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EXCEL - IDEA: XBRL DOCUMENT - Touchpoint Group Holdings Inc.Financial_Report.xls
EX-32.01 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (CHIEF EXECUTIVE OFFICER) - Touchpoint Group Holdings Inc.ex3201q033112.htm
EX-32.02 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (CHIEF FINANCIAL OFFICER) - Touchpoint Group Holdings Inc.ex3202q033112.htm
EX-31.01 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13A-14 - Touchpoint Group Holdings Inc.ex3101q033112.htm
EX-31.02 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14 - Touchpoint Group Holdings Inc.ex3102q033112.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
   
   
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2012
   
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________
 
Commission File Number 000-10822
 
Intelligent Communication Enterprise Corporation
(Exact name of registrant as specified in its charter)
 
Pennsylvania
25-1229323
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
75 High Street
 
Singapore
179435
(Address of principal executive offices)
(Zip Code)
 
+65 6595-6637
(Registrant’s telephone number)
 
n/a
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x
Yes
 
¨
No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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).
x
Yes
 
¨
No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer ¨
Non-accelerated filer o
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨
Yes
 
x
No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of May 10, 2012, the issuer had one class of common stock, with a par value of $0.0001, of which 625,881,006 shares were issued and outstanding.

 
 

 

TABLE OF CONTENTS

   
Page
 
PART I—FINANCIAL INFORMATION
 
     
Item 1:
Financial Statements:
 
 
Unaudited Consolidated Balance Sheets as at March 31, 2012, and
 
 
December 31, 2011
3
 
Unaudited Consolidated Statements of Operations for the
 
 
Three Months Ended March 31, 2012 and 2011
4
 
Unaudited Consolidated Statements of Comprehensive Loss for the
 
 
Three Months Ended March 31, 2012 and 2011
5
 
Unaudited Consolidated Statements of Stockholders’ Equity (Deficiency) and
 
 
Comprehensive Loss for the Periods Ended March 31, 2012,
 
 
and December 31, 2011
6
 
Unaudited Consolidated Statements of Cash Flows for the
 
 
Three Months Ended March 31, 2012 and 2011
7
 
Notes to Consolidated Financial Statements (Unaudited)
9
     
Item 2:
Management’s Discussion and Analysis of Financial Condition
 
 
and Results of Operations
19
     
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
20
     
Item 4:
Controls and Procedures
20
     
 
PART II—OTHER INFORMATION
 
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
21
     
Item 6:
Exhibits
21
     
 
Signatures
22

 
2
 
 

 

PART I—FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

INTELLIGENT COMMUNICATION ENTERPRISE CORPORATION
     
             
Consolidated Balance Sheets
         
March 31, 2012 and December 31, 2011
         
(unaudited)
         
             
      2012     2011
Assets
         
             
Current assets:
         
 
Cash
$
           43,222 
 
$
           68,473 
 
Accounts receivable
 
           75,710 
   
                      - 
 
Prepaid expenses and deposits
 
             2,412 
   
             2,554 
 
Total current assets
 
         121,344 
   
           71,027 
             
Property and equipment, net
 
           28,420 
   
           24,388 
Intangible assets
 
     1,346,184 
   
                      - 
Equity-method investment in i-amtv
 
         368,632 
   
         372,192 
Total assets
$
     1,864,580 
 
$
         467,607 
             
Liabilities and Stockholders' Equity (Deficiency)
         
             
Current liabilities:
         
 
Accounts payable
$
         554,707 
 
$
         493,326 
 
Accrued expenses
 
           71,881 
   
           39,167 
 
Accrued compensation
 
         110,940 
   
             6,795 
 
Amounts due to stockholder
 
           47,100 
   
           36,000 
 
Promissory note
 
           17,352 
   
           17,352 
 
Total current liabilities
 
         801,980 
   
         592,640 
             
Stockholders' Equity (Deficiency)
         
Preferred stock:
         
 
$0.0001 par value, authorized 150,000,000
         
 
issued and outstanding  nil shares (2011 - nil)
 
                      - 
   
                      - 
Common stock:
         
 
$0.0001 par value, authorized 250,000,000,000 shares
         
 
issued and outstanding 625,881,006 shares (2011 - 564,409,192)
 
              62,585 
   
              56,438 
Additional paid-in capital
 
        25,423,522 
   
        24,046,669 
Accumulated deficit
 
       (24,579,582)
   
       (24,384,215)
Accumulated other comprehensive income
 
         156,075 
   
         156,075 
 
Total stockholders' equity (deficiency)
 
     1,062,600 
   
       (125,033)
Total liabilities and stockholders' equity (deficiency)
$
     1,864,580 
 
$
         467,607 
             
See accompanying notes to consolidated financial statements.
         
