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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURUTIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
Commission File Number 000-54359
IN Media Corporation
(Exact name of Registrant as specified in its charter)
Nevada 1711 20-8644177
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employee
Incorporation or Organization) Classification Code Number) Identification No.)
4920 El Camino Real, Suite 100, Los Altos, CA 94022 408-849-9499
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. 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 (ss.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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S- K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a 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]
As of March 15, 2012, the registrant had 52,171,893 shares of common stock
issued and outstanding. The current market value of our common stock as of March
15, 2012 is $0.08 per share. The aggregate market value of the common stock held
by non-affiliates, as of June 30, 2011 (the last business day of the
registrant's most recently completed second fiscal quarter) was $ 2,500,000
based on the closing price of the common stock of $0.14.
Documents Incorporated by Reference: None
IN MEDIA CORPORATION
TABLE OF CONTENTS
Page No.
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Part I
Item 1. Business 3
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 14
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Removed and Reserved 14
Part II
Item 5. Market for Common Equity and Related Stockholder Matters 15
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 7A. Quantitative and qualitative disclosures about market risk 20
Item 8. Financial Statements 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 32
Item 9A. Controls and Procedures 32
Item 9B. Other Information 33
Part III
Item 10. Directors and Executive Officers 34
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners and Management 41
Item 13. Certain Relationships and Related Transactions 42
Item 14. Principal Accounting Fees and Services 42
Part IV
Item 15. Exhibits 44
Signatures 45
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As used in this report, the terms "we", "us", "our" and "our company" refer to
IN Media Corporation.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this Current Report on Form 10-K contains some
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 ("PSLRA"). Certain of the matters discussed
concerning our operations, cash flows, financial position, economic performance
and financial condition, and the effect of economic conditions include
forward-looking statements.
Statements that are predictive in nature, that depend upon or refer to future
events or conditions or that include words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates" and similar expressions are
forward-looking statements. Although we believe that these statements are based
upon reasonable assumptions, including projections of orders, sales, operating
margins, earnings, cash flow, research and development costs, working capital,
capital expenditures and other projections, they are subject to several risks
and uncertainties.
Investors are cautioned that our forward-looking statements are not guarantees
of future performance and the actual results or developments may differ
materially from the expectations expressed in the forward-looking statements.
As for the forward-looking statements that relate to future financial results
and other projections, actual results will be different due to the inherent
uncertainty of estimates, forecasts and projections may be better or worse than
projected. Given these uncertainties, you should not place any reliance on these
forward-looking statements. These forward-looking statements also represent our
estimates and assumptions only as of the date that they were made.
Forward-looking statements involve risks and uncertainties that may cause actual
results to differ materially from the results contained in the forward-looking
statements. The risks included herein are not exhaustive. The annual report on
Form 10-K, and quarterly reports on Form 10-Q, current reports on Form 8-K and
other documents filed with the SEC include additional factors which could impact
our business and financial performance. Moreover, we operate in a rapidly
changing and competitive environment. New risk factors emerge from time to time
and it is not possible for management to predict all such risk factors.
Except as required by law, we expressly disclaim a duty to provide updates to
these forward-looking statements, and the estimates and assumptions associated
with them, after the date of this filing to reflect events or changes in
circumstances or changes in expectations or the occurrence of anticipated
events.
PART I
ITEM 1. BUSINESS
BACKGROUND
IN Media Corporation (the "Company") is a Nevada corporation incorporated on
March 5, 2007 as Tres Estrellas Enterprises, Inc. ("Tres Estrellas"). Effective
February 3, 2010, we changed our name to IN Media Corporation. We are a
development stage company. On October 30, 2009 (the "Acquisition Date"), we
executed an agreement between IN Media Corporation ("IN Media") and Tres
Estrellas whereby IN Media shareholders acquired thirty-three million, five
hundred thousand (33,500,000) shares of the Company's common stock, and in
return we received all the issued and outstanding stock of IN Media, and IN
Media was merged into Tres Estrellas. We reported this event on Form 8-K, filed
with the Securities and Exchange Agreement on November 2, 2009. For financial
accounting purposes, the acquisition was a reverse merger of our company by IN
Media, under the purchase method of accounting, and was treated as a
recapitalization with IN Media as the acquirer. Upon consummation of the merger,
we adopted the business plan of IN Media. Accordingly, the consolidated
statements of operations include the results of operations of IN Media from its
inception on October 27, 2008 and the results of operations of Tres Estrellas
from the Acquisition Date through December 31, 2011. Our fiscal year end is
December 31.
With our registered office in Reno, Nevada, and principal executive office in
Los Altos, CA, we are a development stage company positioned to exploit the
emerging market for Internet Protocol Television ("IPTV") services for cable,
satellite, internet, telephony and mobile services. IPTV delivers video content
from public domain and premium content sources over the internet to consumer
display devices ranging from large screen TVs in the home, to mobile display
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devices such as the I-Phone or I-Pad. Our goal is to become a global leader of
IPTV implementation systems through the design and delivery of a combination of
hardware, software, manufacturing and content services at competitive prices.
Our systems may be offered to communications channel providers, and governmental
organizations, content owners such as publishers, movie and video game owners,
and other premium content databases providers, or distributors and re-sellers
who support such channels to either complete their own proprietary offerings or
provide an all-in-one solution.
TRENDS AND MARKET OPPORTUNITIES
* In recent years the opportunity for IPTV has been fuelled by various
factors including, but not limited to improvements in broadband
technology and infrastructure and consequent reduced cost,
* Growth of mass market adoption of broadband access including mobile
applications,
* Consumer expectations and pressure for video on demand rather than
general broadcast distribution which has become increasingly expensive
and generally poor quality content,
* Fragmentation and specialization of content ownership encouraging
content owners to make their content available by subscription,
advertising sponsorship, or as a message delivery medium.
These trends have taken place in the North American market, but even more so in
developing countries around the world. According to EMARKETER, the total
worldwide broadband subscriber base over 500,000,000 subscribers, and each
broadband subscriber is a potential IPTV viewer. We have focused our efforts on
developing business opportunities in China and India and although we have
received several verbal or written expressions of interest in purchasing our
products we have not actually fulfilled any orders or shipped any of our
products as of December 31, 2011. Our ability to fulfil sales orders is directly
linked to our lack of financial resources and inability to secure credit terms
from our sub-contract manufacturers and component suppliers, and despite our
best efforts to raise working capital through debt and equity transactions,
extended supplier credit, and customer advances, we have not yet managed to
solve these problems, and initial orders have subsequently lapsed. We currently
have an advance from one customer and are continuing to explore credit
arrangements with our sub-contract manaufacturer to finance production of this
order and hope, although we cannot guarantee, to move beyond our development
stage into an operational stage during fiscal 2012.
PRODUCTS
We offer our customers fully integrated plug-and-play solutions comprising
hardware devices, operating software, and access to a library of video content.
As of December 31, 2011, we are currently offering a choice of three hardware
devices:
IPTV SET TOP BOX(IPSTB): The IPSTB enables a user to access video contant such
as movies, videos, games, and eductational or other promotional content simply
connecting the IPSTB to ethernet cable from a home Internet source such as a
modem on one side to a Hi Definition TV set, or other convenient display on the
other. Once connected, the user gains access to internet content like YouTube,
Yahoo, Google or premium distribution sites like NetFlix which stream video over
the internet.
TABLET PC : Our Tablet PC, offered in both 7 inch or 10 inch screen models works
in exactly the same way as our IPSTB enabling the user to access video over the
internet, however, because the display and the STB functionality are both
integrated into the device, the Tablet PC can also be used as a regular browser
for web surfing and other internet enabled functions like checking emails, or
making phone calls, in the same way as a consumer might use an Apple iPad.
PREMIUM VIDEO CONTENT: Numerity Corporation owns the rights to over 4,000 video
titles and, as an inducement to enter into the Licensing and Maintenance
Agreement, entered into a formal agreement with IN Media, as of December 31,
2010, to make this content available to IN Media without charge, thereby
enabling the provision of this content to IN Media customers, either as a direct
subscription service, or as part of a purchased bundled hardware system. This
library includes digital master files of old movies, concerts, speeches, and
sports events which can be downloaded over the internet by consumers who wish to
subscribe to our content service. In addition, for the issuance of 250,000 fully
paid shares of common stock, we have also purchased the rights to access
approximately two thousand additional video titles which we are currently
re-formatting for distribution. We are currently designing and setting up a web
based server to distribute selected content on-line to subscribers among our
future installed base of customers who purchase our set top box. Although our
launch and ramp-up of hardware sales has been delayed by limited financial
resources, we believe we may also have an opportunity to sell video content
subscriptions to consumers and third party distributors through our web site.
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DEVELOPMENT STAGE OPERATIONS
To date, we have built our business by focusing on outsourcing to an experienced
and well established third party provider to reduce the risk of product
development problems and delays, market and employee acquisition, and up-front
cash flow. This provider has been responsible for designing our products and
operating software, QA testing, customer demonstration and evaluation support,
as well as market analysis, channel development and sales promotion. They also
provide general and operational support, such that we have no full time
employees, or full time employee equivalents on our own books. By adopting this
approach, we have managed to develop, test, and bring to market three distinct
product offerings in the highly competitive global market for IP TV at a
significantly lower cost than if we had carried out these activities in-house.
This provider, Numerity Corporation, is owned and controlled by Mr. Karnick, one
of our shareholders, directors and officers, and provides contract executive,
administration and business development services (the "Service Agreement") to
the Company. Initially, the Service Agreement provided for contract service fees
of $40,000 per month, but subsequently, on as of January 1, 2011 the Company and
Numerity agreed to discontinue contract service charges, and instead have
Numerity bill the Company for the actual cost of any goods or services provided
wholly, exclusively and necessarily for the benefit of the Company. The
amendments were approved by the Board of Directors, including Mr. Danny Mabey, a
member of the Board of Directors with no interest in Numerity.
Additionally, in November 2008, we licensed our engineering technology, IP and
set top box designs (the "Licensing and Maintenance Agreement") from Numerity
and committed to pay maintenance and royalties of $415,000 per annum. On July 1,
2010, the Company agreed to amend that licensing agreement to provide a deferral
of any further maintenance dues, and an extension of credit until three months
after first commercial shipment. The amendment to the Licensing and Maintenance
Agreement was additionally approved by the Board of Directors, including Mr.
Danny Mabey, a member of the Board of Directors with no interest in Numerity.
One of our shareholders, Guifeng Qui, who owns approximately 13 million shares
of restricted common stock, has a controlling interest in the Chinese
distributor who we have appointed to represent us in developing our business in
China. The Agreement with this distributor provides that we will receive a
margin of $20 on each unit of set-top box sold through that distribution
channel, and an additional $5 per month per subscriber for content distribution
contracts using our content library. At the same time, we have been working with
other distribution channels in China and other international markets to
demonstrate and prove our products and our integrated platform which includes
hardware, software, and content.
We have focused our efforts on developing business opportunities in China and
India and although we have received several verbal or written expressions of
interest in purchasing our products we have not actually fulfilled any orders or
shipped any of our products as of December 31, 2011. Our ability to fulfil sales
orders is directly linked to our lack of financial resources and inability to
secure credit terms from our sub-contract manufacturers and component suppliers,
and despite our best efforts to raise working capital through debt and equity
transactions, extended supplier credit, and customer advances, we have not yet
managed to solve these problems, and initial orders have subsequently lapsed. We
currently have an advance from one customer and are continuing to explore credit
arrangements with our sub-contract manaufacturer to finance production of this
order and hope, although we cannot guarantee, to move beyond our development
stage into an operational stage during fiscal 2012.
The ability of the Company to emerge from the development stage is dependent
upon, among other things, obtaining additional financing to purchase the
inventory required to fulfill purchase order commitments and make on-account
payments to vendors, while continuing to service our current debt obligations
and cover our overhead expenses. These factors, among others, raise substantial
doubt about the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
THE COMPETITION AND COMPETITIVE ADVANTAGE
The competitive landscape for IPTV services is very crowded as the market
potential is very large. The key players are the platform providers who control
access to telephony, television, internet and content for consumers. However,
new players like Microsoft, Apple, Amazon, and the major Hollywood studios are
moving forward on their own solutions to monetize content and services over the
internet. Key hardware vendors like Motorola, Cisco, Intel, etc. are also
potential competitors for set-top box solutions as they have previously
established relationships with the platform providers.
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Although our competitors have strong brands and significant engineering and
marketing budgets we believe that we will have an opportunity to compete because
we have outsourced our manufacturing and distribution function in China to local
partners who know and operate in the Chinese market where our cost is low and
the power of established US brands may not be so powerful. Since we already have
a fully functional product offering and have established local distribution we
believe our market offering in China is fully competitive with solutions from
our competitors.
EMPLOYEES
We outsource our employees; consequently, we have access to the services of
approximately 10 contract employees including 1 executive and administration, 1
in business development, with the balance working in engineering.
WHERE YOU CAN FIND MORE INFORMATION
We will make available free of charge any of our filings as soon as reasonably
practicable after we electronically file these materials with, or otherwise
furnish them to, the Securities and Exchange Commission ("SEC"). We are not
including the information contained in our website as part of, or incorporating
it by reference into, this report on Form 10-K.
The public may read and copy any materials we file with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20002. The public
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at (http://www.sec.gov).
ITEM 1A. RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION CONTAINED
IN THIS REPORT BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.
