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 Forward-Looking Statements

 

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations.  Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Registrant to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.  The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties.  The Registrant’s plans and objectives are based, in part, on assumptions involving it continuing as a going concern and executing on its stated business plan and objectives.  Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Registrant.  Although the Registrant believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate.  In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Registrant or any other person that the objectives and plans of the Registrant will be achieved.

As used in this Quarterly Report, the terms "we", "us", "our", "Island Radio", “Registrant”, and “Issuer” mean Island Radio, Inc. unless the context clearly requires otherwise.

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PART I – FINANICAL INFORMATION

Item 1.  Financial Statements

ISLAND RADIO, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

ASSETS

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

The accompanying notes to the financial statements are an integral part of these statements.

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ISLAND RADIO, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

(unaudited)

			For the three months ended 3/31/12		For the three months ended 3/31/11		For the period from 6/28/10 (inception) to 3/31/12
Revenues, net		$	-	$	-	$	-
Cost of revenues			-		-		-
Gross profit			-		-		-
Expenses:
	General and administrative		134		114		1,164
	Legal consulting fees		15,000		7,655		69,680
	Accounting fees		2,000		2,000		8,000
	Transfer agent fees		650		1,494		7,402
	Total expenses		17,784		11,263		86,246
(Loss) from operations			(17,784)		(11,263)		(86,246)
Other income (expense):
	Interest expense		272		-		559
	Total other income (expense)		272		-		559
Provision for income taxes			-		-		-
Net income (loss)		$	(18,056)	$	(11,263)	$	(86,805)
(Loss) per common share,      basic and diluted		$	(0.00)	$	(0.00)
Weighted average number of     common shares outstanding,      basic and diluted			4,300,000		6,930,444

The accompanying notes to the financial statements are an integral part of these statements.

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ISLAND RADIO, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ (DEFICIT)

For the period from June 28, 2010 (inception) to March 31, 2012

(unaudited)

The accompanying notes to the financial statements are an integral part of these statements.

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ISLAND RADIO, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ (DEFICIT)

For the period from June 28, 2010 (inception) to March 31, 2012

(unaudited)

(continued)

The accompanying notes to the financial statements are an integral part of these statements.

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ISLAND RADIO, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(unaudited)

				For the three months ended 3/31/12		For the three months ended 3/31/11		Cumulative from 6/28/10 (inception) to 3/31/12
Cash flows from operating activities:
	Net (loss)		$	(18,056)	$	(11,263)	$	(86,805)
	Adjustments to reconcile net (loss) to net cash (used in) operating activities
		Common stock issued in connection with services provided by consultants		-		-		20,000
		Imputed interest on related party loan		272		-		559
	Changes in operating assets and liabilities:
		Increase (decrease) in accounts payable		17,784		(2,139)		38,101
	Net cash provided (used) by operating activities			-		(13,402)		(28,145)
Cash flows from investing activities:
	Proceeds from sale of asset (Blue Water common stock)			-		-		13,000
	Net cash provided (used) by investing activities			-		-		13,000
Cash flows from financing activities:
	Proceeds from common stock subscribed			-		5,600		5,600
	Proceeds from loan from officer			-		-		12,250
	Repayment of loan from officer			-		-		(105)
	Repurchase of common stock			-		-		(10,750)
	Proceeds from issuance of common stock			-		8,150		8,150
	Net cash provided (used) by financing activities			-		13,750		15,145
Net increase (decrease) in cash				-		348		-
Cash – beginning of period				-		-		-
Cash – end of period			$	-	$	348	$	-

The accompanying notes to the financial statements are an integral part of these statements.

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ISLAND RADIO, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

(unaudited)

(continued)

				For the three months ended 3/31/12		For the three months ended 3/31/11		Cumulative from 6/28/10 (inception) to 3/31/12
Non-cash investing and financing activities:
	Issuance of common shares to directors (founder’s stock)		$	-	$	-	$	4,000
	Issuance of common shares for common stock subscribed			-		-		5,600
	Restricted securities exchanged for accounts payable			-		-		7,000
	Forgiveness of loan from officer			12,145		-		12,145
	Issuance of common shares for restricted securities received			-		20,000		20,000
			$	12,145	$	20,000	$	48,745
Supplemental disclosure of cash flow information:
	Interest		$	-	$	-	$	-
	Income taxes		$	-	$	-	$	-

The accompanying notes to the financial statements are an integral part of these statements.