 
3
 
 

 


INTELLIGENT COMMUNICATION ENTERPRISE CORPORATION
 
             
Consolidated Statements of Operations
         
For the three months ended March 31, 2012 and 2011
         
(unaudited)
         
    2012   2011
             
Revenue
$
                        - 
 
$
                         - 
Cost of revenue
 
                        - 
   
                         - 
Gross margin
 
                        - 
   
                         - 
             
Expenses:
         
 
General and administrative
 
           191,510 
   
        1,028,984 
 
Total operating expenses
 
           191,510 
   
        1,028,984 
Loss from operations
 
         (191,510)
   
      (1,028,984)
             
Other income and expense:
         
 
Interest expense
 
                 (297)
   
              (4,736)
 
Equity-method investment activity
 
              (3,560)
   
                         - 
 
Total other expense
 
              (3,857)
   
              (4,736)
             
Loss from continuing operations
 
         (195,367)
   
      (1,033,720)
             
Discontinued operations (Note 3):
         
 
Loss from discontinued operations
 
                        - 
   
          (143,418)
Loss from discontinued operations
 
                        - 
   
          (143,418)
             
             
Net Loss
$
         (195,367)
 
$
      (1,177,138)
             
Net loss per share
         
 
Basic and diluted net loss per share from
         
 
 continuing and discontinued operations
$
                (0.00)
 
$
                (0.00)
             
Weighted average number of shares outstanding
         
 
      Basic and diluted
 
    608,993,145 
   
    640,732,641 
             
See accompanying notes to consolidated financial statements.
     

 
4
 
 

 


INTELLIGENT COMMUNICATION ENTERPRISE CORPORATION
           
Consolidated Statements of Comprehensive Loss
         
For the three months ended March 31, 2012 and 2011
         
(unauditied)
         
           
  2012   2011
           
Net Loss
$
    (195,367)
 
$
    (1,177,138)
Other comprehensive loss:
         
Forgin currency translation adjustment loss
 
                   - 
   
            (3,657)
           
Total comprehensive loss
$
    (195,367)
 
$
    (1,180,795)
           
           
           
See accompanying notes to consolidated financial statements.
     
 
5
 
 

 

INTELLIGENT COMMUNICATION ENTERPRISE CORPORATION
                       
                             
Consolidated Statements of Stockholders' Equity (Deficiency) and Comprehensive Loss
                 
For the three months ended March 31, 2012 and the year December 31, 2011
                     
(unaudited)
                               
                                 
 
Common Stock
    Additional
Paid-in Capital
    Accumulated
Deficit
    Accumulated Other Comprehensive Income (Loss)     Total
Stockholders'
Equity
(Deficiency)
 
Number of Shares
    Amount                        
                                 
Balance December 31, 2010
      640,023,118 
 
$
              64,000 
 
$
        25,532,084 
 
$
       (22,737,828)
 
$
               159,732 
 
$
          3,017,988 
                                  
Net Loss
                      - 
   
                      - 
   
                      - 
   
        (1,646,387)
   
                         - 
   
        (1,646,387)
Foreign currency translations
                      - 
   
                      - 
   
                      - 
   
                      - 
   
                 (3,657)
   
              (3,657)
Comprehensive loss
                             
        (1,650,044)
                                 
Common stock issued for settlement of amounts
   owing to related parties
          4,613,385 
   
                  461 
   
            303,294 
   
                      - 
   
                         - 
   
            303,755 
Common stock issued for services provided
        13,655,891 
   
                1,366 
   
            541,577 
   
                      - 
   
                         - 
   
            542,943 
Common stock issued on exercise of options
            472,500 
   
                    47 
   
              28,303 
   
                      - 
   
                         - 
   
              28,350 
Options issued to related parties for services
                      - 
   
                      - 
   
                1,975 
   
                      - 
   
                         - 
   
                1,975 
Return of common stock on sale of mms division
     (110,000,000)
   