Listed below are certain risk factors associated with us and our businesses. In
addition to the potential effect of these risk factors discussed below, or any
other risks not described below because they are currently unknown to us or we
currently deem such risks as immaterial, but they later become material actually
occurs, it could result in reduced earnings or operating losses, or reduced
liquidity, could in turn adversely affect our ability to service our liabilities
or adversely affect the quoted market prices for our securities.
MINIMAL OPERATING HISTORY AND NO REVENUE MEANS THAT IT IS DIFFICULT TO DETERMINE
WHEN, IF AT ALL, WE WILL EVER BE PROFITABLE, AND PROVIDE A RETURN TO INVESTORS.
Prior to the merger we had a minimal operating history and have subsequently
generated no revenues or earnings from operations. We have no significant assets
or financial resources. We will, in all likelihood, sustain operating expenses
without corresponding revenues, at least until we begin selling our product.
This will result in us incurring a net operating loss which will increase
continuously until we can generate sufficient revenue. There is no assurance
that we can generate or sustain profitable operations.
THE REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS
EXPLANATORY LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE
AS A GOING CONCERN
The independent auditor's report on our financial statements contains
explanatory language that substantial doubt exists about our ability to continue
as a going concern, specifically in Note 2 to the financial statements. The
report states that we had accumulated a loss from operations of $2.7 million and
have earned no revenues since inception, and our liabilities exceed our assets
by over $0.8 million. Management intends to fund its continuing operations
through strict expense management and control, a combination of equity or debt
financing arrangements, reliance on third party contractors to avoid the need
for capital expenditure or commitment to fixed overhead, and extended credit
from suppliers and related parties, all of which may be insufficient to fund our
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capital expenditures, working capital and other cash requirements for the year
ending December 31, 2012. If we are unable to obtain sufficient financing in the
near term or achieve profitability, then we would, in all likelihood, experience
severe liquidity problems and may have to curtail our operations. If we curtail
our operations, we may be placed into bankruptcy or undergo liquidation, the
result of which will adversely affect the value of our common shares.
SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS MEANS THAT IT IS
DIFFICULT TO DETERMINE WHEN, IF AT ALL, OUR BUSINESS MODEL WILL BE ACCEEPTED BY
THE MARKET, AND ENABLE US TO EARN PROFITS AND PROVIDE A RETURN TO INVESTORS.
The success of our proposed plan of operation will depend to a great extent on
the operations, financial condition and management of the Company. In the
immediate future we will spend most of our resources, efforts and expenditures
in two primary areas: 1) The securing of key customers in China and India and 2)
further development of our IPTV set top box. We have generated no revenue since
inception due to the fact that we have not yet made any commercial shipments of
our products. The success of our operations will be dependent upon acceptance of
our product and numerous other factors beyond our control, including, but not
limited to development of our sales channels, competitive features and pricing
compared to our competitors in a dynamic and evolving market, the impact of
economic and political instability on consumer spending habits, consumer
awareness of IP TV and interest in available libraries of content, and our
ability to finance and manage production and distribution of inventories for
resale. Additionally, even if we succeed in winning orders for our products, we
may not be able to finance the building of the inventory necessary to fulfill
such orders on acceptable terms, or on any terms at all.
OUR COMPANY'S BUSINESS IS IMPACTED BY ANY INSTABILITY AND FLUCTUATIONS IN GLOBAL
FINANCIAL SYSTEMS.
The recent credit crisis and related instability in the global financial system,
although somewhat abated, has had, and may continue to have, an impact on our
prospective business and our prospective financial condition. We may face
significant challenges if conditions in the financial markets do not continue to
improve. Our ability to access the capital markets may be severely restricted at
a time when we wish or need to access such markets, which could have a
materially adverse impact on our flexibility to react to changing economic and
business conditions or carry on our operations.
REPORTING REQUIREMENTS MAY UTILIZE A SUBSTANTIAL PORTION OF OUR CASH AND REDUCE
THE PERIOD OF TIME WE CAN SURVIVE ON OUR AVAILABLE CASH RESERVES PRIOR TO
GENERATING REVENUE.
We will incur ongoing costs and expenses for SEC reporting and compliance. To be
eligible for quotation on the OTCBB, issuers must remain current in their
filings with the SEC. Market Makers are not permitted to begin quotation of a
security whose issuer does not meet this filing requirement. Securities already
quoted on the OTCBB that become delinquent in their required filings will be
removed following a 30 day grace period if they do not make their required
filing during that time. In order for us to remain in compliance we will require
future revenues to cover the cost of these filings, which could comprise a
substantial portion of our available cash resources.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA (FINANCIAL INDUSTRY REGULATORY
AUTHORITY, INC.) MAY DISCOURAGE THE TRADABILITY OF THE COMPANY'S SECURITIES AND
THEREBY MAKE IT HARD FOR INVESTORS TO SELL THEIR SHARES AT THE TIME AND PRICES
THEY MIGHT OTHERWISE EXPECT.
We are a "penny stock" company. We are subject to a Securities and Exchange
Commission rule that imposes special sales practice requirements upon
broker-dealers who sell such securities to persons other than established
customers or accredited investors. For purposes of the rule, the phrase
"accredited investors" means, in general terms, institutions with assets in
excess of $5,000,000, or individuals having a net worth in excess of $1,000,000
or having an annual income that exceeds $200,000 (or that, when combined with a
spouse's income, exceeds $300,000). For transactions covered by the rule, the
broker-dealer must make a special suitability determination of the purchaser and
receive the purchaser's written agreement to the transaction prior to the sale.
Effectively, this discourages broker-dealers from executing trades in penny
stocks. Consequently, the rule will affect the ability of purchasers in this
offering to sell their securities in any market that might develop, because it
imposes additional regulatory burdens on penny stock transactions.
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In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, and 15g-9 under the Securities and Exchange Act of
1934, as amended. Because our securities constitute "penny stocks" within the
meaning of the rules, the rules would apply to us and to our securities. The
rules will further affect the ability of owners of shares to sell their
securities in a market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
Shareholders should be aware that, according to the Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, leaving investors with
losses. Our management is aware of the abuses that have occurred historically in
the penny stock market. Although we do not expect to be in a position to dictate
the behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to the Company's
securities.
FINRA SALES PRACTICE REQUIREMENTS MAY LIMIT A SHAREHOLDER'S ABILITY TO BUY AND
SELL OUR COMMON SHARES.
In addition to the "penny stock" rules described above, FINRA has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer's financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common shares, which may limit your ability to buy and sell our stock and have
an adverse effect on the market for our shares.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON THE COMPANY'S STOCK
PRICE AS AN INCREASE IN SUPPLY OF SHARES FOR SALE, WITH NO CORRESPONDING
INCREASE IN DEMAND WILL CAUSE PRICES TO FALL.
All of the outstanding shares of common stock held by the present officers,
directors, and affiliate stockholders are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted
shares, these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable exemptions
from registration under the Act and as required under applicable state
securities laws. Rule 144 provides in essence that a person who is an affiliate
or officer or director who has held restricted securities for six months may,
under certain conditions, sell every three months, in brokerage transactions, a
number of shares that does not exceed the greater of 1.0% of a Company's
outstanding common stock. There is no limit on the amount of restricted
securities that may be sold by a non-affiliate after the owner has held the
restricted securities for a period of six months if the company is a current
reporting company under the 1934 Act. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registration of
shares of common stock of present stockholders, may have a depressive effect
upon the price of the common stock in any market that may develop. In addition,
if we are deemed a shell company pursuant to Section 12(b)-2 of the Act, our
"restricted securities", whether held by affiliates or non-affiliates, may not
be re-sold for a period of 12 months following the filing of a Form 10 level
disclosure or registration pursuant to the Act.
FUTURE ISSUANCES OF SHARES FOR VARIOUS CONSIDERATIONS INCLUDING WORKING CAPITAL
AND OPERATING EXPENSES WILL INCREASE THE NUMBER OF SHARES OUTSTANDING WHICH WILL
DILUTE EXISTING INVESTORS AND MAY HAVE A DEPRESSIVE EFFECT ON THE COMPANY'S
STOCK PRICE.
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There may be substantial dilution to our shareholders purchasing in future
offerings as a result of future decisions of the Board to issue shares without
shareholder approval for cash, services, payment of debt or acquisitions.
THERE MAY IN ALL LIKLIHOOD BE LITTLE DEMAND FOR SHARES OF OUR COMMON STOCK AND
AS A RESULT INVESTORS MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF
THEY NEED TO LIQUIDATE THEIR INVESTMENT.
There may be little demand for shares of our common stock on the OTC Bulletin
Board, or Pink Sheet, meaning that the number of persons interested in
purchasing our common shares at or near ask prices at any given time may be
relatively small or non-existent. This situation is attributable to a number of
factors, including the fact that it is a small company which is relatively
unknown to stock analysts, stock brokers, institutional investors and others in
the investment community that generate or influence sales volume, and that even
if the Company came to the attention of such persons, they tend to be
risk-averse and would be reluctant to follow an unproven, early stage company
such as ours or purchase or recommend the purchase of any of our Securities
until such time as it became more seasoned and viable. As a consequence, there
may be periods of several days or more when trading activity in the Company's
securities is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will generally support
continuous sales without an adverse effect on the securities price. We cannot
give investors any assurance that a broader or more active public trading market
for the Company's common securities will develop or be sustained, or that any
trading levels will be sustained. Due to these conditions, we can give investors
no assurance that they will be able to sell their shares at or near ask prices
or at all if they need money or otherwise desire to liquidate their securities
of the Company.
FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH
SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS AND OPERATING RESULTS.
It is time consuming, difficult and costly for us to develop and maintain the
internal controls, processes and reporting procedures required by the
Sarbanes-Oxley Act, and as our business develops, we may need to hire additional
financial reporting, internal auditing and other finance staff in order to
remain compliant. The cost of compliance will adversely affect our financial
results, while, if we are unable to comply, we may not be able to obtain the
independent accountant certifications that the Sarbanes-Oxley Act requires of
publicly traded companies.
If we fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
we are required to prepare assessments regarding internal controls over
financial reporting and furnish a report by our management on our internal
control over financial reporting. Failure to achieve and maintain an effective
internal control environment or complete our Section 404 certifications could
have a material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the effectiveness of
our internal control over financial reporting, we may discover "material
weaknesses" in our internal controls as defined in standards established by the
Public Company Accounting Oversight Board, or the PCAOB. A material weakness is
a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. The
PCAOB defines "significant deficiency" as a deficiency that results in more than
a remote likelihood that a misstatement of the financial statements that is more
than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, upon receiving sufficient
financing or generating sufficient revenues, we will employ qualified personnel
and adopt and implement policies and procedures to address any such material
weaknesses. However, the process of designing and implementing effective
internal controls is a continuous effort that requires us to anticipate and
react to changes in our business and the economic and regulatory environments
and to expend significant resources to maintain a system of internal controls
that is adequate to satisfy our reporting obligations as a public company. We
cannot assure you that the measures we will take will remediate any material
weaknesses that we may identify or that we will implement and maintain adequate
controls over our financial process and reporting in the future.
9
Any failure to complete our assessment of our internal control over financial
reporting, to remediate any material weaknesses that we may identify or to
implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could
also cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our common stock.
The systems of internal controls and procedures that we have developed and
implemented to date are adequate in a business that has no revenue, few purchase
and expense transactions, and little in the way of tangible assets and working
capital. However, the reliance on third party sub-contractors and lack of
employees makes it difficult to ensure segregation of key duties, provide
multiple levels of review, and ensure that specified checks and balances exist
and are enforced and acted upon where necessary. The current transaction volume
and limited transaction channels mean that operating management, financial
management, board members and auditor can, and do, efficiently perform a very
extensive and detailed transaction review to ensure compliance with the
Company's established procedures and controls. When we secure purchase orders
and start purchasing product from our sub-contract manufacturers, shipping
product to our customers, collecting receivables, and paying our vendors we will
need to apply significantly more resources to the management of our controls and
procedures and to ensure and continue effective compliance. If our business
grows rapidly, we may not be able to keep up with recruiting and training
personnel, and enhancing our systems of internal control in line with the growth
in transaction volumes and compliance risks which could result in loss of
assets, profit, and ability to manage the daily operations of our Company
CERTAIN NEVADA CORPORATION LAW PROVISIONS COULD PREVENT A POTENTIAL TAKEOVER,
WHICH COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
We are incorporated in the State of Nevada. Certain provisions of Nevada
corporation law could adversely affect the market price of our common stock.
Because Nevada corporation law requires board approval of a transaction
involving a change in our control, it would be more difficult for someone to
acquire control of us. Nevada corporate law also discourages proxy contests
making it more difficult for you and other shareholders to elect directors other
than the candidate or candidates nominated by our board of directors
THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS
AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT,
LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE
FLUCTUATIONS IN OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON
SHARES MAY NOT BE INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING
MARKET. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE
PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.
The market for our common shares is characterized by significant price
volatility when compared to seasoned issuers, and we expect that our share price
will continue to be more volatile than a seasoned issuer for the indefinite
future. The volatility in our share price is attributable to a number of
factors. First, as noted above, our common shares are sporadically and thinly
traded. As a consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our shareholders may disproportionately influence
the price of those shares in either direction. The price for our shares could,
for example, decline precipitously in the event that a large number of our
common shares are sold on the market without commensurate demand, as compared to
a seasoned issuer which could better absorb those sales without adverse impact
on its share price. Secondly, we are a speculative or "risky" investment due to
our limited operating history and lack of profits to date, shortage of working
capital, and uncertainty of future market acceptance for our potential products.
