
Basic:
                                               
   Income (loss) from continuing operations
  $ (0.48 )   $ 0.45     $ (0.03 )   $ (0.07 )   $ 0.07     $ (0.00 )
   Income (loss) from discontinued operations
    -       (0.45 )     (0.45 )     -       (0.07 )     (0.07 )
   Net income (loss) per share
  $ (0.48 )   $ -     $ (0.48 )   $ (0.07 )   $ -     $ (0.07 )
                                                 
Weighted average common shares outstanding basic
    308,534       308,534       308,534       216,000       216,000       216,000  
                                                 
                                                 
The accompanying notes are an integral part of these financial statements
 
 
 
11

 
 
ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
NOTE B – DISCONTINUED OPERATIONS (Continued)
 
ePunk, Inc.
                                   
(formerly Truesport Alliances & Entertainment, Ltd.)
                                   
(formerly Sewell Ventures, Inc.)
                                   
Unaudited Consolidated Statements of Cash Flows
                                   
For the Three Months Ended December 31, 2010 and 2009
 
   
2011
   
2010
 
   
December 31,
               
December 31,
             
   
2010
   
Adjustments
   
Total
   
2009
   
Adjustments
   
Total
 
                                     
                                     
Cash flows from operating activities:
                                   
Net loss from continuing operations
  $ (147,620 )   $ 139,753     $ (7,867 )   $ (14,644 )   $ 14,346     $ (298 )
Income (loss) from discontinued operations
    -       (139,753 )     (139,753 )     -       (14,346 )     (14,346 )
Income (loss) from continuing operations
    (147,620 )     -       (147,620 )     (14,644 )     -       (14,644 )
Reconciliation to net cash provided by (used in)
                                               
   continuing operations:
                                               
Depreciation and amortization
    6,369       (6,369 )     -       3,654       (3,654 )     -  
Stock based compensation expense
    -       -       -       -       -          
Stock issued in exchange for liabilities
    -       -       -       -       -       -  
Interest expense due to amortization of debt discount
    -       -       -       -       -       -  
Changes in certain assets and liabilities:
                                               
Accounts receivable
    (20,460 )     20,460       -       (62,634 )     62,634       -  
Related party advances
    -       -       -       1,002       (1,002 )     -  
Inventory
    47,947       (47,947 )     -       12,500       (12,500 )     -  
Other current assets
    (3,391 )     3,391       -       (26,173 )     26,173       -  
Deferred royalty expenses
    (10,937 )     10,937       -       -       -       -  
Accounts payable
    109,825       (109,825 )     -       5,206       (5,206 )     -  
Deferred revenue
    (45,584 )     45,584       -       264,660       (264,660 )     -  
Accrued compensation
    -       -       -       11,260       (11,260 )     -  
Accrued compensation - related party
    1,128       (1,128 )     -       8,000       (8,000 )     -  
Deferred royalty revenue
    21,875       (21,875 )     -       -       -       -  
Accrued interest payable
    9,371       (4,904 )     4,467       -       -       -  
Other current liabilities
    14,812       (14,812 )     -       40,501       (40,501 )     -  
Net cash provided (used) by operating activities of continuing operations
    (16,665 )     -       (3,400 )     243,332       -       (298 )
Net cash provided (used) by operating activities of discontinued operations
    -       13,265       (13,265 )     -       (243,630 )     243,630  
Net cash provided (used) by operating activities
    (16,665 )             (16,665 )     243,332               243,332  
Cash flows from investing activities:
                                               
Capital expenditures, net
    23,800       (23,800 )     -       (57,456 )     57,456       -  
Loans to related parties
    (7,946 )     7,946       -       (131,784 )     131,784       -  
Net cash provided (used) by investing activities of continuing operations
    15,854       (15,854 )     -       (189,240 )     189,240       -  
Net cash provided (used) by investing activities of discontinuing operations
            15,854       15,854               (189,240 )     (189,240 )
Net cash provided (used) by investing activities
    15,854       -       15,854       (189,240 )     -       (189,240 )
Net cash provided by financing activities:
                                               