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ISLAND RADIO, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

March 31, 2012

(unaudited)

NOTE 1 – Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying Balance Sheet as of March 31, 2012, Statements of Operations for the three months ended March 31, 2012 and March 31, 2011, and cumulative from June 28, 2010 (Inception) to March 31, 2012, Statement of Stockholder’s (Deficit) for the cumulative period from June 28, 2010 (Inception) to March 31, 2012, and the Statements of Cash Flows for the three months ended March 31, 2012 and March 31, 2011, and cumulative from June 28, 2010 (Inception) to March 31, 2012, are unaudited.  These unaudited interim financial statements have been prepared in accordance with accounting principles accepted in the United States of America (“GAAP”).  In the opinion of the company’s management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and included all adjustments necessary for the fair presentation of the Company’s statement of financial position at March 31, 2012 and its results of operations and its cash flows for the period ended March 31, 2012 and cumulative from June 28, 2010 (inception) to March 31, 2012.  The results for the period ended March 31, 2012 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2012.

Organization

Island Radio, Inc. (“Company” or “Island Radio”) is a development stage company with minimal operations.  Island Radio was incorporated under the laws of the State of Nevada on June 28, 2010.  The Company’s business plan calls for the development of a 24-hour radio program that will be transmitted over commercial FM radio spectrum from radio broadcast towers strategically located throughout the Caribbean region and simulcast worldwide over the Internet.  Island Radio’s broadcasting studio will be based in St. Maarten, Dutch West Indies.

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X.  They reflect all adjustments which are, in the opinion of the Company’s management, necessary for a fair presentation of the financial position and operating results as of and for the three months ended March 31, 2012 and March 31, 2011, and cumulative from June 28, 2010 (inception) to March 31, 2012.

Use of Estimates

The accompanying financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.  Actual results may vary from these estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of March 31, 2012, the Company had no cash or other assets.

Investments

The Company accounts for its marketable securities, which are classified as trading securities, in accordance with generally accepted accounting principles for certain investments in debt and equity securities, which requires that trading securities be carried at fair value.  Unrealized gains and losses due to changes in fair value as well as realized gains and losses resulting from sales of securities are reported as Other Income/Expenses in the statement of operations.  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  The

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cost basis for realized gains and losses is determined on a specific identification basis.  As of March 31, 2012, the Company had no investments.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

As of March 31, 2012 we believe that the recorded values of all of our financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Net Loss per Share Calculation

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  During the three months ended March 31, 2012 and March 31, 2011, and cumulative from June 28, 2010 (inception) to March 31, 2012 the Company had no dilutive financial instruments issued or outstanding.

Income Taxes

The Company accounts for income taxes pursuant to FASB ASC 740, Income Taxes.  Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

The Company maintains a valuation allowance with respect to deferred tax assets.  Island Radio establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

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Fiscal Year

The Company elected December 31st for its fiscal year end.

NOTE 2 – Development Stage Activities and Going Concern

The Company is in the development stage and has minimal operations, and as such has devoted most of its efforts since its inception to developing its business plan, issuing common stock, attempting to raise capital, establishing its accounting systems and other administrative functions.  The Company’s business plan calls for the development of a 24-hour radio program that will be transmitted over commercial FM radio spectrum from radio broadcast towers strategically located throughout the Caribbean region and simulcast worldwide over the Internet with its broadcasting studio to be based in St. Maarten, Dutch West Indies.  The Company intends to conduct additional capital formation activities through the issuance of its common stock and to achieve these long-term business growth strategies.