As a consequence of this enhanced risk, more risk-adverse investors may, under
the fear of losing all or most of their investment in the event of negative news
or lack of progress, be more inclined to sell their shares on the market more
quickly and at greater discounts than would be the case with the stock of a
seasoned issuer. Many of these factors are beyond our control and may decrease
the market price of our common shares, regardless of our operating performance.
We cannot make any predictions or projections as to what the prevailing market
price for our common shares will be at any time, including as to whether our
10
common shares will sustain their current market prices, or as to what effect
that the sale of shares or the availability of common shares for sale at any
time will have on the prevailing market price.
VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION,
THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR
PROFITABILITY AND RESULTS OF OPERATIONS.
As discussed in the preceding risk factor, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management's attention and resources.
WE DO NOT HAVE KEY MAN INSURANCE ON OUR CEO AND CFO, ON WHOM WE RELY FOR THE
MANAGEMENT OF OUR BUSINESS AND IT MAY BE DIFFICULT, OR TIME CONSUMING TO FIND
SUITABLE REPLACEMENTS WHICH COULD LEAD TO LOSS OF BUSINESS MOMENTUM.
We depend, to a large extent, on the abilities and participation of our current
management team, but have a particular reliance upon Nitin Karnik, the Company's
Chief Executive Officer and Simon Westbrook, our Company's Chief Financial
Officer. The loss of the services of Nitin Karnik or Simon Westbrook for any
reason may have a material adverse effect on our business and prospects. We
cannot assure you that their services will continue to be available to us, or
that we will be able to find a suitable replacement for either of them. We do
not carry key man life insurance for any key personnel.
WE MAY NOT BE ABLE TO HIRE AND RETAIN QUALIFIED PERSONNEL TO SUPPORT OUR GROWTH
AND IF WE ARE UNABLE TO RETAIN OR HIRE SUCH PERSONNEL IN THE FUTURE, OUR ABILITY
TO IMPROVE OUR PRODUCTS AND IMPLEMENT OUR BUSINESS OBJECTIVES COULD BE ADVERSELY
AFFECTED.
Due to lack of cash resources we have not been able to pay any of our directors
or executives for the services they have provided to date, and should one or
more of our these executives be unable or unwilling to continue in their present
positions, we may not be able to replace them easily or at all, and our business
may be disrupted and our financial condition and results of operations may be
materially and adversely affected. Competition for senior management and senior
technology personnel is intense, the pool of qualified candidates is very
limited, and we may not be able to retain the services of our senior executives
or senior technology personnel, or attract and retain high-quality senior
executives or senior technology personnel in the future. Considering our current
cash position, we do not have adequate cash resources to hire and retain key
personnel should we fail to raise additional funding or generate cash flow from
operations. Such failure could materially and adversely affect our future growth
and financial condition.
WE HAVE ISSUED CONVERTIBLE NOTES WHICH COME DUE FOR CONVERSION OR REPAYMENT
BASED ON A VARIABLE AVERAGE SHARE PRICE AT THAT TIME, AND SHAREHOLDERS MAY
SUFFER SIGNIFICANT DILUTION IF OUR STOCK PRICE IS THEN LOW.
From time to time, the Company has issued convertible notes which can be
converted at the noteholder's option any time after six months from the issuance
date based on 62.5% of the average of the lowest three closing bid prices over
the ten days preceding the conversion date. We have at times experienced
considerable volatility in our share price and if the share price falls in
advance of a note conversion date, investors could suffer significant dilution
when the notes are converted into shares of common stock. We are required to
maintain an available pool of common shares equal to 300% of the number of
shares required for conversion. As at December 31, 2011, we have reserved
3,767,849 shares of common stock to cover the conversion of the then outstanding
Notes and accrued interest.
WE ARE RESPONSIBLE FOR THE INDEMNIFICATION OF OUR OFFICERS AND DIRECTORS AND IN
THE EVENT OF CLAIMS NOT COVERED BY OUR DIRECTORS AND OFFICERS INSURANCE, WE MAY
HAVE TO SPEND OUR LIMITED RESOURCES ON LEGAL FEES DIVERTING CASH FROM FUNDING
BUSINESS OPERATING EXPENSES AND WORKING CAPITAL.
11
Our Bylaws provide for the indemnification of our directors, officers,
employees, and agents, under certain circumstances, against costs and expenses
incurred by them in any litigation to which they become a party arising from
their association with or activities on our behalf. Consequently, we may be
required to expend substantial funds to satisfy these indemnity obligations.
THE COMPANY IS PLANNING ON DOING A SIGNIFICANT PORTION OF ITS BUSINESS IN THE
PEOPLE'S REPUBLIC OF CHINA ("PRC"). GIVEN A HISTORY OF POLITICAL AND ECONOMIC
INSTABILITY, IT IS POSSIBLE THAT MEASURES BEYOND OUR CONTROL COULD AFFECT OUR
OWNERSHIP OF ASSETS, ABILITY TO DO BUSINESS, ACQUIRE NECESSARY LICENSES AND
PERMITS, COMPLY WITH IMPORT LEGISLATION AND DUTIES, REMIT PROFITS, OR IN OTHER
WAYS ADVERSELY AFFECT OUR PROFFITABILITY, OR ABILITY TO CONTINUE TO DO BUSINESS
IN THIS MARKET.
The PRC is passing from a planned economy to a market economy. The Chinese
government has confirmed that economic development will follow a model of market
economy under socialism. While the PRC government has pursued economic reforms
since its adoption of the open-door policy in 1978, a large portion of the PRC
economy is still operating under five-year plans and annual state plans adopted
by the government that set down national economic development goals. Through
these plans and other economic measures, such as control on foreign exchange,
taxation and restrictions on foreign participation in the domestic market of
various industries, the PRC government exerts considerable direct and indirect
influence on the economy. This refining and re-adjustment process may not
necessarily have a positive effect on our operations or future business
development. Our operating results may be adversely affected by changes in the
PRC's economic and social conditions as well as by changes in the policies of
the PRC government, which we may not be able to foresee, such as changes in laws
and regulations (or the official interpretation thereof), measures which may be
introduced to control inflation, changes in the rate or method of taxation, and
imposition of additional restrictions on currency conversion.
THE RECENT NATURE AND UNCERTAIN APPLICATION OF MANY PRC LAWS APPLICABLE TO US
CREATE AN UNCERTAIN AND POTENTIALLY ADVERSE ENVIRONMENT FOR BUSINESS OPERATIONS
AND THEY COULD HAVE A NEGATIVE EFFECT ON OUR ABILITY TO SELL OUR PRODUCTS
PROFITABLY IN THE PRC MARKET.
The PRC legal system is a civil law system. Unlike the common law system, such
as the legal system used in the United States, the civil law system is based on
written statutes in which decided legal cases have little value as precedents.
In 1979, the PRC began to promulgate a comprehensive system of laws and has
since introduced many laws and regulations to provide general guidance on
economic and business practices in the PRC and to regulate foreign investment.
Progress has been made in the promulgation of laws and regulations dealing with
economic matters such as corporate organization and governance, foreign
investment, commerce, taxation and trade. The promulgation of new laws, changes
of existing laws and the abrogation of local regulations by national laws could
have a negative impact on our business and business prospects. In addition, as
these laws, regulations and legal requirements are relatively recent, their
interpretation and enforcement involve significant uncertainty.
IF RELATIONS BETWEEN THE UNITED STATES AND CHINA WORSEN, INVESTORS MAY
ANTICIPATE FUTURE ECONOMIC TRADE RESTRICTIONS OR OTHER DIFFICULTIES AND DECIDE
TO SELL OR AVOID BUYING SHARES OF COMPANIES OPERATING IN PRC. THIS WOULD LIKELY
LEAD TO A DECLINE IN OUR STOCK PRICE AND WE MAY HAVE DIFFICULTY ACCESSING THE
U.S. CAPITAL MARKETS.
At various times during recent years, the United States and China have had
disagreements over political and economic issues. Controversies may arise in the
future between these two countries. Any political or trade controversies between
the United States and China could adversely affect the market price of our
common stock and our ability to access U.S. capital markets.
GOVERNMENTAL CONTROL OF CURRENCY CONVERSION MAY AFFECT THE DOLLAR VALUE OF
REVENUES EARNED IN PRC, AND THE REALISED VALUE OF REMITTANCES WHICH COULD REDUCE
THE PROFITABILITY OF OUR BUSINESS AND THE VALUE OF YOUR INVESTMENT.
The PRC government imposes controls on the convertibility of RMB ("RMB") into
foreign currencies and, in certain cases, the remittance of currency out of the
PRC. Currently, the RMB is not a freely convertible currency. Shortages in the
availability of foreign currency may restrict our ability to remit sufficient
12
foreign currency to pay dividends, or otherwise satisfy foreign currency
denominated obligations. Under existing PRC foreign exchange regulations,
payments of current account items, including profit distributions, interest
payments and expenditures from the transaction, can be made in foreign
currencies without prior approval from the PRC State Administration of Foreign
Exchange by complying with certain procedural requirements. However, approval
from appropriate governmental authorities is required where RMB is to be
converted into foreign currency and remitted out of China to pay capital
expenses such as the repayment of loans and corporate debt obligations
denominated in foreign currencies.
The PRC government may also at its discretion restrict access in the future to
foreign currencies for current account transactions. If the foreign exchange
control system prevents us from obtaining sufficient foreign currency to satisfy
our currency demands, we may not be able to pay certain of our expenses as they
come due.
THE FLUCTUATION OF THE RMB ("RMB") MAY MATERIALLY AND ADVERSELY AFFECT THE
DOLLAR VALUE OF REVENUES EARNED IN PRC, AND THE REALISED VALUE OF REMITTANCES
WHICH COULD REDUCE THE PROFITABILITY OF OUR BUSINESS AND THE VALUE OF YOUR
INVESTMENT.
The value of the RMB against the U.S. dollar and other currencies may fluctuate
and is affected by, among other things, changes in the PRC's political and
economic conditions. Any significant revaluation of the RMB may materially and
adversely affect our cash flows, revenues and financial condition. For example,
to the extent that we need to convert U.S. dollars into RMB for our operations,
appreciation of the RMB against the U.S. dollar could have a material adverse
effect on our business, financial condition and results of operations.
Conversely, if we decide to convert our RMB into U.S. dollars for business
purposes and the U.S. dollar appreciates against the RMB, the U.S. dollar
equivalent of the RMB we convert would be reduced. Any significant evaluation of
RMB may reduce our operation costs in U.S. dollars but may also reduce our
earnings in U.S. dollars. In addition, the depreciation of significant U.S.
dollar denominated assets could result in a charge to our income statement and a
reduction in the value of these assets.
PUBLIC DISCLOSURE REQUIREMENTS AND COMPLIANCE WITH CHANGING REGULATION OF
CORPORATE GOVERNANCE POSE CHALLENGES FOR OUR MANAGEMENT TEAM AND RESULT IN
ADDITIONAL EXPENSES AND COSTS WHICH MAY REDUCE THE FOCUS OF MANAGEMENT AND THE
PROFITABALITY OF OUR COMPANY.
Changing laws, regulations and standards relating to corporate governance and
public disclosure, including the Dodd-Frank Wall Street Reform and Consumer
Protection Act and the rules and regulations promulgated thereunder, the
Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public
companies and significantly increased the costs and risks associated with
accessing the U.S. public markets. Our management team will need to devote
significant time and financial resources to comply with both existing and
evolving standards for public companies, which will lead to increased general
and administrative expenses and a diversion of management time and attention
from revenue generating activities to compliance activities.
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR
SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR
PLANNED
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This filing contains forward-looking statements about our business, financial
condition and prospects that reflect our management's assumptions and good faith
beliefs based on information currently available. We can give no assurance that
the expectations indicated by such forward-looking statements will be realized.
If any of our assumptions should prove incorrect, or if any of the risks and
uncertainties underlying such expectations should materialize, our actual
results may differ materially from those indicated by the forward-looking
statements.
The key factors that are not within our control and that may have a direct
bearing on operating results include, but are not limited to, acceptance of our
proposed services and the products we expect to market, our ability to establish
a customer base, managements' ability to raise capital in the future, the
retention of key employees and changes in the regulation of our industry.
13
There may be other risks and circumstances that management may be unable to
predict. When used in this filing, words such as, "believes," "expects,"
"intends," "plans," "anticipates," "estimates" and similar expressions are
intended to identify and qualify forward-looking statements, although there may
be certain forward-looking statements not accompanied by such expressions.
ITEM 1B. UNRESOLVED STAFF COMMENTS
This Item is not applicable to us as we are not an accelerated filer, a large
accelerated filer, or a well-seasoned issuer.
ITEM 2. PROPERTIES
Our principal executive office address is 4920 El Camino Real, Suite 100, Los
Altos, CA 94022. Effective December 31, 2010, we entered into an agreement with
Numerity Corporation under which they agreed to allow us, without charge, to
share their office space for the duration of their current lease. As a
consequence, we currently have no long term lease obligations. Our properties
are adequate for our current needs.
We currently have no investment policies as they pertain to real estate, real
estate interests or real estate mortgages.
ITEM 3. LEGAL PROCEEDINGS
We are currently not involved in any litigation that we believe could have a
materially adverse effect on our financial condition or results of operations.