Proceeds from the issuance of common stock
    -       -       -       -       -       -  
Borrowings on convertible notes payable - related parties
    -       -       -       -       -       -  
Borrowings on notes payable
    -       -       -       164,020       (164,020 )     -  
Borrowings on notes payable - related parties
    -       -       -       -       -       -  
Proceeds from repayment of stock subscription receivable
    -       -       -       -       -       -  
Net cash provided (used) by financing activities from continuing operations
    -       -       -       164,020       (164,020 )     -  
Net cash provided (used) by financing activities from discontinued operations
            -       -               164,020       164,020  
Net cash provided (used) by financing activities
    -       -       -       164,020       -       164,020  
Net increase in cash
    (811 )     -       (811 )     218,112       -       218,112  
Cash - beginning of period
            -       -       4,624       (4,624 )     -  
Cash of discontinued operations - beginning of period
    2,815       -       2,815       -       4,624       4,624  
Less cash of discontinued operations - end of period
    -       (2,004 )     (2,004 )     -       (222,736 )     (222,736 )
Cash - end of period
  $ 2,004     $ (2,004 )   $ -     $ 222,736     $ (222,736 )   $ -  
                                                 
The accompanying notes are an integral part of these financial statements
 

 
12

 

ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
NOTE C – RELATED PARTY CONVERTIBLE NOTES PAYABLE

As of December 31, 2010, the Company had the following related party convertible notes payable that were not included in discontinued operations as they did not transfer to Seven Base Consulting, LLC pursuant to the Agreement and Plan of Reorganization and Corporation Separation.
 
   
 Interest
 Date of:
Accrued
Total
 
 Amount
 Rate
 Funding
 Maturity
 Interest
 Due
Rico Italia Investments Inc
 $   10,000
5.00%
02/14/10
12/31/11
 $   439.8
 $ 10,439.8
     51,000
5.00%
03/18/10
12/31/11
     2,019
      53,019
       8,000
5.00%
06/09/10
09/10/10
        225
        8,225
     10,000
5.00%
06/28/10
09/30/10
        255
      10,255
Total
 $   79,000
     
 $   2,938
 $    81,938
             
             
Excelsior Management LLC
 $   10,000
5.00%
02/14/10
12/31/11
 $   439.8
 $ 10,439.8
     15,000
5.00%
02/26/10
12/31/11
        635
      15,635
     59,000
5.00%
05/27/10
08/27/10
     1,762
      60,762
     28,000
5.00%
06/02/10
09/01/10
        813
      28,813
Total
 $ 112,000
     
 $   3,650
 $  115,650
             
             
Palatine Capital Investment Group LLC
 $   54,340
5.00%
01/30/10
12/31/10
 $   2,509
 $    56,849
     30,000
5.00%
02/14/10
12/31/11
     1,323
      31,323
     25,000
5.00%
02/26/10
12/31/11
     1,062
      26,062
     14,500
5.00%
09/09/10
12/31/11
          62
      14,562
     25,000
5.00%
09/17/10
12/31/11
        106
      25,106
Total
 $ 148,840
     
 $   5,061
 $  153,902
             
Grand Total
 $ 339,840
     
 $ 11,649
 $  351,490
Current
    339,840
     
    11,649
     351,490
Non current
 $             -
     
 $           -
 $              -
             
 
As of December 31, 2010, the above promissory notes are convertible to common stock at an exercise price of 50 percent below the average trading price for the five day period prior to the date of conversion, with a minimum conversion price of $0.50 per share and a maximum conversion price of $1.50 per share, resulting in beneficial conversion features.

The Company measured the intrinsic value of the beneficial conversion features of the convertible notes payable as of the commitment date for the respective convertible notes payable. The intrinsic value of the beneficial conversion features of $149,354 has been recorded as additional paid-in capital and debt discount in the accompanying balance sheet as of September 30, 2010. The debt discount was amortized using the interest method from the respective loan commitment dates to the earliest conversion date of May 1, 2010.

Accrued interest payable on the convertible notes payable totaled $11,649 as of December 31, 2010.

 
13

 
 
ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009


NOTE D – STOCKHOLDERS EQUITY

Preferred Stock
The Company has authorized 25,000,000 shares of $0.0001 par value preferred stock available for issuance.  No shares of preferred stock have been issued as of December 31, 2010.

Common Stock
The Company has authorized 100,000,000 shares of no par value common stock available for issuance.  308,534 shares have been issued as of December 31, 2010 and September 30, 2010, respectively.

Stock Issued for Cash
Between March 31, 2010 and May 1, 2010, the Company issued 11,534 (1,153,400 pre 100:1 reverse split on 7/5/11) shares of common stock through a private placement memorandum at $0.25 to $0.30 per share for total proceeds of $301,020.