 

While management of the Company believes that Island Radio will be successful in its planned operating activities under its business plan and capital formation activities, there can be no assurance that it will be able to successfully execute on either of these or that it will be able to generate adequate revenues to earn a profit or sustain its operations.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United State of America, which contemplate continuation of the Company as a going concern.  The Company has not established a source of revenues sufficient to cover its operating costs, and as such, has incurred an operating loss since its inception.  Further, as of March 31, 2012, the Company had a working capital deficiency of ($86,805).  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

NOTE 3 – Share Exchange and Subsequent Sale of Blue Water Restaurant Group, Inc. Common Stock Holdings

On March 29, 2011 we entered into a Share Exchange Agreement with Blue Water Restaurant Group, Inc. (“Blue Water”), a Nevada corporation planning a going public initiative and starting a chain of restaurants in St. Maarten, Dutch West Indies.  Under the terms of the agreement we issued Blue Water 2,000,000 shares of our restricted common stock in exchange for 2,000,000 restricted shares of Blue Water common stock, $0.001 par value.  These shares were valued at $20,000, or $0.01 a share.

Blue Water registered 1,300,000 of our total holdings of 2,000,000 shares of their common stock in a SEC Registration Statement on Form S-1 that was declared effective on September 8, 2011.  Subsequently, we sold these 1,300,000 registered shares without restrictions to 36 different individuals at a price of $0.01 per share, or $13,000 in total.  Our remaining 700,000 shares were transferred to Taurus Financial Partners, LLC (“Taurus”) in exchange for a $7,000 reduction in our outstanding accounts payable.  All of the cash proceeds from the sale of our Blue Water shares were paid to Taurus to reduce our outstanding accounts payable to them.  As of March 31, 2012 we continued to owe Taurus $31,101 and no had remaining holdings in Blue Water.

NOTE 4 – Notes Payable to Sole Officer and Director

As of December 31, 2011 we had notes payable to our sole officer and director, Nina Edstrom, aggregating $12,145, which includes $10,750 she loaned the Company to repurchase and cancel 1,075,000 shares of its common stock.  

Ms. Edstrom voluntarily forgave these outstanding debts on March 1, 2012 which was recorded in the financial statements as additional paid-in capital.  Additionally, during the three months ended March 31, 2012 these debts had accrued $272 in imputed interest that was recorded in the financial statements as additional paid-in capital.

NOTE 5 – Common Stock

The total number of common shares authorized that may be issued by the Company is 25,000,000 shares with a par value of $0.001 per share.

During the period June 28, 2010 (inception) to March, 2012 the Company issued an aggregate of 9,375,000 shares as follows:

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·

4,000,000 shares to its directors as Founder’s Shares;

 

·

2,000,000 shares to a consultant for total consideration of $20,000, or $0.01 per share, based on the value of the services performed;

·

1,375,000 shares in exchange for aggregate cash consideration of $13,750, or $0.01 per share;

·

2,000,000 shares in exchange for 2,000,000 shares of restricted common stock in Blue Water Restaurant Group, Inc. (“Blue Water”), a Nevada corporation, presently undertaking a going public initiative.  This investment was valued at $20,000, or $0.01 per share, based on the most recent private transaction price of Blue Water common stock, which was $0.01 per share.  In addition, Blue Water registered 1,300,000 of our shares of its common stock for unrestricted resale in a SEC Registration Statement on Form S-1 which was declared “effective” on September 8, 2011.

On September 19, 2011 the Company repurchased 1,075,000 shares of its common stock, which were subsequently cancelled.  These shares were purchased for $10,750, or $0.01 a share.  This purchase was financed by a non-interest bearing demand loan from our sole officer and director, Nina Edstrom.  During the three months ended March 31, 2012 this note had accrued $272 in imputed interest that was recorded in the financial statements as additional paid-in capital.

On October 13, 2011, two shareholders returned to the Company an aggregate of 4,000,000 shares of restricted common stock.  These shares were subsequently cancelled.

As of April 17, 2012, the Company had 4,300,000 shares of its common stock issued and outstanding.

NOTE 6 – Preferred Stock

The total number of preferred shares authorized that may be issued by the Company is 5,000,000 shares with a par value of $0.001 per share.

As of April 17, 2012, the Company had no shares of its preferred stock issued and outstanding.