There is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the executive officers of our company or any of
our subsidiaries, threatened against or affecting our company, our common stock,
or of our company's officers or directors in their capacities as such, in which
an adverse decision could have a material adverse effect.
ITEM 4. REMOVED AND RESERVED
14
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our Common stock is currently traded on the OTC Bulletin Board (OTCBB) under the
symbol "IMDC". The following table sets forth, for the periods indicated, the
high and low inter-dealer closing prices per share of our common stock as
reported on the OTC Bulletin Board, without retail mark-up, mark-down or
commission and may not represent actual transactions.
The following table sets forth the high and low bid prices for our common stock
for the last two years.
Year Quarter High Low
---- ------- ---- ---
2010 First $ 0.12 $ 0.08
2010 Second $ 1.53 $ 0.12
2010 Third $ 1.20 $ 0.51
2010 Fourth $ 0.92 $ 0.17
2011 First $ 0.45 $ 0.13
2011 Second $ 0.17 $ 0.10
2011 Third $ 0.22 $ 0.08
2011 Fourth $ 0.18 $ 0.05
HOLDERS
As of December 31, 2011, there were 52,171,893 shares of our common stock issued
and outstanding with 17 shareholders of record.
TRANSFER AGENT
Our Transfer Agent is TranShare Corporation.
DIVIDEND POLICY
Dividends, if any, will be contingent upon our revenues and earnings, if any,
capital requirements and financial conditions. The payment of dividends, if any,
will be within the discretion of our Board of Directors. We presently intend to
retain all earnings, if any, for use in our business operations.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Number of securities
remaining available for
Number of Securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
Plan Category warrants and rights rights reflected in column (a))
------------- ------------------- ------ ------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders 1,600,000 0.15 83,000
Equity compensation plans not
approved by security holders -- -- --
Total 1,600,000 83,000
15
RECENT SALES OF UNREGISTERED SECURITIES
SUMMARY ISSUANCE OF COMMON STOCK
Year ended Year ended
ended ended
December 31, December 31,
2011 2010 Total
---------- ---------- ----------
# SHARES
Payment of consultants 400,000 417,000 817,000
Purchase of assets 250,000 -- 250,000
Conversion of notes 1,403,904 145,618 1,549,522
Settlement of debt 4,500,000 -- 4,500,000
Payment of note interest 55,371 -- 55,371
---------- ---------- ----------
TOTAL 6,609,275 562,618 7,171,893
========== ========== ==========
Year ended Year ended
ended ended
December 31, December 31,
2011 2010 Total
---------- ---------- ----------
VALUE OF SHARES
Payment of consultants $ 64,000 $ 503,999 $ 567,999
Purchase of assets 40,000 -- 40,000
Conversion of notes 143,000 30,000 173,000
Settlement of debt 675,000 -- 675,000
Payment of note interest 6,120 -- 6,120
---------- ---------- ----------
TOTAL $ 928,120 $ 533,999 $1,462,119
========== ========== ==========
During the year ended December 31, 2011, we issued 1,403,904 fully-paid shares
of our common stock in reliance on the exemptions for sales of securities not
involving a public offering, as set forth in Rule 506 promulgated under the
Securities Act and in Section 4(2) of the Securities Act, based on the
following: (a) the debt holder confirmed to us that they were "accredited
investors," as defined in Rule 501 of Regulation D promulgated under the
Securities Act and had such background, education and experience in financial
and business matters as to be able to evaluate the merits and risks of an
investment in the securities; (b) there was no public offering or general
solicitation with respect to the conversion of the debt and issuance of the
shares; (c) the debt holder acknowledged that the shares being issued were
"restricted securities" for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered under the Securities
Act or exempt from registration under the Securities Act; and could only be
transferred if subsequently registered under the Securities Act or transferred
in a transaction exempt from registration under the Securities Act. Other than
the 1,403,904 fully-paid shares issued in conversion of $143,000 of convertible
debt, we did not sell any equity securities which were not registered under the
Securities Act of 1933 during the year ended December 31, 2011 that were not
otherwise disclosed in this annual report on Form 10-K, in our quarterly reports
on Form 10-Q, or in our current reports on Form 8-K filed during the year ended
December 31, 2011.
PENNY STOCK RULES
The Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
Our shares are considered penny stock under the Securities and Exchange Act. The
shares will remain penny stocks for the foreseeable future. The classification
of penny stock makes it more difficult for a broker-dealer to sell the stock
into a secondary market, which makes it more difficult for a purchaser to
liquidate his/her investment. Any broker-dealer engaged by the purchaser for the
purpose of selling his or her shares in us will be subject to Rules 15g-1
through 15g-10 of the Securities and Exchange Act. Rather than creating a need
to comply with those rules, some broker-dealers will refuse to attempt to sell
penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document, which:
- contains a description of the nature and level of risk in the market
for penny stock in both public offerings and secondary trading;
- contains a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the customer with
respect to a violation of such duties or other requirements of the
Securities Act of 1934, as amended;
16
- contains a brief, clear, narrative description of a dealer market,
including "bid" and "ask" price for the penny stock and the
significance of the spread between the bid and ask price;
- contains a toll-free telephone number for inquiries on disciplinary
actions;
- defines significant terms in the disclosure document or in the conduct
of trading penny stocks; and
- contains such other information and is in such form (including
language, type, size and format) as the Securities and Exchange
Commission shall require by rule or regulation;
The broker-dealer also must provide, prior to effecting any transaction in a
penny stock, to the customer:
- the bid and offer quotations for the penny stock;
- the compensation of the broker-dealer and its salesperson in the
transaction;
- the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
- monthly account statements showing the market value of each penny
stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
their securities.
SHARES AVAILABLE UNDER RULE 144
There are currently 34,031,392 shares of common stock that are considered
restricted securities under Rule 144 of the Securities Act of 1933 of which
33,781,392 shares are held by affiliates, as that term is defined in Rule
144(a)(1) and other shareholders. Under Rule 144, such shares can be publicly
sold, subject to volume restrictions and certain restrictions on the manner of
sale, commencing six months after their acquisition for those companies that
have been subject to the reporting requirements of section 13 or 15(d) of the
Exchange Act for a period of at least 90 days before the sale.
ITEM 6. SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with our
financial statements and related notes thereto included elsewhere in this annual
report. The following discussion and analysis should be read in conjunction with
the financial statements of In Media Corporation, included herewith. This
discussion should not be construed to imply that the results discussed herein
will necessarily continue into the future, or that any conclusion reached herein
will necessarily be indicative of actual operating results in the future. Such
discussion represents only the best present assessment of our management.
This discussion and analysis contain forward-looking statements that involve
risks, uncertainties and assumptions. Actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
17
factors, including, but not limited to, those presented under the heading of
"Risk Factors" and elsewhere in this annual report, including the Cautionary
Note Regarding Forward Looking Statements preceding Item 1. As used in this
report, "we", "us", "our", "In Media", "Company" or "our company" refers to In
Media Corporation, unless the context requires otherwise.
Our financial statements have been prepared in accordance with United States
generally accepted accounting principles. We urge you to read this report in
conjunction with the risk factors described herein.
RESULTS OF OPERATIONS
To date, we have built our business by focusing on outsourcing to an experienced
and well established third party provider to reduce the risk of product
development problems and delays, market and employee acquisition, and up-front
cash flow. This provider has been responsible for designing our products and
operating software, QA testing, customer demonstration and evaluation support,
as well as market analysis, channel development and sales promotion. They also
provide general and operational support, such that we have no full time
employees, or full time employee equivalents on our own books. By adopting this
approach, we have managed to develop, test, and bring to market three distinct
product offerings in the highly competitive global market for IP TV at a
significantly lower cost than if we had carried out these activities in-house.
This provider, Numerity Corporation, is owned and controlled by Mr. Karnick, one
of our shareholders, directors and officers, and provides contract executive,
administration and business development services (the "Service Agreement") to
our company. Initially, the Service Agreement provided for contract service fees
of $40,000 per month, but subsequently, on as of January 1, 2011 the Company and
Numerity agreed to discontinue contract service charges, and instead have
Numerity bill our company for the actual cost of any goods or services provided
wholly, exclusively and necessarily for the benefit of our company. The
amendments were approved by the Board of Directors, including Mr. Danny Mabey, a
member of the Board of Directors with no interest in Numerity.
Additionally, in November 2008, we licensed our engineering technology, IP and
set top box designs (the "Licensing and Maintenance Agreement") from Numerity
and committed to pay maintenance and royalties of $415,000 per annum. On July 1,
2010, we agreed with Numerity to amend that licensing agreement to provide a
deferral of any further maintenance dues, and an extension of credit until three
months after first commercial shipment. The amendment to the Licensing and
Maintenance Agreement was approved by the Board of Directors, including Mr.
Danny Mabey, a member of the Board of Directors with no interest in Numerity. .
One of our shareholders, Guifeng Qui, who owns approximately 13 million shares
of restricted common stock, has a controlling interest in the Chinese
distributor who we have appointed to represent us in developing our business in
China. The Agreement with this distributor provides that we will receive a
margin of $20 on each unit of set-top box sold through that distribution
channel, and an additional $5 per month per subscriber for content distribution
contracts using our content library. At the same time, we have been working with
other distribution channels in China and other international markets to
demonstrate and prove our products and our integrated platform which includes
hardware, software, and content.
We have focused our efforts on developing business opportunities in China and
India and, although we have received several verbal or written expressions of
interest in purchasing our products, we have not actually fulfilled any orders
or shipped any of our products as of December 31, 2011. Our ability to fulfil
sales orders is closely linked to our lack of financial resources and inability
to secure credit terms from our sub-contract manufacturers and component
suppliers, and despite our best efforts to raise working capital through debt
and equity transactions, extended supplier credit, and customer advances, we
have not yet managed to solve these problems, and initial orders have
subsequently lapsed. We currently have an advance from one customer and are
continuing to explore credit arrangements with our sub-contract manaufacturer to
finance production of this order and hope, although we cannot guarantee, to move
beyond our development stage into an operational stage during 2012.
We have accumulated a deficit of $2.7 million during our development through
December 31, 2011. Our ability to emerge from the development stage is dependent
upon, among other things, obtaining additional financing to purchase the
inventory required to fulfill purchase order commitments and make on-account
payments to vendors, while continuing to service our current debt obligations
and cover our overhead expenses. These factors, among others, raise substantial
18
doubt about our ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
We incurred $502,987 and $726,216 in general administrative expenses for the
years ended December 31, 2011 and 2010, respectively. These costs consisted of
sub-contracted general and administrative, engineering designs and business
development expenses, and professional and administrative expenses associated
with our financial reports and SEC filings. The decrease of 34% over the same
period in 2010 was principally due to the revised Service Agreement with
Numerity Corporation under which Numerity only charges us for actual expenses
incurred.
Additionally, we incurred $207,500 of software maintenance expenses in
connection with our IPTV operating platform license in the years ended December
31, 2011 and 2010, respectively. This license agreement, which commenced in the
second half of 2009, was renegotiated with Numerity Corporation to reflect
delays in commercial shipments of our hardware and related licensed software. As
a result, maintenance fees for the year ended December 31, 2010 were reduced
from $415,000 to $207,500 and will not resume until first commercial shipments
of our products.
During the years ended December 31, 2011 and December 31, 2010, we incurred
interest and debt discount amortization expenses of $148,086 and $48,272,
respectively. This increase followed an increase in outstanding convertible
notes during 2011, and penalty interest charges on repayments.
The following table provides selected financial data about our company as at
December 31, 2010.
Balance Sheet Data: December 31, 2011
------------------- -----------------
Cash $ 52
Total assets $ 40,052
Total liabilities $ 822,384
Shareholders' equity (deficit) $(782,332)
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at December 31, 2011 was $52. During the year ended December
31, 2011, we expended $144,510 in cash as a result of operating activities which
included $858,573 of operating losses partially offset by $64,000 of common
stock issued to consultants in lieu of cash settlements, and $207,500
amortization of pre-paid maintenance fees due on the licensing agreement with
Numerity Corporation. Cash was contributed principally by the increase in
certain operating liabilities, and by the issuance of $85,000 in convertible
notes. Since inception, $290,000 has been raised through the issuance of our
common stock.
We are a development stage company and have generated no revenue to date.
Although we have managed to raise $290,000 through the issuance of common stock,
secured advances from directors and officers of the Company, obtained extended
credit from related parties in connection with services provided, and raised
funding from the issuance of convertible notes, aggregating $285,500, net of
repayments, as of December 31, 2011, there is no assurance that we can secure
additional funding to cover our expenses or working capital requirements in the
future. We filed an S-1 registration statement on September 13, 2010 in
contemplation of raising up to $4 million from the sale of our common stock,
however, this filing was withdrawn on October 18, 2010 so as not to limit other
short-term fund-raising activities being undertaken in connection with providing
the working capital we need to fund recently received purchases orders. As a
result of the loss of our original market maker, and delays in finding a
replacement and completing the required approval with FINRA, our stock was
temporarily listed for approximately six months on the OTCQB exchange rather
than on the OTC Bulletin Board which hampered our ability to raise additional
note financing from our current note finance partner and other potential
investors. Our access to capital is therefore severely limited until such time
as we start to generate cash flow from operations, and if we are no longer able
to raise capital by the issuance of convertible notes, or obtain services for
stock, or secure extended credit, there would be a severe risk that we would not
be able to pay our bills, and the Company may be forced into liquidation.