             (11,000)
   
        (2,739,000)
   
                      - 
   
                         - 
   
        (2,750,000)
Common stock issued for acquisition of investment
        15,644,298 
   
                1,564 
   
            378,436 
   
                      - 
   
                         - 
   
            380,000 
                                 
Balance December 31, 2011
      564,409,192 
   
              56,438 
   
        24,046,669 
   
       (24,384,215)
   
               156,075 
   
           (125,033)
                                 
Net Loss
                      - 
   
                      - 
   
                      - 
   
           (195,367)
   
                         - 
   
           (195,367)
Comprehensive loss
                             
           (195,367)
                                 
Common stock issued for acquisition of subsidiary
        61,471,814 
   
                6,147 
   
          1,376,853 
   
                      - 
   
                         - 
   
          1,383,000 
                                 
Balance March 31, 2012
625,881,006 
 
$
62,585 
 
$
25,423,522 
 
$
(24,579,582)
 
$
156,075 
 
$
1,062,600 
                                 
See accompanying notes to consolidated financial statements.
                     

 
6
 
 

 


INTELLIGENT COMMUNICATION ENTERPRISE CORPORATION
     
               
Consolidated Statements of Cash Flows
         
For the three months ended March 31, 2012 and 2011
         
(unaudited)
         
               
      2012   2011
Cash used in operating activities
         
 
of continuing operations:
         
               
Operating activities:
         
 
Net loss from continuing operations
$
    (195,367)
 
$
 (1,033,720)
 
Adjustment to reconcile net loss for the period to
         
 
net cash used in operating activities:
         
   
Depreciation of property and equipment
 
           3,193 
   
           2,085 
   
Amortization of intangible assets
 
                   - 
   
      875,000 
   
Equity-method investment activity
 
           3,560 
   
                   - 
   
Changes in assets and liabilities, net
         
   
   of effects of acquisition and disposition of subsidiaries
         
   
   Prepaid expenses and deposits
 
           1,758 
   
           2,500 
   
   Accounts payable
 
         (9,467)
   
           7,482 
   
   Accrued expenses
 
         30,882 
   
       (46,337)
   
   Accrued compensation
 
      103,935 
   
         58,160 
 
Net cash used in operating activities
         
   
from continuing operations
 
       (61,506)
   
    (134,830)
               
Investing activities:
         
 
Purchase of property and equipment
 
                   - 
   
         (8,262)
 
Cash component upon acquisition / disposition
 
         25,155 
   
                   - 
 
Net cash provided by (used by) investing activities
         
   
from continuing operations
 
         25,155 
   
         (8,262)
               
Financing activities:
         
 
Proceeds from affiliated company, net
 
         11,100 
   
      162,700 
 
Net cash provided by financing activities
         
   
from continuing operations
 
         11,100 
   
      162,700 
               
Increase (decrease) in cash during the period
 
       (25,251)
   
         19,608 
Foreign exchange effect on cash
 
                   - 
   
            (120)
Net cash provided by discontinued operations
 
                   - 
   
         17,559 
               
Cash at beginning of the period
 
         68,473 
   
         66,249 
               
Cash at end of the period
$
         43,222 
 
$
      103,296 
               
See accompanying notes to consolidated financial statements.
         
 
7
 
 

 


INTELLIGENT COMMUNICATION ENTERPRISE CORPORATION
       
               
Consolidated Statements of Cash Flows
         
For the three months ended March 31, 2012 and 2011
         
(unaudited)
         
               
Supplementary Information:
         
               
      2012   2011
               
 
Non-cash transactions:
         
   
Common stock issued for settlement of amounts due to related parties
$
                   - 
 
$
      225,000 
   
Common stock issued for acquisition of subsidiary
 
   1,383,000 
   
                   - 
               
               
See accompanying notes to consolidated financial statements.
         