NOTE 7 – Income Taxes

The provision (benefit) for income taxes for the period from June 28, 2010 (inception) to March 31, 2012 was as follows, assuming a 35 percent effective tax rate:

				For the three months ended March 31, 2012		For the period June 28, 2010 (inception) to March 31, 2012
Current tax provision:
	Federal
		Taxable income	$	-	$
		Total current tax provision	$	-	$
Deferred tax provision:
	Federal
		Loss carryforwards	$	6,224	$	23,186
		Change in valuation allowance		(6,224)		(23,186)
		Total deferred tax provision	$	-	$	-

As of March 31, 2012, the Company had approximately $66,246 in tax loss carryforwards that can be utilized in future periods to reduce taxable income through 2031.

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The Company provided a valuation allowance equal to the deferred income tax assets for the period from June 28, 2010 (inception) to March 31, 2012 because it is not presently known whether future taxable income will be sufficient to utilize the tax loss carryforwards.

The Company has no uncertain tax positions.

NOTE 8 – Related Party Transactions

As of March 31, 2012, the Company operated out of office space that is being provided to us by our former president and chief executive officer, Eric Boyer, free of charge.

There is no written agreement or other material terms or arrangements relating to this arrangement which could be terminated by Mr. Boyer at any time without notice.

For the three months ended March 31, 2012 and cumulative from June 28, 2010 (inception) to March 31, 2012 the Company’s rent expense was zero.  This is because of the short time period and the minimal level of operating activities that have transpired during this period of time.

NOTE 9 – Recent Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (“FASB”) issued ASU 2010-28, “Intangible –Goodwill and Other (Topic 350): When to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts.”  This update requires an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not (more than 50%) that a goodwill impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s goodwill is not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The adoption of this standard did not have a material impact on the Company’s financial statements.

In December 2010, the FASB issued ASU 2010-29, “Business Combinations (Topic 805): Disclosure of supplementary pro forma information for business combinations.”  This update changes the disclosure of pro forma information for business combinations.  These changes clarify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.  Also, the existing supplemental pro forma disclosures were expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The adoption of this standard did not have a material impact on the Company’s financial statements.

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”.  This amendment explains which modifications constitute troubled debt restructurings (“TDR”).  Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met.  For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption.  The adoption of this standard did not have a material impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011.  This guidance amends certain accounting and disclosure requirements related to fair value measurements.  Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy.  The adoption of this standard did not have a material impact on the Company’s financial statements.

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In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011.  This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.  In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements.  This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income.  The adoption of this standard did not have a material impact on the Company’s financial statements.

In September 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment.  The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit.  The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test.  The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  The adoption of this standard did not have a material impact on the Company’s financial statements.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements.

NOTE 10 – Subsequent Events

There were no material subsequent events through the date these financial statements were filed with the Securities and Exchange Commission on Form 10-Q.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a development stage corporation with limited operations and are not currently generating any revenues from our business operations.  Our independent registered public accounting firm has issued a going concern opinion in their audit report dated February 22, 2012, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2012.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  We do not anticipate generating significant revenues until we are able to launch our initial 24-hour streaming radio program over the Internet.  Accordingly, we must raise additional cash from sources other than operations.  

We presently are exploring other such sources of funding, including raising funds through a second public offering, a private placement of securities, or loans.  If we are unable to raise this additional funding, we will either have to suspend operations until we do raise the cash or cease operations entirely.

The following discussion should be read in conjunction with our Financial Statements and the notes thereto and the other information included in this Quarterly Report as filed with the SEC on Form 10-Q.

Plan of Operations

We plan on developing a widely listened to 24-hour radio program that will be transmitted over commercial FM radio spectrum from radio broadcast towers strategically located throughout the Caribbean region and simulcast worldwide over the Internet using current generation streaming media technology.  Our radio broadcasting studio will be based in St. Maarten, Dutch West Indies.

It is important to note that we are a development stage business with minimal business activity.  As of March 31, 2012 we did not own any radio broadcast licenses nor have we applied for any radio broadcast licenses in any targeted broadcast territory.  Further, we do not have any ownership or leaseholds in any radio broadcast towers nor do we have any agreements in place or in principal with any owners of radio broadcast towers to carry our radio programming should we apply for and be granted a license to broadcast our radio programming.