Our operating expenses, in managements' opinion, are very low with management
and consultants working for equity or deferred compensation, using their own
phones, office equipment and supplies, paying their own travel expenses, and
working in a rent-free office location. Our remaining overhead expenses relate
19
to compliance costs, and our audit, legal, EDGAR filing and share registration
and communication service are currently approximately eighty thousand dollars a
year. We believe that we can continue to finance these costs, and pay off
overdue accounts payable through the sale of convertible notes, and we raised an
aggregate $85,000, net of repayments, by this means during the year ended
December 31, 2011.
In addition to our overheads, we have costs of marketing, sales support, and
production as well as ongoing product design and development. We are relying on
our customers, distribution partners and manufacturing sub-contractors to assist
us by providing their support and hope that we can match customer and supplier
letters of credit to cover future order transactions. We have accumulated
significant debt from Numerity Corporation and as a result of the common link
with our CEO, Nick Karnik, Numerity has agreed to continue to extend credit
subject to notice of one year and one day. Whenever creditors become more
pressing, we plan to offer settlement by means of issuing restricted stock in
lieu of cash payment.
We are currently seeking other available sources of funding to provide secured,
back-to-back financing of our purchase order commitments with production
inventory. If we are unable to secure adequate capital to continue, our business
will likely fail, and our shareholders could lose some or all of their
investment. We cannot continually incur operating losses in the future and may
decide that we can no longer continue with our business operations as detailed
in our business plan because of a lack of financial results and a lack of
available financial resources.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Other than the derivative conversion options on our convertible notes described
in Note 6 to our Financial Statements we do not hold any derivative instruments
and do not engage in any hedging activities.
20
ITEM 8. FINANCIAL STATEMENTS
GEORGE STEWART, CPA
316 17TH AVENUE SOUTH
SEATTLE, WASHINGTON 98144
(206) 328-8554 FAX(206) 328-0383
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
In Media Corp.
I have audited the accompanying balance sheets of In Media Corp. (A Development
Stage Company) as of December 31, 2011 and 2010, and the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
2011 and 2010 and for the period from October 27, 2008 (inception), to December
31, 2011. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of In Media Corp., (A Development
Stage Company) as of December 31, 2011 and 2010, and the results of its
operations and cash flows for the years ended December 31, 2011 and 2010 and the
period from October 27, 2008 (inception), to December 31, 2011 in conformity
with generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note # 2 to the financial
statements, the Company has had no operations and has no established source of
revenue. This raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also described in Note
# 2. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ George Stewart
-----------------------------
Seattle, Washington
March 12, 2012
21
In Media Corporation
(A Development Stage Company)
Balance Sheets
December 31, December 31,
2011 2010
------------ ------------
(Restated)
ASSETS
CURRENT ASSETS
Cash $ 52 $ 62
Prepaid expenses and license fees -- 207,500
------------ ------------
52 207,562
Movie distribution systems 40,000 --
------------ ------------
TOTAL ASSETS $ 40,052 $ 207,562
============ ============
LIABILITIES & STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 368,791 $ 48,478
Accrued interest 7,797 6,715
Advances and deposits received from customers 47,650 --
Loan from director -- 2,100
Derivative liability on option grants 23,780 81,469
Convertible note, principal amount 55,000 170,500
Less discount (19,782) (39,911)
------------ ------------
Notes payable, net 35,218 130,589
------------ ------------
TOTAL CURRENT LIABILITIES 483,236 269,351
LONG TERM LIABILITIES
Long term accounts payable to related party 339,148 952,548
STOCKHOLDERS' EQUITY
Common stock - 75,000,000 shares authorized at $0.001 par value;
52,171,893 and 45,562,618 shares issued and outstanding
at December 31, 2011 and December 31, 2010, respectively 52,172 45,563
Additional paid-in Capital 1,862,405 778,436
Deficit accumulated during the development stage (2,696,909) (1,838,336)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (782,332) (1,014,337)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 40,052 $ 207,562
============ ============
The accompanying footnotes are an integral part of these financial statements.
22
In Media Corporation
(A Development Stage Company)
Statements of Operations
Inception
October 27, 2008
Year Ending Year Ending Through
December 31, December 31, December 31,
2011 2010 2011
------------ ------------ ------------
(Restated)
EXPENSES
General & administrative $ 502,987 $ 762,216 $ 1,882,301
Development expenses 207,500 207,500 618,250
Interest and debt discount expense 148,086 48,272 196,358
------------ ------------ ------------
NET (LOSS) $ (858,573) $ (1,017,988) $ (2,696,909)
============ ============ ============
Basic and fully-diluted (loss) per share* $ (0.02) $ (0.02)
============ ============
Weighted average number of basic common
shares outstanding 47,687,536 45,117,713
============ ============
----------
* The fully-diluted loss per share is not presented since the result would be
anti-dilutive.
The accompanying footnotes are an integral part of these financial statements.
23
In Media Corporation
(A Development Stage Company)
Statements of Cash Flows
Inception
October 27, 2008
Year Ended Year Ended Through
December 31, December 31, December 31,
2011 2010 2011
------------ ------------ ------------
(Restated)
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (858,573) $ (1,017,988) $ (2,696,909)
Adjustments to reconcile net income to net cash used
in operating activities
Stock issued for services in lieu of cash 64,000 503,999 567,999
Amortization of prepaid maintenance expenses 207,500 207,500 --
Non cash stock compensation expense 47,687 -- 47,687
Discount on convertible notes, net of amortization (33,083) -- (33,083)
Extinguishment of derivative liability on convertible notes, net 52,794 41,558 94,352
Foregiveness of director's loan -- (30,565) --
Note interest paid by common stock 7,202 6,715 13,917
Write off of organization expenses -- 1,970 --
Increase (decrease) in operating liabilities
Accounts payable 320,313 26,662 368,791
Amounts due to related party -- 57,548 952,548
Advances and deposits from customers 47,650 -- 47,650
------------ ------------ ------------
TOTAL CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (144,510) (202,601) (637,048)
------------ ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES
TOTAL CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- --
------------ ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- -- 290,000
Net proceeds from sale of convertible notes 85,000 200,500 285,500
Advances from related party 61,600 -- 61,600
Loan/(repayment of loan) from a director (2,100) 2,100 --
------------ ------------ ------------
TOTAL CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 144,500 202,600 637,100
------------ ------------ ------------
Net increase (decrease) in cash (10) (1) 52
Cash at beginning of period 62 63 --
------------ ------------ ------------
CASH AT END OF PERIOD $ 52 $ 62 $ 52
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid $ -- $ -- $ --
============ ============ ============
Taxes Paid $ 800 $ 800 $ 2,400
============ ============ ============
The accompanying footnotes are an integral part of these financial statements.
24
In Media Corporation
(A Development Stage Company)
Statements of Shareholders' Equity and Retained Earnings
Accumulated
Deficit
Common Additional During the
Common Stock Paid-in Development
Stock # Amount Capital Stage Total
------- ------ ------- ----- -----
Balance December 31, 2007 33,500,000 $ 33,500 $ 221,500 $ (20,759) $ 234,241
Net loss, year ended December 31, 2008 (32,038) (32,038)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2008 33,500,000 33,500 221,500 (52,797) 202,203
----------- ----------- ----------- ----------- -----------
Merger of Tres Estrellas and In Media
Corporation, October 30, 2009 11,500,000 11,500 23,500 (50,965) (15,965)
Net loss through Dec 31, 2009 (716,586) (716,586)
----------- ----------- ----------- ----------- -----------
Balance December 31, 2009 45,000,000 45,000 245,000 (820,348) (530,348)
----------- ----------- ----------- ----------- -----------
Net loss for year ended
December 31, 2010 (1,017,988) (1,017,988)
Issuance of Common stock to
consultants 417,000 417 503,582 503,999
Isuance of Common Stock in
conversion of notes 145,618 146 29,854 30,000
----------- ----------- ----------- ----------- -----------
Balance December 31, 2010 45,562,618 45,563 778,436 (1,838,336) (1,014,337)
----------- ----------- ----------- ----------- -----------
Net loss for year ended December 31, 2011 (858,573) (858,573)
Issuance of Common stock to settle
accounts payable 4,500,000 4,500 670,500 675,000
Issuance of Common stock to settle
accrued interest 55,371 55 6,065 6,120
Issuance of Common stock in lieu of
payment to consultants 400,000 400 63,600 64,000
Issuance of Common stock to purchase
assets 250,000 250 39,750 40,000
Isuance of Common Stock in conversion of
notes 1,403,904 1,404 141,596 143,000
Options expense during the period 47,687 47,687
Extinguishment of derivative liability
on notes repaid and converted 114,771 114,771
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2011 52,171,893 $ 52,172 $ 1,862,405 $(2,696,909) $ (782,332)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
25
IN MEDIA CORPORATION
NOTES TO RESTATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2011 AND 2010
1. ORGANIZATION
IN Media Corporation (the "Company") is a Nevada corporation incorporated on
March 5, 2007 as Tres Estrellas Enterprises, Inc. ("Tres Estrellas"). Effective
February 3, 2010, the Company changed its name to IN Media Corporation. The
Company is a development stage company. On October 30, 2009 ("the Acquisition
Date"), we executed an agreement between IN Media Corporation ("IN Media") and
Tres Estrellas whereby IN Media shareholders acquired thirty-three million, five
hundred thousand (33,500,000) shares of the Company's common stock and the
Company acquired all the issued and outstanding shares of In Media and IN Media
was merged into Tres Estrellas. The Company reported this event on Form 8-K,
filed with the Securities and Exchange Agreement on November 2, 2009. For
financial accounting purposes, the acquisition was a reverse merger of the
Company by IN Media, under the purchase method of accounting, and was treated as
a recapitalization with IN Media as the acquirer. Upon consummation of the
merger, the Company adopted the business plan of IN Media. Accordingly, the
consolidated statements of operations include the results of operations of IN
Media from its inception on October 27, 2008 and the results of operations of
Tres Estrellas from the Acquisition Date through December 31, 2011. The
Company's fiscal year end is December 31.
2. GOING CONCERN AND LIQUIDITY CONSIDERATIONS
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. As at December 31, 2011, the Company had accumulated a loss
from operations of $2.7 million and has earned no revenues since inception, and
our liabilities exceed our assets by over $780,000. The Company intends to fund
its continuing operations through strict expense management and control, a
combination of equity or debt financing arrangements, reliance on third party
contractors to avoid the need for capital expenditure or commitment to fixed
overhead, and extended credit from suppliers and related parties, all of which
may be insufficient to fund its capital expenditures, working capital and other
cash requirements for the year ending December 31, 2012.
We have focused our efforts on developing business opportunities in China and
India and although we have received several verbal or written expressions of
interest in purchasing our products we have not actually fulfilled any orders or
shipped any of our products as of December 31, 2011. Our ability to fulfil sales
orders is directly linked to our lack of financial resources and inability to
secure credit terms from our sub-contract manufacturers and component suppliers,
and despite our best efforts to raise working capital through debt and equity
transactions, extended supplier credit, and customer advances, we have not yet
managed to solve these problems, and initial orders have subsequently lapsed. We
currently have an advance from one customer and are continuing to explore credit
arrangements with our sub-contract manaufacturer to finance production of this
order and hope, although we cannot guarantee, to move beyond our development
stage into an operational stage during 2012. The ability of the Company to
emerge from the development stage is dependent upon, among other things,
obtaining additional financing to purchase the inventory required to fulfill
current purchase order commitments, to make on-account payments to vendors, and
to service our current debt obligations. These factors, among others, raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
3. RESTATEMENT OF FINANCIAL STATEMENTS
Subsequent to December 31, 2010, the Company reconsidered the manner in which it
had been accounting for convertible debt issued as a primary means of raising
additional equity funding. As a result, the Company has re-stated its financial
statements and filed an Amended form 10-K for the year ended December 31, 2010.
All references in this report on Form 10-K to the prior year refer to the
amended financial statements for the year ended December 31, 2010.
26
4. SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
The accounting and reporting policies of the Company conform to U.S. generally
accepted accounting principles (US GAAP) applicable to development stage
companies.
B) USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
C) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks, money market funds, and
certificates of term deposits with maturities of less than three months from
inception, which are readily convertible to known amounts of cash and which, in
the opinion of management, are subject to an insignificant risk of loss in
value.
D) FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS
The Company's financial instruments as defined by FASB ASC 825-10-50 include
cash, trade accounts receivable, and accounts payable and accrued expenses. All
instruments are accounted for on a historical cost basis, which, due to the
short maturity of these financial instruments, approximates fair value at
December 31, 2011. FASB ASC 820 defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting
principles, and expands disclosures about fair value measurements. ASC 820
establishes a three-tier fair value hierarchy which prioritizes the inputs used
in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market
data, which requires the reporting entity to develop its own
assumptions.
The Company does not have any assets or liabilities measured at fair value on a
recurring basis at December 31, 2011 and December 31, 2010.
E) INCOME TAXES
The Company accounts for income taxes under ASC 740 "Income Taxes" which
codified SFAS 109, "Accounting for Income Taxes" and FIN 48 "Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109."
Under the asset and liability method of ASC 740, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under ASC 740, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period the
enactment occurs. A valuation allowance is provided for certain deferred tax
assets if it is more likely than not that the Company will not realize tax
assets through future operations.