Stock Issued for liabilities
On June 30, 2010, the Company issued Scott Ence, former CEO, 500,000 shares of common stock valued at $0.25 per share (5,000 shares at $25 per share post 100:1 reverse split on June 20, 2011) and used the issuance to repay certain liabilities totaling $74,371 and record $50,629 of stock compensation expense.

NOTE E - COMMITMENTS

The Company has no commitments as of December 31, 2010.

NOTE F - INCOME TAXES

The Company’s total deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for federal income tax purposes. The Company has recognized a valuation allowance equal to the deferred tax assets due to the uncertainty of realizing the benefits of the assets.

NOTE G – RELATED PARTY TRANSACTIONS

During the three months ended December 31, 2010, the Company made no advances to a related party.

During the three months ended December 31, 2010, the Company purchased $1,267, loaned $5,250 and received reimbursements of $2,726 for a net cash outflow of $3,791 to a related party owned by three related party stockholders and one director.  As of December 31, 2010, the Company had $584,644 as due from related parties from discontinued operations.

During the three months ended December 31, 2010, the Company did not issue any notes in exchange for funds from related parties.  As of December 31, 2010, the Company’s total related party liabilities attributable to discontinued operations was $623,320

NOTE H – SUBSEQUENT EVENTS

Pursuant to FASB Accounting Standards Codification 855, Subsequent Events, Including ASC 855-10-S99-2, the Company evaluated subsequent events through August 11, 2011.

 
14

 

ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009

 
NOTE H – SUBSEQUENT EVENTS (Continued)

On April 22, 2011, the Company and Seven Base Consulting, LLC entered into an Agreement and Plan of Reorganization whereby the Company divested all Seven Base Consulting, LLC business related assets, liabilities and rights to the operation of the Seven Base Consulting, LLC business to Seven Base Consulting, LLC in exchange for the return of 9,000,000 shares of Truesport Alliances & Entertainment, Ltd. Common stock held by Seven Base Consulting, LLC members.  As a result of this transaction all the Company’s assets were transferred and the Company kept certain notes payable totaling approximately $359,000.

On June 15, 2011, Excelsior Management, LLC, (“Seller”) as agent for the beneficial owners of a total of twenty million two hundred and eighty five thousand one hundred sixty seven (20,285,167) shares of common stock (the “Common Shares”),  of Truesport Alliances & Entertainment, Ltd. (now known as ePunk, Inc.), (the “Company”), entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Richard Jesse Gonzales, Justin Matthew Dornan, and Frank J. Drechsler (collectively referred to as the “Purchaser”) for the sale and purchase of the Common Shares.  As a result of the execution of the Stock Purchase Agreement, the Seller sold, 65.75% of the issued and outstanding shares of common stock of the Company to the Purchaser in exchange for $23,451.97.  Concurrently with the closing of the Stock Purchase Agreement, Scott Ence, resigned from his positions as the Company’s President, Chief Executive Officer, Treasurer, Secretary, and Chairman of the Board of Directors and Brent Stuchlik resigned from his position as a Director of the Company.  On June 20, 2011 a majority of the shareholders of the Company approved the appointment of Richard Jesse Gonzales, Justin Matthew Dornan, and Frank J. Drechsler to the Board of Directors. In addition, at such time, Richard Jesse Gonzales was appointed the Company’s President and Chief Executive Officer, Justin Matthew Dornan as Treasurer, and Frank J. Drechsler as Secretary.  None of the appointed directors or officers entered into an employment agreement with the Company, nor will any be compensated for their services as officers or directors of the Company.

On June 20, 2011, the board of directors and a majority of the shareholders of the Company approved the name change of the Company from TrueSport Alliance & Entertainment, Ltd. to ePunk, Inc. On June 20, 2011, the Company amended Article 1 of its Articles of Incorporation to change the Company’s name to ePunk, Inc.

On June 20, 2011, the shareholders and the board of directors of ePunk authorized a 100 for 1 reverse stock split. FINRA approved the reverse split on June 28, 2011 and declared the reverse split effective as of July 5, 2011.