Programming Format

We intend to develop a 24-hour radio broadcast program featuring classic rock & roll and oldies from the 1970s and 1980s.  We will have live disc jockeys (DJs) running the music programming, taking musical requests and talking with entertaining listeners live over the air.  In addition, our programming will include periodic breaks for international news, local weather, and sports updates.

Targeted Demographic Group

Our radio programming will be aimed at attracting listeners aged 30 – 50 with annual household incomes in excess of $40,000.  Based on our president and chief executive officers experience at Island92 (www.island92.com), we anticipate a significant portion of our listeners will be comprised of vacationing tourists, expatriates, and other island visitors such as yacht and aviation crews and cruise ship visitors.  Many of these visiting listeners will return home and continue listening to our radio programming over the Internet at www.islandradiolive.com.

Proposed Milestones to Implement Business Operations

The following milestones are based on estimates made by our management team.  The working capital requirements and the projected milestones are approximations and are subject to adjustments.  As of March 31, 2012 we had not raised adequate funding to commence executing on the following plan.  We are presently seeking additional sources of funding to initiate operations.  We believe we need to raise a minimum of $50,000 in additional funding to commence operations and meet our minimal working capital needs over the next 12 months.  There is no assurance that any additional financing will be available, or if available, on terms that will be acceptable to us.

 

We estimate generating initial revenues approximately ten months following raising enough capital to commence the following operations.  We plan to complete our milestones as follows:

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0 - 4 Months

We will construct a radio broadcast studio in St. Maarten, Dutch West Indies.  This studio will be approximately 150 square feet in size.  We anticipate the cost of construction, plus the purchase of some initial recording and broadcasting equipment will cost approximately $7,500, which includes a new Dell PowerEdge R310 Server ($2,000), Internet DSL connection deposit ($1,500), wiring ($500), and construction costs ($3,500 in building materials and labor).

 

5 - 7 Months

We will develop and beta test our interactive streaming Internet website (www.islandradiolive.com).  This website will allow our listeners to log in from anywhere in the world and listen to our live radio broadcast using the current generation of streaming media technology as well as see what is happening live in the broadcast studio through a fixed webcam and interact in real time with the live DJ and other listeners through an interactive chat room.  Visitors to the website will also be able to learn about the radio programming schedule, current and recently played songs (including artists name and the ability to purchase the song directly through the website), upcoming events, weather, news and sports.  We estimate this website will cost approximately $2,500 to complete.

8 - 9 Months

We will develop and conduct a limited test market for our radio programming schedule to test varying DJ segments in order to maximize potential listener appeal.  We will also be working out any bugs in our website to ensure that, once we are officially live with 24-hour radio broadcasting, our streaming Internet radio broadcast has no unnecessary interruptions.

Concurrently we will apply for a radio broadcasting license for the island of Saba, Dutch West Indies.  It is our intent to place a 1,500 watt radio tower at the top of Saba, whose mountain peak is approximately 2,877 feet above sea level.  We estimate that we should be able to reach the islands of Saba, St. Maarten, St. Eustatius, Anguilla and St. Barthelemy (St. Barts) with this proposed tower configuration.

We estimate that these activities will cost an aggregate of approximately $3,000.

10 - 12 Months

We will initiate our live 24-hour radio broadcast over the Internet and begin our sales and marketing efforts to sell advertising time on our radio broadcast and banner advertisements on our website.

In addition we will start seeking additional equity financing aimed at raising up to an additional $200,000 for the construction of our planned Saba, Dutch West Indies radio broadcast tower, provided our application for a radio broadcast license is approved.

We estimate that these activities will cost us approximately $3,000.

Note: The amounts allocated to each line item in the above milestones are subject to change without notice.  Our planned milestones are based on the estimated amount of time to complete each milestone following receipt of sufficient capital to begin executing our business plan.  Any line item amounts not expended completely, as detailed in the milestones above, shall be held in reserve as working capital and subject to reallocation as required for ongoing operations.