F) EARNINGS (LOSS) PER SHARE
FASB ASC 260, "Earnings Per Share" provides for calculation of "basic" and
"diluted" earnings per share. Basic earnings per share includes no dilution and
is computed by dividing net income (loss) available to common shareholders by
the weighted average common shares outstanding for the period. Diluted earnings
per share reflect the potential dilution of securities that could share in the
earnings of an entity similar to fully diluted earnings per share. Basic and
diluted loss per share was the same at the reporting dates, as the diluted loss
would be anti-dilutive.
27
G) STOCK-BASED COMPENSATION
ASC 718 "Compensation - Stock Compensation" which codified SFAS No. 123
prescribes accounting and reporting standards for all stock-based payments award
to employees, including employee stock options, restricted stock, employee stock
purchase plans and stock appreciation rights, may be classified as either equity
or liabilities. The Company should determine if a present obligation to settle
the share-based payment transaction in cash or other assets exists. A present
obligation to settle in cash or other assets exists if: (a) the option to settle
by issuing equity instruments lacks commercial substance or (b) the present
obligation is implied because of an entity's past practices or stated policies.
If a present obligation exists, the transaction should be recognized as a
liability; otherwise, the transaction should be recognized as equity. The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of ASC 505-50 "Equity - Based
Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task
Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods or Services". Measurement of share-based payment
transactions with non-employees shall be based on the fair value of whichever is
more reliably measurable: (a) the goods or services received; or (b) the equity
instruments issued. The fair value of the share-based payment transaction should
be determined at the earlier of performance commitment date or performance
completion date.
H) DERIVATIVE INSTRUMENTS
The Company recognizes the underlying value of embedded derivatives in
accordance with ASC 815-15-25-1. The value of the option for noteholders to
convert their notes into shares of common stock is calculated and credited as a
derivative liability for the duration of the notes, while an offsetting amount
is classified as a discount to the principal value of the notes. The derivative
value added to the discount reserve and derivative value was $ 61,978 and
$81,469 during the years ended December 31, 2011 and 2010, respectively. The
value of the debt discount is amortized as interest expense on a straight line
basis over the life of the notes. During the years ended December 31, 2011 and
2010, the Company amortized $65,388 and $41,558, respectively, as debt discount
expense. At December 31, 2011, the Company valued the derivative liability and
determined that the carrying value was above market value and wrote down $16,865
against additional paid-in capital. At December 31, 2010, the Company valued the
derivative liability and determined that the carrying value was in line with
market value and, accordingly, no adjustments were made to the value of
derivative liability or additional paid-in capital at that date.
I) REVENUE RECOGNITION
The Company recognizes revenue from the sale of products and services in
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
104 ("SAB 104"), "Revenue Recognition in Financial Statements." Revenue will
consist of services income and will be recognized only when all of the following
criteria have been met: (i) Persuasive evidence for an agreement exists; (ii)
Service has occurred; (iii) The fee is fixed or determinable; and (iv)Revenue is
reasonably assured.
J) PREPAID EXPENSES AND LICENSE FEES
In November 2008, the Company and Numerity Corporation entered into a license
agreement ("License Agreement") under which Numerity agreed to grant the Company
a non-exclusive, perpetual license to the software and source code for the
design of our IPTV set top box ("STB") including streaming, storage, encoding
and billing modules as well as the designs and schematic drawings for the actual
STB. The License provided for the first one hundred thousand units to be shipped
royalty free, the next one hundred thousand units shipped to be subject to a
royalty payment of $50 per unit, and additional units thereafter subject to a
royalty payment of $20 per unit. To date the Company has not shipped any STB
units, and has therefore not incurred any royalty expense, however, as and when
STBs are shipped in future periods, the Company will accrue all royalty
obligations payable, and charge the cost of royalties to cost of sales in the
periods incurred. Additionally, as part of the License Agreement, Numerity
agreed to provide technical support, upgrades and enhancements in exchange for a
maintenance fee of $415,000 per annum. The Company capitalized the maintenance
fee as a prepaid license expense, and amortized the prepayment in installments
over the term of the maintenance agreement. On June 30, 2010 the Company
renegotiated the terms of the License Agreement such that Numerity would provide
technical support through June 30, 2011 for no additional charge, and the
amortization rate was adjusted to amortize the remaining prepaid balance in
equal installments over the year ended June 30, 2011. No further maintenance
fees are payable until the Company commences first commercial shipments of its
products.
28
5. CAPITAL STOCK
A) AUTHORIZED STOCK
The Company has authorized 75,000,000 common shares with $0.001 par value. Each
common share entitles the holder to one vote, in person or proxy, on any matter
on which action of the stockholder of the corporation is sought.
On June 17, 2010 the Company filed an S-8 registration with the SEC reserving
2,500,000 common shares for issuance under the Company's 2010 Stock Option Plan.
During the period from registration to December 31, 2010, the Company issued
417,000 shares to consultants and employees, and has 2,083,000 registered shares
available for future issuance.
On August 27, 2010 the Company filed an S-1 registration with the SEC reserving
4,000,000 common shares for issuance under the terms of a self-underwritten
public offering. The filing was subsequently withdrawn on October 18, 2010.
B) SHARE ISSUANCES
Since inception (October 27, 2008) to December 31, 2011, the Company has issued
the following shares:
(i) A total of 5,500,000 common stock shares to an officer and director at
$0.002 per share for a total of $11,000. The shares bear a restrictive
transfer legend in accordance with Rule 144 under the Securities Act.
(ii) A total of 6,000,000 common stock shares to 40 unaffiliated investors
at $.004 per share for a total of $24,000 pursuant to an SB-2
Registration Statement.
(iii)A total of 33,500,000 common stock shares to the shareholders of IN
Media Corporation pursuant to the terms and conditions of a Merger
Agreement.
This issuance of stock did not involve any public offering, general advertising
or solicitation. At the time of the issuance, IN Media had fair access to and
was in possession of all available material information about our Company. The
shares bear a restrictive transfer legend in accordance with Rule 144 under the
Securities Act.
In addition, the Company has issued common stock instead of cash to make
purchases or settle liabilities as follows:
SUMMARY ISSUANCE OF COMMON STOCK
Year ended Year ended
ended ended
December 31, December 31,
2011 2010 Total
---------- ---------- ----------
# SHARES
Payment of consultants 400,000 417,000 817,000
Purchase of assets 250,000 -- 250,000
Conversion of notes 1,403,904 145,618 1,549,522
Settlement of debt 4,500,000 -- 4,500,000
Payment of note interest 55,371 -- 55,371
---------- ---------- ----------
TOTAL 6,609,275 562,618 7,171,893
========== ========== ==========
Year ended Year ended
ended ended
December 31, December 31,
2011 2010 Total
---------- ---------- ----------
VALUE OF SHARES
Payment of consultants $ 64,000 $ 503,999 $ 567,999
Purchase of assets 40,000 -- 40,000
Conversion of notes 143,000 30,000 173,000
Settlement of debt 675,000 -- 675,000
Payment of note interest 6,120 -- 6,120
---------- ---------- ----------
TOTAL $ 928,120 $ 533,999 $1,462,119
========== ========== ==========
29
6. NOTES PAYABLE
During the years ended December 31, 2011 and December 31, 2010, the Company
issued, repaid and converted convertible notes as set out in the following
table.
Date of Original Note Balance of
Issuance Proceeds Converted Repaid Notes Outstanding
-------- -------- --------- ------ -----------------
2010 $ 200,500 $ (153,000) $ (47,500) $ --
2011 $ 147,500 $ (30,000) $ (62,500) $ 55,000
The notes carry interest at 8% per annum and can be converted at the
noteholder's option any time after six months from the issuance date based on
62.5% of the average of the lowest three closing bid prices over the ten days
preceding the conversion date. The Company is required to maintain an available
pool of common shares equal to 300% of the number of shares required for
conversion. As at December 31, 2011 and December 31, 2010, the Company has
reserved 3,767,849 and 4,639,804 shares, respectively, of common stock to cover
the conversion of the then outstanding Notes and accrued interest.
The Company recognizes the underlying value of embedded derivatives in
accordance with ASC 815-15-25-1. The value of the option for noteholders to
convert their notes into shares of common stock is calculated using a Black
Scholes model and credited as a derivative liability for the duration of the
notes, while an offsetting amount is classified as a discount to the principal
value of the notes. The derivative value added to the discount reserve and
derivative value was $61,978 and $81,469 during the years ended December 31,
2011 and 2010, respectively. The value of the debt discount is amortized as
interest expense on a straight line basis over the life of the notes. During the
years ended December 31, 2011 and 2010, the Company amortized $65,388 and
$41,558, respectively, as debt discount expense. At December 31, 2011, the
Company valued the derivative liability and determined that the carrying value
was above market value and wrote down $16,865 against additional paid-in
capital. At December 31, 2010, the Company valued the derivative liability and
determined that the carrying value was in line with market value and,
accordingly, no adjustments were made to the value of derivative liability or
additional paid-in capital at that date.
7. INCOME TAXES
The Company has incurred operating losses of approximately $2.7 million since
inception, which, if unutilized, will begin to expire in 2027. Future tax
benefits, which may arise as a result of these losses, have not been recognized
in these financial statements, and have been offset by a valuation allowance.
Details of future income tax assets are as follows:
December 31, 2011
-----------------
Future income tax assests:
Net operating loss from October 27, 2008
(inception) to December 31, 2011 $2,696,909
Statutory tax rate (combined federal and state) 39.7%
Non-capital tax loss 1,069,749
Valuation allowance (1,069,749)
----------
$ --
==========
The potential future tax benefits of these losses have not been recognized in
these financial statements due to uncertainty of their realization. When the
future utilization of some portion of the carry forwards is determined not to be
"more likely than not," a valuation allowance is provided to reduce the recorded
tax benefits from such assets.
30
8. NEW ACCOUNTING PRONOUNCEMENTS
The Company does not expect any recent accounting pronouncements to have a
material impact on its financial statements.
9. RELATED PARTY TRANSACTIONS
Between inception and December 31, 2010 one of our directors, Mr Chavez,
provided and billed for services which were accrued but not paid. The balance
due to Mr Chavez was $30,565 on December 31, 2009. The balance due was
subsequently waived and written off as at March 31, 2010.
From time to time, Mr. Karnick, though his wholly owned Company, Numerity, has
advanced cash to pay off supplier balances on behalf of the Company and the
balance is reported as a loan from related party. The loan is unsecured,
interest-free, and has been or will be repaid when the Company raises sufficient
cash to do so.
One of our shareholders, directors and officers, Mr Karnick, who, together with
his wife, owns approximately 16 million shares of restricted common stock, also
owns a 100% interest in Numerity Corporation from whom we have licensed our
engineering technology, IP and set top box ("STB") designs, and to whom we are
committed to pay royalties of $50 per STB after the first 100,000 units have
been shipped, and $20 per STB after 200,000 units have been shipped. No royalty
payments have been made through December 31, 2011 since no STBs have been
shipped as at that date. In addition, the Company committed to pay $415,000 per
annum to Numerity Corporation in respect of a maintenance agreement on the
licensed software, but has not made any such payments to Numerity as at December
31, 2011. On July 1, 2010, the Company and Numerity agreed to amend that
licensing agreement to provide a deferral of maintenance dues, and an extension
of credit until the earlier of three months after first commercial shipment, or
June 30, 2011. The amendment was authorized for the Company by Mr Danny Mabey, a
board director with no interest in Numerity.
One of our shareholders, directors and officers, Mr Karnick, who, together with
his wife, owns approximately 16 million shares of restricted common stock, also
owns a 100% interest in Numerity Corporation, a provider of contract executive,
administration and business development services (the "Service Agreement") to
the Company. Initially, the Service Agreement provided for contract service fees
of $40,000 per month, but subsequently, as of January 1, 2011 the Company and
Numerity agreed to discontinue contract service charges, and instead have
Numerity bill the Company for the actual cost of any goods or services provided
wholly, exclusively and necessarily for the benefit of the Company. The
amendments were authorized by Mr. Danny Mabey, a board director with no interest
in Numerity.
In the years ended December 31, 2011 and 2010, the Company accrued $91,500 and
$150,000 respectively for services provided by Numerity Corporation. During
2011, the Company paid $$675,000 off the balance of the debt through the
issuance of fully paid shares of common stock, leaving a balance due to Numerity
at December 31, 2011 of $339,148. In order to regularize a de facto extended
credit arrangement between IN Media and Numerity Corporation, we have obtained a
formal agreement from Numerity Corporation, effective as of December 31, 2010,
agreeing to interest-free, revolving credit terms of one year and one day on all
amounts due to Numerity. This extended credit can be terminated at any time
subject to either party giving notice to the other, and subject to repayment of
the balance being made one year and one day after receipt of notice.
One of our shareholders, Guifeng Qui, who owns approximately 13 million shares
of restricted common stock, has a controlling interest in the Chinese
distributor who we have appointed to represent us in developing our business in
China. The Agreement with this distributor provides that we will receive a
margin of $20 on each unit of set-top box sold through that distribution
channel, and an additional $5 per month per subscriber for content distribution
contracts using our content library.
One of our shareholders, directors and officers, Mr Karnick, who, together with
his wife, owns approximately 16 million shares of restricted common stock, also
owns a 100% interest in Numerity Corporation which owns the library of film
content which we intend to include as part of our product offerings. Numerity
has agreed to make the library available to us at no charge.
31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Management reviewed our disclosure controls and procedures, and internal control
over financial reporting and concluded that they were effective as at the end of
the period covered by this report. Following a weakness identified in relation
to the year ended December 31, 2010, the Company corrected and issued an Amended
and Restated Form 10-K/A for that year, and has subsequently extended the scope
of its engagement with its professional advisors to focus more closely on
ensuring compliance with GAAP.