On June 16, 2011, all the related party promissory notes that remained the obligation of ePunk, Inc. totaling $358,519 of principle and interest were purchased by three separate parties for a total purchase price of $99,196.  Then, on June 24, 2011 the Company and holders of the notes entered into an amendment to the convertible promissory notes changing the original conversion price from 50 percent below the average trading price for the five day period prior to the date of conversion, with a minimum conversion price of $0.50 per share and a maximum conversion price of $1.50 per share to a stated conversion price of $0.01 per share.  Per ASC 470-20-25-12, no portion of the proceeds from these notes are attributable to the modification of the conversion feature as the conversion can be made at the option of the holder at a specified price, the conversion price does not decrease, the debt was originally sold at the face amount, the interest rate is lower than the Company would pay for non-convertible debt and the conversion price was greater than the perceived market value of the stock due to the divestiture of the Company’s only business.  In addition, the Company has experienced significant operating losses and shareholder dilution, in the event of a conversion an attempt to sell converted shares would most likely result in a lower stock price due to the lack and expected thin trading volume of the Company’s stock on the secondary markets, and the perceived market value of the stock was less than the conversion price due to the above leaving significant uncertainty about the future trading price of the stock and the ability to recover the face amount of the debt.

 
15

 

ePunk, Inc.
(Formerly Truesport Alliances and Entertainment, Ltd.)
(Formerly Sewell Ventures, Inc.)
Unaudited Notes to Financial Statements
For the Three Months Ended December 31, 2010 and 2009


NOTE H – SUBSEQUENT EVENTS (Continued)

On June 30, 2011, The board and majority of the shareholders of the Company approved the issuance of 24,750,000 shares of common stock (post reverse split) in exchange for 100% of the issued and outstanding capital stock of Punk Industries, Inc. causing Punk Industries, Inc. to become a wholly owned subsidiary of the Company.  Punk Industries, Inc. was formed in February 2011 to develop off-road vehicle distribution.  The Merger will be accounted for as a “reverse merger,” as the stockholders of Punk Industries, Inc. owned a majority of the outstanding shares of ePunk, Inc. common stock immediately following the Merger.  Punk Industries, Inc. was deemed to be the acquirer in the reverse merger.  Consequently, the assets and liabilities and the historical operations of Punk Industries prior to the Merger will be reflected in the financial statements at the historical cost basis of Punk Industries, Inc.  Our consolidated financial statements after completion of the Merger will include the assets and liabilities of both ePunk, Inc. and Punk Industries, Inc., the historical operations of Punk Industries, Inc. and our ePunk, Inc. operations from the Effective Date of the Merger.  We will account for the merger under recapitalization accounting whereby the equity of the acquiring enterprise (Punk Industries, Inc.) will be presented as the equity of the combined enterprise and the capital stock account of the acquiring enterprise is adjusted to reflect the par value of the outstanding stock of the legal acquirer (ePunk, Inc.) after giving effect to the number of shares issued in the business combination.  Shares retained by the legal acquirer (ePunk, Inc.) are reflected as an issuance as of the reverse merger date (June 30, 2011) for the historical amount of the net assets of the acquired entity.
 
 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-Q which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); finding suitable merger or acquisition candidates; expansion and growth of the Company's business and operations; and other such matters are forward-looking statements.  These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company.

These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "plans," "may," "will," or similar terms. These statements appear in a number of places in this Filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations for its limited history; (ii) the Company's business and growth strategies; and, (iii) the Company's financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company's limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition.

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

Recent Events

ePunk, Inc. (the “Company”)(formerly Truesport Alliances & Entertainment, Ltd.) (formerly Sewell Ventures, Inc.) was incorporated under the laws of the State of Delaware on April 27, 2007 to search for investment opportunities.

On December 16, 2009, the Company acquired Seven Base Consulting, LLC, d.b.a. “7Base” a privately owned Nevada limited liability company (“7Base”), pursuant to an Acquisition Agreement (the “Exchange”). 7Base was organized under the laws of the State of Nevada on October 17, 2008. 7Base is a diversified company engaged in the business of designing, manufacturing, selling, distributing, and licensing to others the right to resell high quality, branded apparel, sporting goods, fitness equipment, merchandise, training centers and events under their own brand image. In addition, 7Base generates additional revenues through the sale of consulting, media, and entertainment services related to the mixed martial arts industry. Upon consummation of the Exchange, the Registrant adopted the business plan of 7Base.