 
8
 
 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1.  Description of Business and Summary of Significant Accounting Policies

Organization

Intelligent Communication Enterprise Corporation (the “Company” or “Intelligent”) has continuing operations providing multimedia content and integrated media services.  The iCEsync business using the Modizo.com platform is distributing video content to website visitors and attracting advertising revenue.

On November 12, 2009, Intelligent acquired all of the stock of Radius-ED Limited (“Radius”) through the issuance of 379,787,226 shares of common stock of Intelligent (representing 89% of post-issuance voting stock) and issuance of a convertible promissory note in the amount of $1,500,000.  Prior to the acquisition of Radius, Whitefields Capital Limited held a majority of Intelligent’s and Radius’s voting stock.  Specifically, Whitefields Capital Limited owned 62% of the voting stock of Intelligent and 100% of the voting stock of Radius.  In addition, certain members of Whitefields Capital Limited’s management and board of directors served on the board of Intelligent.  Based on these facts, Intelligent and Radius were deemed under the common control of Whitefields Capital Limited.  As the entities were deemed under common control, the acquisition was recorded using the pooling-of-interest method effective as of January 1, 2009, in accordance with Financial Accounting Standards Board (“FASB”) standards on business combinations for entities under common control.

On January 20, 2010, Intelligent acquired all of the stock of Solesys S.A. through the issuance of 149,693,061 shares of common stock of Intelligent.  Intelligent has accounted for this transaction using the acquisition method.

On May 10, 2011, Intelligent sold its mobile-messaging services (iCEmms) division for cash of $2,370,000 and return of 110,000,000 shares of common stock of Intelligent, with a fair value of $2,750,000 (Note 3).  The division’s financial results of operations, cash flows, and balances have been reclassified as discontinued operations for all periods presented to enhance comparability.

On July 1, 2011, Intelligent acquired a 40% equity interest in i-amtv Limited through the issuance of 15,644,298 shares of common stock.  Intelligent has accounted for this transaction using the equity-method of accounting.

On March 5, 2012, Intelligent completed the acquisition of Global Integrated Media Ltd. (“GIM”) and exchanged 61,471,814 shares of common stock in exchange for all of the issued and outstanding shares of GIM with a fair value of $1,383,000.  The balance sheet of GIM has been consolidated as of March 31, 2012, the date the Company gained control of GIM, and operations will be consolidated commencing April 1, 2012.

Interim Period Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the Securities and Exchange Commission’s instructions.  Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.  The results of operations reflect interim adjustments, all of which are of a normal recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for such interim period.  The results reported in these interim consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year.  Certain information and note disclosure normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations.  These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission on April 16, 2012.
 
9
 
 

 

 
Going Concern

The Company’s consolidated financial statements have been prepared in conformity with GAAP applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business.  During the year ended December 31, 2011, the Company sold its iCEmms division, which was its only revenue-producing division.  The Company used cash received from the sale of its iCEmms division to retire debt and fund the iCEsync business, but the Company’s intention is to raise additional equity to finance the further development of markets for its products and services until positive cash flows can be generated from its operations.  However, the Company cannot assure that additional funds will be available to the Company when required or on terms acceptable to the Company, if at all.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  Such limitations could have a material adverse effect on the Company’s business, financial condition, or operations, and these consolidated financial statements do not include any adjustment that could result.  Failure to obtain sufficient additional funding would necessitate the Company to reduce or limit its operating activities or even discontinue operations.

Principles of Consolidation

The 2011 consolidated financial statements include the accounts of Intelligent Communication Enterprise Corporation and its wholly owned subsidiaries Mobiclear Ltd., Mobiclear Inc. (British Virgin Islands), ICE Mobile Sdn. Bhd., and ICE Messaging Pte. Ltd.  Operations of ICE Mobile Sdn. Bhd. and ICE Messaging Pte. Ltd. have been included up to the time of divestiture.

For 2012, the consolidated financial statements include the accounts of Intelligent Communication Enterprise Corporation and its wholly owned subsidiaries Mobiclear Ltd. and Mobiclear Inc. (British Virgin Islands) and the balance sheets, at March 31, 2012, of Global Integrated Media Ltd. and Global Integ. Media (GIM) Ltd., Corporation.

All significant intercompany balances and transactions have been eliminated.