EVALUATION OF DISCLOSURE CONTROLS
RESPONSIBILITY FOR FINANCIAL STATEMENTS
Our principal executive officer and principal financial officer are responsible
for the integrity and objectivity of all information presented in this annual
report. They were prepared in conformity with accounting principles generally
accepted in the United States of America and include amounts based on our
principal executive officer and principal financial officer's best estimates and
judgments. Our principal executive officer and principal financial officer
believe the Amended and Restated Financial Statements fairly reflect the form
and substance of transactions and that the financial statements fairly represent
the Company's financial position and results of operations.
DISCLOSURE CONTROLS AND PROCEDURES
We have established disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to the officers who certify the Company's financial reports and to
the Board of Directors. Based on their evaluation as of December 31, 2011, our
principal executive officer and principal financial officer have concluded that
the Company's disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934) were effective to
ensure that the information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Currently, as a small development stage company, we maintain our internal
controls through a segregation of duties between our principal executive officer
and principal financial officer. For example, all incoming supplier invoices are
delivered direct to the principal financial officer for recording in the books,
checking, and processing. The principal financial officer must submit all
payment requests to the principal executive officer for approval, allocation of
cash and presentation of a check for mailing to the payee. The principal
financial officer conducts regular reconciliations of the bank account to make
sure that all receipts and disbursements have been identified, supported by
appropriate documentation and payment approvals, and the transactions are
matched to postings in the books of account. As a small development stage
company, we have very limited financial activity during the year. Thus, the
current check and balance of the financial activity by our principal executive
officer and principal financial officer provide sufficient controls to ensure
fairness, accuracy and proper disclosure. Any documentation as it relates to the
Company's assessment is very limited as there are only a limited number of
business transactions. No testing was performed on the limited transactions
within the Company by our principal executive officer and principal financial
officer since 100% of the transactions were actually performed by our principal
executive officer and principal financial officer. Our principal executive
officer and principal financial officer concluded that adequate procedures were
in place to approve and monitor all disbursements distributed by the Company and
confirm all funds received by the Company. Our principal executive officer and
principal financial officer are responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
the rules promulgated under the Securities Exchange Act of 1934. Our principal
executive officer and principal financial officer have conducted an evaluation
32
of the effectiveness of our internal control over financial reporting based on
the framework in "Internal Control - Integrated Framework" issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on the
above evaluation, our principal executive officer and principal financial
officer concluded that our internal control over financial reporting was
effective as of December 31, 2011.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under
the Exchange Act, there was no change identified in our internal control over
financial reporting that occurred during the last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting. In response to our restatement, the Company
has extended the scope of its engagement with its professional advisors to focus
more closely on ensuring compliance with GAAP.
ITEM 9B. OTHER INFORMATION
None.
33
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
As at December 31, 2011 our Officers and Board of Directors were comprised of
the following:
Name Age Served Since Positions With Company
---- --- ------------ ----------------------
Nitin Karnik 49 October 2008 CEO & Director
Danny Mabey 61 April 2, 2010 COO & Director
Simon Westbrook 63 February 18, 2010 CFO & Principal Accounting Officer
There are currently no employment contracts in place for any officers.
The following is a brief description of the business experience of our executive
officers, director and significant employees: Dr. Nitin Karnik has been the
Chief Executive Officer of IN Media from October 2008 to present. From 2007
through 2009, Dr. Karnik served as the Chief Executive Officer of RSR Consulting
Inc., a California company covering media consulting in the area of IPTV,
broadband, voice over IP technology, video on demand technology, and streaming
technology with clients in India and China. From 2002 through 2007, Dr. Karnik
was the Senior Vice President of Mars Entertainment Group, Singapore, where his
assignments included content production, distribution, movie production,
designing technology for media, digital cinema technology development, and
business development to Hollywood studios, Bollywood studios and world-wide
television networks.
Mr. Mabey was hired in April 2010 as a member of the board of directors, and
COO, based on his extensive industry experience and knowledge of IPTV technology
and markets. Mr. Mabey has been the President of 121View USA, a Utah corporation
since 2009. He directed the development process of 121View, a Singapore based
company, into the U.S. market. In addition, since 2004, Mr. Mabey has been
President of Interactive Devices Inc., a California corporation that directs the
business operations and development team of software developers in California,
Israel and Utah. From 2003 through 2009, Mr. Mabey was the Vice President of
Broadcast International, a Utah corporation in which Mr. Mabey was involved in
patent development and intellectual property management, product development,
business and network expansion and corporate funding development. Mr. Mabey
received his Bachelors of Arts at Boise State University and his Masters of
Public Administration at Idaho State University.
Mr. Westbrook served as CFO of Public Wireless, Inc., a wireless communication
infrastructure business from 2005-2009. From 2004-2005, Mr. Westbrook served as
CFO of Nanoamp Solutions Inc., a memory IC company. Prior to 2004, Mr. Westbrook
served as CFO at Sage, Inc., (NASDAQ: SAGI), a company specializing in flat
panel display controller ICs. Mr. Westbrook is a Chartered Accountant and holds
a masters degree in Economics from Trinity College, Cambridge in the United
Kingdom.
COMPENSATION OF DIRECTORS
Our bylaws provide that, unless otherwise restricted by our certificate of
incorporation, our Board of Directors has the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, related to
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
our director. Our bylaws further provide that no such payment will preclude any
director from serving our Company in any other capacity and receiving
compensation therefore. Further, members of special or standing committees may
be given compensation for attending committee meetings.
34
AUDIT COMMITTEE FINANCIAL EXPERT
We do not have an audit committee or a compensation committee of our board of
directors. In addition, our board of directors has determined that we do not
have an audit committee financial expert serving on the board. When we develop
our operations, we will create an audit and a compensation committee and will
seek an audit committee financial expert for our board and audit committee.
CONFLICTS OF INTEREST
Our officers and directors are now and may in the future become shareholders,
officers or directors of other companies, which may be formed for the purpose of
engaging in business activities similar to ours. Accordingly, additional direct
conflicts of interest may arise in the future with respect to such individuals
acting on behalf of us or other entities. Moreover, additional conflicts of
interest may arise with respect to opportunities which come to the attention of
such individuals in the performance of their duties or otherwise. Currently, we
do not have a right of first refusal pertaining to opportunities that come to
their attention and may relate to our business operations.
Our officers and directors are, so long as they are our officers or directors,
subject to the restriction that all opportunities contemplated by our plan of
operation which come to their attention, either in the performance of their
duties or in any other manner, will be considered opportunities of, and be made
available to us and the companies that they are affiliated with on an equal
basis. A breach of this requirement will be a breach of the fiduciary duties of
the officer or director. If we or the companies with which the officers and
directors are affiliated both desire to take advantage of an opportunity, then
said officers and directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to such
transactions.
One of our shareholders, directors and officers, Mr Karnick, who, together with
his wife, owns approximately 16 million shares of restricted common stock, has a
controlling interest in Numerity Corporation from whom we have licensed our
engineering technology, IP and set top box designs, and to whom we are committed
to pay maintenance and royalties. On July 1, 2010, the Company agreed to amend
that licensing agreement to provide a deferral of maintenance dues, and an
extension of credit until the earlier of three months after first commercial
shipment, or June 30, 2012. The amendment was authorized for the Company by Mr
Danny Mabey, board director with no interest in Numerity.
One of our shareholders, directors and officers, Mr Karnick, who, together with
his wife, owns approximately 16 million shares of restricted common stock, has a
controlling interest in Numerity Corporation with whom we have contracted the
provision of executive, administration and business development services and to
whom we committed to pay contract service fees of $40,000 per month. On July 1,
2010, the Company agreed to amend that service agreement such that the next
$330,000 of service fees payable would be waived by Numerity, and the
corresponding fees would be payable directly to Numerity's sub-contractors,
either in cash or common stock at the option of the Company. Additionally, the
parties agreed to extend credit for amounts due to Numerity on a rolling term of
a year and one day until further agreement between the parties. The amendment
was authorized by Mr Danny Mabey, a board director with no interest in Numerity.
Subsequently, $675,000 of the Numerity debt was assigned to a third party, and
then extinguished by the issuance of 4.5 million shares of fully-paid common
stock. The balance due to Numerity at December 31, 2011 is $339,148.
One of our shareholders, Guifeng Qui, who owns approximately 13 million shares
of restricted common stock, has a controlling interest in the Chinese
distributor who we have appointed to represent us in developing our business in
China. The Agreement with this distributor provides that we will receive a
margin of $20 on each unit of set-top box sold through that distribution
channel, and an additional $5 per month per subscriber for content distribution
contracts using our content library of over four thousand titles.
One of our shareholders, directors and officers, Mr Karnick owns the library of
film content which has been made available for our use at no charge to us, which
we intend to include as part of our product offerings.
35
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
To the best of our knowledge, during the past ten years, none of the following
occurred with respect to a present or former director or executive officer of
the Company: (1) any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time; (2) any conviction in
a criminal proceeding or being subject to a pending criminal proceeding
(excluding traffic violations and other minor offenses); (3) being subject to
any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any court of any competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; and (4) being found by a court of
competent jurisdiction (in a civil action), the Securities and Exchange
Commission or the commodities futures trading commission to have violated a
Federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
CODE OF ETHICS
The Company has adopted a code of business conduct and ethics that applies to
its directors, officers, and employees, including its principal executive
officers, principal financial officer, principal accounting officer, controller
or persons performing similar functions. The Financial Code of Ethics is filed
as Exhibit 14.1 to this Annual Report.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT 9.A. DIRECTORS AND EXECUTIVE
OFFICERS, PROMOTERS, AND CONTROL PERSONS:
The Company believes that all filings of Form 4 and 5 required of Section 16(a)
of the Exchange Act of Directors, Officers or holders of 10% of the Company's
shares have been timely.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
Nitin Karnik 2011 $ --(a) $ -- $ -- $ -- $ -- $ -- $ -- $ --
2010 $ --(a) $ -- $ -- $ -- $ -- $ -- $ -- $ --
2009 $ --(b) $ -- $ -- $ -- $ -- $ -- $ -- $ --
Danny Mabey 2011 $80,000(c,d) $ -- $ -- $23,364 $ -- $ -- $ -- $103,364
2010 $60,000(c,e) $ -- $ -- $ -- $ -- $ -- $ -- $ 60,000
Simon 2011 $96,000(f,g) $ -- $ -- $23,364 $ -- $ -- $ -- $119,364
Westbrook 2010 $88,000(f,h) $ -- $ -- $ -- $ -- $ -- $ -- $ 88,000
----------
(a) Mr. Karnik is the CEO and owner of Numerity Corporation. The amounts billed
by Numerity for engineering, design and executive services provided by
Numerity, and maintenance fees due under the terms of the Numerity License
Agreement in 2011, 2010, and 2009 were $895,000, $120,000 and $0,
respectively. During 2011 and 2010, the Company paid Numerity $29,900 and
$136,000, respectively, which was treated as payment of the oldest balance
due to Numerity.
36
(b) Mr. Karnik was appointed as CEO in October, 2009.
(c) Mr. Mabey's compensation for the provision of services as COO and director
of the Company has not been paid due to the lack of cash available. An
amount of $140,000 has been included in accounts payable at December 31,
2011 in respect of compensation due to Mr Mabey.
(d) In 2011, Mr. Mabey was granted an option to purchase 800,000 shares at
$0.15 per share, vesting over two years. Using a Black Scholes valuation
model, the Company calculated the value of these options amortized in 2011
was $23,264.
(e) Mr. Mabey was appointed as a director of the Company in 2010.
(f) Mr. Westbrook's compensation for the provision of services as CFO of the
Company has not been paid due to the lack of cash available. An amount of
$184,000 has been included in accounts payable at December 31, 2011 in
respect of compensation due to Mr. Westbrook.
(g) In 2011, Mr. Westbrook was granted an option to purchase 800,000 shares at
$0.15 per share, vesting over two years. Using a Black Scholes valuation
model, the Company calculated the value of these options amortized in 2011
was $23,264.
(h) Mr. Westbrook joined the Company as CFO in February 2010.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
Option Awards Stock Awards
------------------------------------------------------------- --------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options Options Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Year Exercisable(#) Unexercisable(#) Options(#) Price($) Date Vested(#) Vested($) Vested(#) Vested(#)
---- ---- -------------- ---------------- ---------- ----- ---- --------- --------- --------- ---------
Nitin 2011 -- -- -- -- -- -- -- -- --
Karnik 2010 -- -- -- -- -- -- -- -- --
2009 -- -- -- -- -- -- -- -- --
Danny (a) 2011 398,904 401,096 -- $0.15 1-Sep-21 401,096 $24,066 -- --
Mabey 2010 -- -- -- -- -- -- -- -- --
2009 -- -- -- -- -- -- -- -- --
Simon (b) 2011 398,904 401,096 -- $0.15 1-Sep-21 401,096 $24,066 -- --
Westbrook 2010 -- -- -- -- -- -- -- -- --
2009 -- -- -- -- -- -- -- -- --
----------
(a) Mr Mabey was appointed in April 2010.