Long-Term Plan (5 Years)

Over the ensuing five years our growth and expansion will focus primarily on obtaining additional radio broadcasting licenses on strategic Caribbean islands and then construct or acquire radio broadcasting towers to transmit our simulcast radio programming.  Presently we have identified the following Caribbean islands we intend to focus on during this time period:

·

Curacao, Dutch West Indies;

·

Providenciales, Turks and Caicos; and

·

Nassau, Bahamas.

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We estimate that we will need to raise up to an additional $600,000 (estimated at $200,000 per location) for licensing and the establishment of a sufficient radio broadcast tower necessary to service the marketplace on each of the listed Caribbean islands.

Limited Operating History; Need for Additional Capital

 

There is limited historical financial information about us upon which to base an evaluation of our performance.  We are in the start-up stage of operations and have yet to generate any revenues.  We cannot guarantee that we will be successful in our business operations.  Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns, such as increases in marketing costs, increases in administration expenditures associated with daily operations, increases in accounting and audit fees, and increases in legal fees related to filings and regulatory compliance.

 

To become profitable and competitive, we have to successfully develop and sell marketing time on our radio programming.  We anticipate relying on equity sales of our common stock in order to continue to fund our business operations until we are able to generate sufficient revenues to cover our operating expenses, which may never happen.  Issuances of additional shares will result in dilution to our then existing stockholders.  There is no assurance that we will be able to make any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.  We may also rely on loans from our directors.  However, there are no assurances that our directors will provide us with any additional funds.

 

Currently, we do not have any arrangements for additional financing.  We have no assurance that future financing will be available to us on acceptable terms.  If financing is not available on satisfactory terms, we may be unable to continue, develop, or expand our operations.  Equity financing could result in additional dilution to existing shareholders.

Status as a Shell Company

As of March 31, 2012, because we have nominal operations and minimal assets, we are considered to be a shell company under the Securities Exchange Act of 1934, as amended.  Because we are considered a shell company, the securities sold in previous offerings can only be resold through (i) registration under the Securities Act of 1933, as amended (“Securities Act”), (ii) Section 4(1) of the Securities Act, if available, for non-affiliates, or (iii) by meeting the conditions of Rule 144(i) of the Securities Act.

Results of Operations

Three Months Ended March 31, 2012

Revenues.  As of March 31, 2012, we have not generated any revenues and remain a development stage company.

Net Loss.  We had a net loss of ($18,056) for the three months ended March 31, 2012 compared to a net loss of ($11,263) for the same period a year ago.  This represents an increase in net loss of $6,793, or 60.3%.  Our net loss was attributable to costs related to an offering of our common stock and complying with our ongoing SEC reporting requirements, which have consisted primarily of legal, accounting and outside consulting fees.

Operating Expenses.  Our total operating expenses for the three months ended March 31, 2012 were $17,784 compared to $11,263 for the same period a year ago.  This represents an increase in operating expenses of $6,521, or 57.9%.  Our operating expenses were comprised of costs related to an offering of our common stock and complying with our ongoing SEC reporting requirements, which have consisted primarily of legal, accounting and outside consulting fees.

Other income (expenses).  During the period ended March 31, 2012 we recorded $272 in imputed interest expenses related to a note outstanding payable to our sole officer and director.  This note was formally forgiven on March 1, 2012.  Both the accrued imputed interest and forgiven balance of the note outstanding were recorded in Island Radio’s financial statements under additional paid-in capital.

Cumulative During the Development Stage – June 28, 2010 (inception) through March 31, 2012

For ease of reading we refer to the period of June 28, 2010 (inception) through March 31, 2012 as the “Developmental Period”.

Revenues.  We have not generated any revenues during the Developmental Period.

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Net Loss.  We have incurred a net loss of ($86,805) during the Developmental Period.  This net loss was primarily attributable to organizational costs related to our formation, an offering of our common stock, and complying with our ongoing SEC reporting requirements.  These expenses have consisted primarily of legal, accounting, and outside consulting fees.

Operating Expenses.  Our total operating expenses for the Developmental Period were $86,246.  These operating expenses were primarily attributable to organizational costs related to our formation, an early offering of our common stock, and complying with our ongoing SEC reporting requirements.  These expenses have consisted primarily of legal, accounting, and outside consulting fees.