Pursuant to the terms of the Exchange, the Company acquired 7Base in exchange for an aggregate of 20,000,000 newly issued shares (the “Exchange Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), resulting in an aggregate of 29,200,000 shares of the Company common stock issued and outstanding. As a result of the Exchange, 7Base became a wholly-owned subsidiary of the Company. The Company shares were issued to the members of 7Base on a pro rata basis, on the basis of the membership interests of 7Base held by such 7Base members at the time of the Exchange. 
 
 
17

 
 
As a result of the ownership interests of the former shareholders of 7Base, for financial statement reporting purposes, the merger between the Company and 7Base was treated as a reverse acquisition with 7Base deemed the accounting acquirer and the Company deemed the accounting acquiree under the purchase method of accounting in accordance with paragraph 805-40-05-2 of the FASB Accounting Standards Codification. The reverse merger was deemed a capital transaction and the net assets of 7Base (the accounting acquirer) were carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of 7Base which are recorded at historical cost. The equity of the Company is the historical equity of 7Base retroactively restated to reflect the number of shares issued by the Company in the transaction.

On January 15, 2010, the Issuers name was changed with the State of Delaware from Sewell Ventures, Inc. to Truesport Alliances, Ltd., and on January 29, 2010, the Company changed its state of incorporation to the State of Nevada and restated the articles of incorporation changing the name to Truesport Alliances & Entertainment, Ltd.

On April 22, 2011, the Company and Seven Base Consulting, LLC entered into an Agreement and Plan of Reorganization whereby the Company divested all Seven Base Consulting, LLC business related assets, liabilities and rights to the operation of the Seven Base Consulting, LLC business to Seven Base Consulting, LLC in exchange for the return of 9,000,000 shares of Truesport Alliances & Entertainment, Ltd. Common stock held by Seven Base Consulting, LLC members.  As a result of this transaction all the Company’s assets were transferred and the Company kept certain notes payable totaling approximately $359,000.  Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 205-20, Discontinued Operations, our fiscal year 2010 financial statement amounts have been reclassified to reflect the impact of the discontinued operations of our 7Base business activities, which was the sole focus of the Company during 2010.  Unless otherwise noted, the information provided within our MD&A reflects only the continued operations of our business.

On June 15, 2011, Excelsior Management, LLC, (“Seller”) as agent for the beneficial owners of a total of twenty million two hundred and eighty five thousand one hundred sixty seven (20,285,167) shares of common stock (the “Common Shares”),  of Truesport Alliances & Entertainment, Ltd. (now known as ePunk, Inc.), (the “Company”), entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Richard Jesse Gonzales, Justin Matthew Dornan, and Frank J. Drechsler (collectively referred to as the “Purchaser”) for the sale and purchase of the Common Shares.  As a result of the execution of the Stock Purchase Agreement, the Seller sold, 65.75% of the issued and outstanding shares of common stock of the Company to the Purchaser in exchange for $23,451.97.  Concurrently with the closing of the Stock Purchase Agreement, Scott Ence, resigned from his positions as the Company’s President, Chief Executive Officer, Treasurer, Secretary, and Chairman of the Board of Directors and Brent Stuchlik resigned from his position as a Director of the Company.  On June 20, 2011 a majority of the shareholders of the Company approved the appointment of Richard Jesse Gonzales, Justin Matthew Dornan, and Frank J. Drechsler to the Board of Directors. In addition, at such time, Richard Jesse Gonsales was appointed the Company’s President and Chief Executive Officer, Justin Matthew Dornan as Treasurer, and Frank J. Drechsler as Secretary.  None of the appointed directors or officers entered into an employment agreement with the Company, nor will any be compensated for their services as officers or directors of the Company.

On June 20, 2011, the board of directors and a majority of the shareholders of the Company approved the name change of the Company from TrueSport Alliance & Entertainment, Ltd. to ePunk, Inc. On June 20, 2011, the Company amended Article 1 of its Articles of Incorporation to change the Company’s name to ePunk, Inc.

On June 20, 2011, the shareholders and the board of directors of ePunk authorized a 100 for 1 reverse stock split. FINRA approved the reverse split on June 28, 2011 and declared the reverse split effective as of July 5, 2011.
 