Cash

Cash consists of checking accounts held at financial institutions in Singapore, Hong Kong, and the Philippines.  At times cash balances may exceed insured limits.  The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal.

Accounts Receivable

Accounts receivable result primarily from provision of publishing services to customers and are recorded at their principal amounts.  Receivables are considered past due after 30 days.  When necessary, the Company provides an allowance for doubtful accounts that is based on a review of outstanding receivables, historical collection information, and current economic conditions.  There was no allowance for doubtful accounts at March 31, 2012.  Receivables are generally unsecured.  Account balances are charged off against the allowance when the Company determines it is probable the receivable will not be recovered.  The Company does not have off-balance sheet credit exposure related to its customers.

Fair Value Measurements

Fair value is defined as the exchange price that will be received for an asset or paid to transfer a liability (an exit price) in the principal.  Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs.  To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered to be observable and the third unobservable:
 
10
 
 

 


Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

Property and Equipment

Property and equipment are primarily comprised of furniture, computer equipment, and software that are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives as follows: furniture, seven years; computer equipment, five years; computer equipment and software, three years.

Repairs and maintenance costs are charged to expense as incurred.  Expenditures that substantially increase the useful lives of existing assets are capitalized.

Intangible Assets

Intangible assets include software development costs, customer lists, and supplier contracts and are amortized on a straight-line basis over the estimated useful lives of two to three years.  The Company periodically evaluates whether changes have occurred that would require revision of the remaining estimated useful life.  The Company performs periodic reviews of its capitalized intangible assets to determine if the assets have continuing value to the Company.  Customer lists and supplier contracts, which were part of the iCEmms business, have been included up to the date of sale of the business and are included in discontinued operations for comparative purposes.

The Company expenses all costs related to the development of internal-use software as incurred, other than those incurred during the application development stage, after achievement of technological feasibility.  Costs incurred in the application development stage are capitalized and amortized over the estimated useful life of the software.  Internally developed software costs are amortized on a straight-line basis over the estimated useful life of the software.  The Company performs periodic reviews of its capitalized software development costs to determine if the assets have continuing value to the Company.  Costs for assets that are determined to be of no continuing value are written off.  During the three months ended March 31, 2012 and 2011, software development costs of $nil and $8,262, respectively, have been capitalized.

Impairment of Other Long-Lived Assets

The Company evaluates the recoverability of its property and equipment and other long-lived assets whenever events or changes in circumstances indicate impairment may have occurred.  An impairment loss is recognized when the net book value of such assets exceeds the estimated future undiscounted cash flows attributed to the assets or the business to which the assets relate.  Impairment losses, if any, are measured as the amount by which the carrying value exceeds the fair value of the assets.  During the three months ended March 31, 2012 and 2011, no potential impairment losses related to the Company’s long-lived assets were identified.
 
11
 
 

 

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned.  For the iCEsync business, the Company considers revenue, which includes charges on a transactional and other basis and the GIM business, which includes contract publishing and advertising sales, realized or realizable and earned when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured.  The Company establishes persuasive evidence of a sales arrangement for each type of revenue transaction based on a signed contract with the customer.

Discontinued Operations

The Company reclassifies, from continuing operations to discontinued operations, for all periods presented, the results of operations for any component disposed of.  The Company defines a component as being distinguishable from the rest of the Company because it has its own operations and cash flows.  A component may be a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group.  Such reclassifications have no effect on the net income or shareholders’ equity.

Advertising Expenses

It is the Company’s policy to expense advertising costs as incurred.  No advertising costs were incurred during the three months ended March 31, 2012 or 2011.

Research and Development Expenses

Research and development expenses include all direct costs, primarily salaries for Company personnel and outside consultants, related to the development of new products, significant enhancements to existing products, and the portion of costs of development of internal-use software required to be expensed.  Research and development costs are charged to operations as incurred with the exception of those software development costs that may qualify for capitalization.

Income Taxes

Deferred income tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, operating loss, and tax credit carryforwards, and are measured using the enacted income tax rates and laws that will be in effect when the differences are expected to be recovered or settled.  Realization of certain deferred income tax assets is dependent upon generating sufficient taxable income in the appropriate jurisdiction.  The Company records a valuation allowance to reduce deferred income tax assets to amounts that are more likely than not to be realized.  The initial recording and any subsequent changes to valuation allowances are based on a number of factors (positive and negative evidence).  The Company considers its actual historical results to have a stronger weight than other, more subjective, indicators when considering whether to establish or reduce a valuation allowance.

The Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return.  Estimated interest and penalties are recorded as a component of interest expense and other expense, respectively.

Because tax laws are complex and subject to different interpretations, significant judgment is required.  As a result, the Company makes certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities; (2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions.  The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized.
 
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Net Loss per Share

Basic net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding in the period.  Diluted loss per share takes into consideration common shares outstanding (computed under basic loss per share) and potentially dilutive securities.  For the three months ended March 31, 2012 and 2011, outstanding stock options and warrants are antidilutive because of net losses, and as such, their effect has not been included in the calculation of diluted net loss per share.  Common shares issuable are considered outstanding as of the original approval date for purposes of earnings per share computations.

Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss), as defined, includes net income, foreign currency translation adjustment, and all changes in equity (net assets) during a period from non-owner sources.  To date, the Company has not had any significant transactions that are required to be reported in other comprehensive income (loss), except for foreign currency translation adjustments.

Foreign Operations and Currency Translation

The functional currency of the Company’s foreign subsidiaries is the local currency.  Assets and liabilities of foreign subsidiaries, other than those denominated in U.S. dollars, are translated into U.S. dollars at the rate of exchange at the balance sheet date.  Revenues and expenses are translated at the average rate of exchange throughout the year.  Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated.  The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations.

Transaction gains and losses that arise from exchange-rate fluctuations on transactions denominated in a currency other than the local functional currency are included in general and administrative expenses.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the fiscal year.  The Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, determining fair values of assets acquired and liabilities assumed in business combinations, valuation allowance for deferred tax assets, allowances for doubtful accounts, and potential income tax assessments and other contingencies.  The Company bases its estimates on historical experience, current conditions, and other assumptions that it believes to be reasonable under the circumstances.  Actual results could differ from those estimates and assumptions.

Financial Instruments

The Company has the following financial instruments: cash, accounts receivable, notes receivable, accounts payable, accrued expenses, and notes payable.  The carrying value of these financial instruments approximates their fair value due to their liquidity or their short-term nature.

Share-Based Compensation

The Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest.  The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures.
 
13
 
 

 


Note 2.  Business Combinations

Acquisition of GIM

In the fourth quarter of 2011, the Company entered into an agreement to acquire GIM by issuing 61,471,814 million shares of the Company’s stock, valued at $1,383,000, in exchange for all of the outstanding shares of GIM.  The consideration for this transaction was exchanged on March 5, 2012.  The Company has consolidated GIM as of March 31, 2012, the date the Company gained control of GIM.  GIM will continue to operate as Global Integrated Media Ltd. and will continue to offer custom publishing, advertising design, brand building, media representation, and website design and development.  The objective of the acquisition is to expand the Company’s service offerings and enhance the development of the Company’s Modizo line of business.  This business combination has been accounted for using the acquisition method.

The allocation of the purchase consideration to assets and liabilities is not yet finalized.  The preliminary allocation of the purchase price was based upon a preliminary valuation and the Company’s estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date).  The primary areas of the preliminary purchase price allocation that are not yet finalized are the identification and determination of intangible assets.  The preliminary fair values of the assets acquired and liabilities assumed by major class in the acquisition of GIM were recognized as follows:

    March 31, 2012
Assets
   
Cash
$
25,155
Accounts receivable
 
76,620
Prepaid expenses and deposits
 
1,616
Property and equipment
 
7,225
Intangible assets
 
1,346,184
Total assets
 
1,456,800
     
Liabilities
   
Accounts payable and accrued expenses
 
71,968
Customer deposits
 
1,832
   
73,800
     
Net assets acquired
$
1, 383,000

Operations, revenue, and expenses will include the operations of GIM effective from April 1, 2012, which is the first business day after the acquisition date.