Other income (expenses).  During the Development Period we recorded $559 in imputed interest expenses related to a note outstanding payable to our sole officer and director.  This note was formally forgiven on March 1, 2012.  Both the accrued imputed interest and forgiven balance of the note outstanding were recorded in Island Radio’s financial statements under additional paid-in capital.

Total Stockholders’ Deficit.  Our stockholders’ deficit was ($31,101) as of March 31, 2012.

Accounts Payable and Accrued Expenses.  As of March 31, 2012, we had $31,101 in accounts payable, which are payable to Taurus Financial Partners, LLC, an independent service provider.  Our accounts payable primarily consists of legal, accounting, and outside consulting fees attributable to organizational costs related to our formation, an early offering of our common stock, and complying with our ongoing SEC reporting requirements.

Liquidity and Capital Resources

As of March 31, 2012, we had no assets and our total liabilities were $31,101, which was comprised solely of accounts payable to our independent SEC filing service provider, Taurus Financial Partners, LLC.  We had no external credit facilities (i.e. bank loans, revolving lines of credit, etc.).

We expect to incur continued losses over the next 12 months, possibly even longer.  As of March 31, 2012, we no assets or cash on hand and we believe that we need at least $50,000 to commence operations and meet our minimal working capital requirements over the next 12 months.  

We presently are exploring other such sources of funding.  Without limiting our available options, future equity financings will most likely be through the sale of additional shares of our common stock.  It is possible that we could also offer warrants, options and/or rights in conjunction with any future issuances of our common stock.  However, we can give no assurance that financing will be available to us, and if available to us, in amounts or on terms acceptable to us.  If we cannot secure adequate financing, we may be forced to cease operations and you will lose your entire investment.

Going Concern Consideration

Our independent registered public accounting firm has issued a going concern opinion in their audit report dated February 22, 2012, which can be found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2012.  This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months.  Our financial statements found within this Quarterly Report on Form 10-Q and the aforementioned Annual Report on Form 10-K contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Off –Balance Sheet Operations

As of March 31, 2012, we had no off-balance sheet activities or operations.

CRITICAL ACCOUNTING POLICIES

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (US GAAP) for financial information and in accordance with the Securities and Exchange Commission’s (SEC) Regulation S-X.  They reflect all adjustments which are, in the opinion of Island Radio’s management,

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necessary for a fair presentation of the financial position and operating results as of and for the three months ended March 31, 2012 and March 31, 2011, and cumulative from June 28, 2010 (inception) to March 31, 2012.

Use of Estimates

The accompanying financial statements of Island Radio have been prepared in accordance with generally accepted accounting principles in the United States of America.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.  Actual results may vary from these estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, Island Radio considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.  As of March 31, 2012, Island Radio had no cash or cash equivalents.

Investments

Island Radio accounts for its marketable securities, which are classified as trading securities, in accordance with generally accepted accounting principles for certain investments in debt and equity securities, which requires that trading securities be carried at fair value.  Unrealized gains and losses due to changes in fair value as well as realized gains and losses resulting from sales of securities are reported as Other Income/Expenses in the statement of operations.  Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available.  The cost basis for realized gains and losses is determined on a specific identification basis.  As of March 31, 2012, Island Radio had no investments.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

As of March 31, 2012 we believe that the recorded values of all of our financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Net Loss per Share Calculation

Basic net loss per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.   Diluted earnings per shares is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been

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outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  During the three months ended March 31, 2012 and cumulative from June 28, 2010 (inception) to March 31, 2012 Island Radio had no dilutive financial instruments issued or outstanding.

Income Taxes

Island Radio accounts for income taxes pursuant to FASB ASC 740, Income Taxes.  Under FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

 

Island Radio maintains a valuation allowance with respect to deferred tax assets.  Island Radio establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration Island Radio’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.

 

Changes in circumstances, such as Island Radio generating taxable income, could cause a change in judgment about its ability to realize the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.