 
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On June 30, 2011, The board and majority of the shareholders of the Company approved the issuance of 24,750,000 shares of common stock (post reverse split) in exchange for 100% of the issued and outstanding capital stock of Punk Industries, Inc. causing Punk Industries, Inc. to become a wholly owned subsidiary of the Company.  Punk Industries, Inc. was formed in February 2011 to develop off-road vehicle distribution.  The Merger will be accounted for as a “reverse merger,” as the stockholders of Punk Industries, Inc. owned a majority of the outstanding shares of ePunk, Inc. common stock immediately following the Merger.  Punk Industries, Inc. was deemed to be the acquirer in the reverse merger.  Consequently, the assets and liabilities and the historical operations of Punk Industries prior to the Merger will be reflected in the financial statements at the historical cost basis of Punk Industries, Inc.  Our consolidated financial statements after completion of the Merger will include the assets and liabilities of both ePunk, Inc. and Punk Industries, Inc., the historical operations of Punk Industries, Inc. and our ePunk, Inc. operations from the Effective Date of the Merger.  We will account for the merger under recapitalization accounting whereby the equity of the acquiring enterprise (Punk Industries, Inc.) will be presented as the equity of the combined enterprise and the capital stock account of the acquiring enterprise is adjusted to reflect the par value of the outstanding stock of the legal acquirer (ePunk, Inc.) after giving effect to the number of shares issued in the business combination.  Shares retained by the legal acquirer (ePunk, Inc.) are reflected as an issuance as of the reverse merger date (June 30, 2011) for the historical amount of the net assets of the acquired entity.
 
Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that affect the amounts reported. Note A of Notes to Financial Statements describes the significant accounting policies used in the preparation of the financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes:
 
 
· 
 
 
We are required to make assumptions about matters that are highly uncertain at the time of the estimate; and
 
 
 
· 
 
 
Different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty.  We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances.  These estimates may change as new events occur, as additional information is obtained and as our operating environment changes.  These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations.

In preparing our financial statements to conform to accounting principles generally accepted in the United States, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes.  These estimates include useful lives for fixed assets for depreciation calculations and assumptions for valuing options and warrants. Actual results could differ from these estimates.

Revenue Recognition

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 
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Stock-Based Compensation

The Company accounts for all compensation related to stock, options and warrants using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  When issued, we use the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees.

In calculating this fair value, there are certain assumptions that we use consisting of:
 
 
1)  
The expected life of the option.  No incentive stock options have been granted to date.  In the event the Company issues employee options, we will base our determination of expected life on the guidance in ASC 718-10-55-29 to 34.  The Company utilizes the contract term of each non qualified option except in the event that the option is not transferrable in which case we apply the aforementioned guidance in determining the expected term.
2)  
Risk-free interest rate.  We use the treasury bill rate that most closely aligns with the duration of the derivative.
3)  
Dividend yield.  Until a dividend is offered this input will always be zero.
4)  
Volatility.  We use the Dow Jones Internet Composite Index (Ticker: FDN) from inception of the index to the date of grant.
5)  
Forfeiture rate.  To date this rate has been zero.
6)  
Stock price (see discussion below).

The use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense.

We may periodically issue common stock as compensation.  Pursuant to ASC 505-50-30-6 issuances are valued using the market price of the stock or value of the services rendered on the date of the related agreement, whichever is more readily determinable.  To date, common stock granted and issued for services has been issued free of obligation to the recipient and for no consideration.  The shares are valued at the price non-employees are willing to accept as payment in lieu of cash, which, historically, has been the price per share of recent sales of unregistered securities or value of debt converted to common stock.

Long-lived Assets

Long-lived assets, comprised of equipment, and identifiable intangible assets, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  Factors that may cause an impairment review include significant changes in technology that make current computer-related assets that we use in our operations obsolete or less useful and significant changes in the way we use these assets in our operations.  When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges).  If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss.  The impairment loss calculation compares the carrying value of the asset to the asset’s estimated fair value, which may be based on estimated future cash flows (discounted and with interest charges).  We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value.  If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis.  The new cost basis will be depreciated (amortized) over the remaining useful life of that asset.  Using the impairment evaluation methodology described herein, there have been no long-lived asset impairment charges for each of the last two years.

Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

We have not made any material changes in our impairment loss assessment methodology during the past two fiscal years.  We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses.  However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.
 
 
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Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current period and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

When accounting for Uncertainty in Income Taxes, first, the tax position is evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements.  The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company underwent a change of control for income tax purposes on October 8, 2003 according to Section 381 of the Internal Revenue Code.  The Company’s utilization of U.S. Federal net operating losses will be limited in accordance to Section 381 rules.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
RESULTS OF OPERATIONS

Results of Operations