(b) Mr Westbrook was appointed in February 2010
37
PENSION BENEFITS TABLE
Number of Present
Years Value of Payments
Plan Credited Accumulated During Last
Name Year Name Service(#) Benefit($) Fiscal Year($)
---- ---- ---- ---------- ---------- --------------
Nitin Karnik 2011 -- -- -- --
2010 -- -- -- --
2009 -- -- -- --
Danny Mabey (a) 2011 -- -- -- --
2010 -- -- -- --
2009 -- -- -- --
Simon Westbrook (b) 2011 -- -- -- --
2010 -- -- -- --
2009 -- -- -- --
----------
(a) Mr Mabey was appointed in April 2010
(b) Mr Westbrook was appointed in February 2010
NONQUALIFIED DEFERRED COMPENSATION TABLE
Executive Registrant Agregate Aggregate
Contributions Contributions Earnings Aggregate Balance
in Last Fiscal in Last Fiscal in Last Fiscal Withdrawals at Last Fiscal
Name Year Year($) Year($) Year($) Distributions($) Year-end($)
---- ---- ------- ------- ------- ---------------- -----------
Nitin Karnik 2011 -- -- -- -- --
2010 -- -- -- -- --
2009 -- -- -- -- --
Danny Mabey (a) 2011 -- -- -- -- --
2010 -- -- -- -- --
2009 -- -- -- -- --
Simon Westbrook (a) 2011 -- -- -- -- --
2010 -- -- -- -- --
2009 -- -- -- -- --
----------
(a) Mr Mabey was appointed in April 2010
(b) Mr Westbrook was appointed in February 2010
38
DIRECTOR COMPENSATION TABLE
Change in
Pension
Value and
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Paid in Stock Option Plan Compensation All Other
Name Year Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
---- ---- ------- --------- --------- --------------- ----------- --------------- --------
Nitin Karnik (a) 2011 -- -- -- -- -- -- --
2010 -- -- -- -- -- -- --
2009 -- -- -- -- -- -- --
Danny Mabey (b) 2011 -- -- $23,263 -- -- -- $23,263
2010 -- -- -- -- -- -- --
2009 -- -- -- -- -- -- --
----------
(a) Mr Karnik did not receive or accrue any compensation in any year.
(b) Mr Mabey was appointed in April 2010. He has accrued, but has not been paid
$140,000 for his services as a director, and COO, of the Company.
ALL OTHER COMPENSATION TABLE
Perquisites Company Change
and Other Contributions to Severance in Control
Personal Tax Insurance Retirement and Payments / Payments /
Name Year Benefits($) Reimbursements($) Premiums($) 401(k) Plans($) Accruals($) Accruals($) Total($)
---- ---- ----------- ----------------- ----------- --------------- ----------- ----------- --------
Nitin Karnik 2011 -- -- -- -- -- -- --
2010 -- -- -- -- -- -- --
2009 -- -- -- -- -- -- --
Danny Mabey (a) 2011 -- -- -- -- -- -- --
2010 -- -- -- -- -- -- --
2009 -- -- -- -- -- -- --
Simon Westbrook (b) 2011 -- -- -- -- -- -- --
2010 -- -- -- -- -- -- --
2009 -- -- -- -- -- -- --
----------
(a) Mr Mabey was appointed in April 2010
(b) Mr Westbrook was appointed in February 2010
39
PERQUISITES TABLE
Personal Use Financial
of Company Planning/ Executive
Name Year Car/Parking($) Legal Fees($) Club Dues($) Relocation($) Total($)
---- ---- -------------- ------------- ------------ ------------- --------
Nitin Karnik 2011 -- -- -- -- --
2010 -- -- -- -- --
2009 -- -- -- -- --
Danny Mabey (a) 2011 -- -- -- -- --
2010 -- -- -- -- --
2009 -- -- -- -- --
Simon Westbrook (b) 2011 -- -- -- -- --
2010 -- -- -- -- --
2009 -- -- -- -- --
----------
(a) Mr Mabey was appointed in April 2010
(b) Mr Westbrook was appointed in February 2010
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
Before Change After Change
in Control in Control
Termination Termination
w/o Cause or for w/o Cause or Voluntary Change in
Name Year Good Reason($) for Good Reason($) Termination($) Death($) Disability($) Control($)
---- ---- -------------- ------------------ -------------- -------- ------------- ----------
Nitin Karnik 2011 -- -- -- -- -- --
2010 -- -- -- -- -- --
2009 -- -- -- -- -- --
Danny Mabey (a) 2011 -- -- -- -- -- --
2010 -- -- -- -- -- --
2009 -- -- -- -- -- --
Simon Westbrook (b) 2011 -- -- -- -- -- --
2010 -- -- -- -- -- --
2009 -- -- -- -- -- --
----------
(a) Mr Mabey was appointed in April 2010
(b) Mr Westbrook was appointed in February 2010
EMPLOYMENT AGREEMENTS
As of this time, there are no employment agreements with any named executive
officer.
40
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, CONFLICTS OF
INTEREST.
No retirement, pension, profit sharing, stock option or insurance programs or
other similar programs have been adopted by us for the benefit of our employees.
LEGAL PROCEEDINGS.
We are currently not involved in any litigation that we believe could have a
materially adverse effect on our financial condition or results of operations.
There is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the executive officers of our company or any of
our subsidiaries, threatened against or affecting our company, our common stock,
any of our subsidiaries or of our company's or our company's subsidiaries'
officers or directors in their capacities as such, in which an adverse decision
could have a material adverse effect.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists stock ownership of our common stock, as of December
31, 2011 based on an aggregate of 52,171,893 common shares of the combined
entities. The information includes beneficial ownership by (i) holders of more
than 5% of our common stock, (ii) each of our directors and executive officers
and (iii) all of our directors and executive officers as a group. Except as
noted below, to our knowledge, each person named in the table has sole voting
and investment power with respect to all shares of our common stock beneficially
owned by them.
Name and Address Amount of Percentage
of Beneficial Owner Beneficial Ownership of Class
------------------- -------------------- --------
Nitin Karnik, CEO & director (1) 11,823,529 22.7%
4944 El Camino Real, Ste 100,
Los Altos, CA 94022
Danny Mabey, COO & director (2) 464,658 0.9%
4944 El Camino Real, Ste 100,
Los Altos, CA 94022
Simon Westbrook, CFO (2) 464,658 0.9%
4944 El Camino Real, Ste 100,
Los Altos, CA 94022
Directors and officers as a group (1) 12,752,845 24.4%
Guifeng Qui 13,137,255 25.2%
6-03 Xue Xi Yuan Vanke, New Town
Xin Yi Bau Da Doe,
Tianjin, PRC 300402
Sulu Karnik (3) 3,869,608 7.4%
255 W El Camino Real,
Sunnyvale, CA 94087
Maxway Electronics, Ltd. (4) 4,569,608 8.8%
Room 1609-12 Nan Fung Tower
173 Des Voeux Road,
Hong Kong, PRC
Directors,officers and affiliates
as a group 34,329,316 65.8%
----------
(1) Excludes holdings by Nitin Karnik's spouse, Sulu Karnik.
(2) Number of shares of common stock exercisable under the Company's 2010 Stock
Option plan as of February 29, 2012.
(3) Spouse of Nitin Karnik, excludes holdings by Nitin Karnik.
(4) Maxway Electronics, Ltd. is controlled by Sanjeev Dandpande.
41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, Mr. Karnick, though his wholly owned Company, Numerity, has
advanced cash to pay off supplier balances on behalf of the Company and the
balance is reported as a loan from related party. The loan is unsecured,
interest-free, and will be repaid when the Company raises sufficient cash to do
so.
One of our shareholders, directors and officers, Mr Karnick, who, together with
his wife, owns approximately 16 million shares of restricted common stock, has a
controlling interest in Numerity Corporation from whom we have licensed our
engineering technology, IP and set top box designs, and to whom we are committed
to pay maintenance and royalties. On July 1, 2010, the Company agreed to amend
that licensing agreement to provide a deferral of maintenance dues, and an
extension of credit until the earlier of three months after first commercial
shipment, or June 30, 2012. The amendment was authorized for the Company by Mr
Danny Mabey, a board director with no interest in Numerity.
One of our shareholders, directors and officers, Mr Karnick, who, together with
his wife, owns approximately 16 million shares of restricted common stock, has a
controlling interest in Numerity Corporation with whom we have contracted the
provision of executive, administration and business development services and to
whom we committed to pay contract service fees of $40,000 per month. On July 1,
2010, the Company agreed to amend that service agreement such that the next
$330,000 of service fees payable would be waived by Numerity, and the
corresponding fees would be payable directly to Numerity's sub-contractors,
either in cash or common stock at the option of the Company. Additionally, the
parties agreed to extend credit for amounts due to Numerity on a rolling term of
a year and one day until further agreement between the parties. The amendment
was approved by the Board of Directors, including Mr. Danny Mabey, a member of
the Board of Directors with no interest in Numerity . Subsequently, $675,000 of
the Numerity debt was assigned to a third party, and then extinguished by the
issuance of 4.5 million shares of fully-paid common stock. The balance due to
Numerity at December 31, 2011 is $339,148.
One of our shareholders, Guifeng Qui, who owns approximately 13 million shares
of restricted common stock, has a controlling interest in the Chinese
distributor who we have appointed to represent us in developing our business in
China. The Agreement with this distributor provides that we will receive a
margin of $20 on each unit of set-top box sold through that distribution
channel, and an additional $5 per month per subscriber for content distribution
contracts using our content library of over four thousand titles.
One of our shareholders, directors and officers, Mr Karnick owns the library of
film content which has been made available for our use at no charge to us, which
we intend to include as part of our product offerings.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth fees related to services performed by George
Stewart, CPA:
2011 2010
-------- --------
Audit Fees (1) $ 9,930 $ 9,749
Audit Related Fees (2) -- --
Tax Fees (3) -- --
All Other fees (4) -- --
-------- --------
Total $ 9,930 $ 9,749
======== ========
----------
(1) Audit fees represent fees for professional services provided in connection
with the audit of our financial statements and review of our quarterly
financial statements.
(2) During 2011, we did not incur fees for assurance services related to the
audit of our financial statements and for services in connection with
audits of our benefit plans, which services would be reported in this
category.
(3) During 2011, we did not incur fees for tax advice, tax planning and tax
return preparation.
(4) During 2011, we did not incur fees for other services.
42
The Board of Directors has reviewed and discussed with the Company's management
and independent registered public accounting firm the audited financial
statements of the Company contained in the Company's Annual Report on Form 10-K
for the Company's 2011 fiscal year. The Board has also discussed with the
auditors the matters required to be discussed pursuant to SAS No. 61
(Codification of Statements on Auditing Standards, AU Section 380), which
includes, among other items, matters related to the conduct of the audit of the
Company's financial statements.
The Board has received and reviewed the written disclosures and the letter from
the independent registered public accounting firm required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and has discussed with its auditors its independence from the Company. The Board
has considered whether the provision of services other than audit services is
compatible with maintaining auditor independence.
Based on the review and discussions referred to above, the Board approved the
inclusion of the audited financial statements be included in the Company's
Annual Report on Form 10-K for its 2011 fiscal year for filing with the SEC.
PRE-APPROVAL POLICIES
The Board's policy is to pre-approve all audit services and all permitted
non-audit services (including the fees and terms thereof) to be provided by the
Company's independent registered public accounting firm; provided, however,
pre-approval requirements for non-audit services are not required if all such
services (1) do not aggregate to more than five percent of total revenues paid
by the Company to its accountant in the fiscal year when services are provided;
(2) were not recognized as non-audit services at the time of the engagement; and
(3) are promptly brought to the attention of the Board and approved prior to the
completion of the audit.
The Board pre-approved all fees described above.
43
PART IV
ITEM 15. EXHIBITS
The following exhibits are included with this filing:
Exhibit
Number Description
------ -----------
3(i) Amended and Restated Articles of Incorporation*
3(ii) Amended and Restated Bylaws*
10.1 Numerity licensing and maintenance agreement*
10.2 Numerity licensing and maintenance agreement 1st amendment*
10.3 Numerity service agreement*
10.4 Numerity service agreement 1st amendment*
10.5 Numerity service agreement 2nd amendment*
10.6 IN TV independent sales representation agreement*
10.7 Numerity license to use office agreement*
10.8 Numerity revolving credit agreement*
10.9 Numerity video library license agreement*
14.1 Financial Code of Ethics**
31.1 Sec. 302 Certification of CEO**
31.2 Sec. 302 Certification of CFO**
32.1 Sec. 906 Certification of CEO**
32.1 Sec. 906 Certification of CFO**
101 Interactive data files pursuant to Rule 405 of Regulation S-T.**
----------
* Incorporated by reference to the Company's Amended Annual Report on Form
10-K/A, filed November 14, 2011.
** Filed herein.
44
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
March 20, 2012 IN Media Corporation
By /s/ Nitin Karnik
--------------------------------------------------
Nitin Karnik
Chief Executive Officer and Director (Principal
Executive Officer)
By /s/ Simon P. Westbrook
--------------------------------------------------
Simon P. Westbrook
Chief Financial Officer, Chief Financial Officer
(Principal Accounting Officer)
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Nitin Karnik March 20, 2012
----------------------------------------------------- --------------
Nitin Karnik Date
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Simon P. Westbrook March 20, 2012
----------------------------------------------------- --------------
Simon P. Westbrook Date
Chief Financial Officer, Principal Accounting Officer
(Principal Financial Officer)
/s/ Danny Mabey March 20, 2011
----------------------------------------------------- --------------
Danny Mabey Date
Director
4