Recently Issued Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (“FASB”) issued ASU 2010-28, “Intangible –Goodwill and Other (Topic 350): When to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts.”  This update requires an entity to perform all steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not (more than 50%) that a goodwill impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert that such a reporting unit’s goodwill is not impaired and additional testing is not necessary despite the existence of qualitative factors that indicate otherwise.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The adoption of this standard did not have a material impact on Island Radio’s financial statements.

In December 2010, the FASB issued ASU 2010-29, “Business Combinations (Topic 805): Disclosure of supplementary pro forma information for business combinations.”  This update changes the disclosure of pro forma information for business combinations.  These changes clarify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.  Also, the existing supplemental pro forma disclosures were expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.  This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The adoption of this standard did not have a material impact on Island Radio’s financial statements.

In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”.  This amendment explains which modifications constitute troubled debt restructurings (“TDR”).  Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met.  For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption.  The adoption of this standard did not have a material impact on Island Radio’s financial statements.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011.  This guidance amends certain accounting and disclosure requirements related to fair value measurements.  Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy.  The adoption of this standard did not have a material impact on Island Radio’s financial statements.

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In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011.  This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity.  In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements.  This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income.  The adoption of this standard did not have a material impact on Island Radio’s financial statements.

In September 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment.  The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit.  The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test.  The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  The adoption of this standard did not have a material impact on Island Radio’s financial statements.

Island Radio has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial statements.

Contractual Obligations

As of March 31, 2012, Island Radio had no contractual obligations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Not applicable since we are a smaller reporting company.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our chief executive officer and principal accounting officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be presented or detected on a timely basis.

Based on management’s assessment, we have concluded that, as of March 31, 2012, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our annual and interim filings with the SEC.

Our chief executive officer and principal financial officer have concluded that our disclosure controls and procedures had the following material weaknesses:

·

We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function.  While this control deficiency did not result in any audit adjustments to our interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties;

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·

Island Radio lacks sufficient resources to perform the internal audit function and does not have an Audit Committee;

·

We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert to Island Radio.  The Board of Directors is comprised of one (1) member whom is the sole active executive officer.  As a result, there may be lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by Island Radio; and

·

Documentation of all proper accounting procedures is not yet complete.

These weaknesses were identified in our Annual Report filed with the SEC on Form 10-K.  These weaknesses have existed since our inception on June 28, 2010 and, as of March 31, 2012, have not been remedied.

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:

·

Considering the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures;

 

·

Hiring additional qualified financial personnel, including a Chief Financial Officer, on a full-time basis;

·

Expanding our current board of directors to include additional independent individuals willing to perform directorial functions; and

·

Increasing our workforce in preparation for exiting the development stage and commencing revenue producing operations.

Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near-term due to our limited financial resources.  Until such remedial actions can be realized, we will continue to rely on the limited advice of outside professionals and consultants.

Changes in Controls and Procedures

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1.  Legal Proceedings

No officer, director, or persons nominated for these positions, and no promoter or significant employee of our corporation has been involved in legal proceedings that would be material to an evaluation of our management.  We are not aware of any pending or threatened legal proceedings involving Island Radio, Inc.

 

During the past ten (10) years, Nina Edstrom, our sole officer and director, has not been the subject of the following events:

 

1)

Any bankruptcy petition filed by or against any business of which Ms. Edstrom was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time;

2)

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding;

3)

An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting Ms. Edstrom’s involvement in any type of business, securities or banking activities; and

Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Item 1A.  Risk Factors

Not applicable since we are a smaller reporting company.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Default Upon Senior Securities

None.

Item 4.  (Removed and Reserved)

Not Applicable.

Item 5.  Other Information

None.

Item 6.  Exhibits

* Incorporated by our Registration Statement on Form S-1/A filed October 12, 2010.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereto duly authorized on this 19th day of April, 2012.

ISLAND RADIO, INC.

By:

/s/ Nina Edstrom                                                          

Nina Edstrom

President, Chief Executive Officer,

Principal Executive Officer, Secretary, Treasurer,

Chief Financial Officer,

Principal Accounting Officer and Director

(Sole Officer and Director)

 

 

 

 

 

 

 

 

 

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