Unaudited pro forma results of the Company for the three months ended March 31, 2012 and 2011, as if the acquisition occurred on January 1, 2011, after giving effect to certain acquisition accounting adjustments, are stated below.  The unaudited pro forma information presented is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2011:

    Three Months Ended March 31
    2012     2011
Revenue
141,249 
 
 157,850 
Loss for the period
 
(170,413)
   
(1,124,822)
Loss per share – basic and diluted
(0.00)
 
(0.00)
 
14
 
 

 

Note 3.  Discontinued Operations

On May 10, 2011, the Company completed the sale of two subsidiaries, ICE Mobile Sdn. Bhd. and ICE Messaging Pte. Ltd., which comprised all of the Company’s messaging business (iCEmms) operations, assets, and liabilities.  Consideration received was $2.37 million in cash and return of 110 million shares of the Company’s common stock, which had a fair value of $2.75 million as of the closing date.  The buyer had previously acquired the 110 million shares of the Company’s stock in a private transaction.  These 110 million shares have been cancelled and returned to the Company’s authorized but unissued shares.

The iCEmms division is being accounted for as discontinued operations in accordance with GAAP.  The results of operations and cash flows for the comparative periods have been reclassified to separate the divested business from the Company’s continuing operations.

The following table summarizes results of the Company’s messaging business classified as discontinued operations in the accompanying consolidated statements of operations for the three months ended March 31, 2011:

    2011
Revenue
 2,847,872 
Cost of revenue
 
2,205,262 
Operating expenses
 
786,028 
     
Loss from discontinued operations
  (143,418)

Note 4.  Note Receivable

The note receivable of $500,000 was due in full by June 11, 2011.  To date, this amount has not been received and the amount was reserved for during 2011.

Note 5.  Property and Equipment, net

Property and equipment consist of the following:

    March 31, 2012     December 31, 2011
Furniture, computer equipment and software
51,502 
 
38,321 
Less accumulated depreciation
 
(23,082)
   
(13,933)
           
Property and equipment, net
28,420 
 
24,388 

Depreciation expense for three months ended March 31, 2012 and 2011 was $3,193 and $2,085, respectively.

Note 6.  Intangible Assets

Intangible assets consist primarily of software development costs, customer and reseller relationships, and supplier contracts, which are amortized over the estimated useful life, generally on a straight-line basis with the exception of customer relationships, which are generally amortized over the greater of straight-line or the related asset’s pattern of economic benefit.

    March 31, 2012
Intellectual property
1,346,842
Less accumulated amortization
 
-
     
Intangible assets, net
  1,346,842
 
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Note 7.  Equity-method Investment

On July 1, 2011, the Company acquired a 40% equity interest in i-amtv Limited, a Brunei corporation, for $380,000.  The acquisition price was settled by the issuance of 15,644,298 shares of common stock.  The Company has accounted for this investment using the equity-method of accounting as it has the ability to exercise significant influence, but not control, over the investee.  The acquisition of an interest in i-amtv provides the Company with access to the video library for use with its Modizo.com platform.  The Company’s share of net income or loss in the equity-method investee is classified as “equity-method investment activity” on the consolidated statements of operations.

The following summarizes the equity-method investee’s operations and balance sheet as provided to the Company by i-amtv Limited:

 
Three Months Ended
March 31, 2012
Statement of Operations:
 
Revenue
$               -
Operating expenses
      18,900
Other income
       10,000
Net loss
        (8,900)
   
 
March 31, 2012
Balance Sheet:
 
Current assets
$    22,646
Noncurrent assets
    949,999
Current liabilities
       50,932

The Company’s share of loss for the three months ended March 31, 2012, is $3,560.

Note 8.  Promissory Note

The Company issued a non-interest-bearing promissory note, due June 15, 2009, in the amount of $17,352.  The promissory note remains unpaid as of March 31, 2012.

Note 9.  Related-Party Transactions

During the three ended March 31, 2012 and 2011, an affiliated company provided services in the amount of $11,100 and $162,700, respectively.  The unpaid balance of $47,100 is included in amounts due to stockholder.

Note 10.  Share Capital

Preferred Stock

The Company’s authorized capital includes 150,000,000 shares of preferred stock of $0.0001 par value.  The designation of rights including voting powers, preferences, and restrictions shall be determined by the Board of Directors before the issuance of any shares.

No shares of preferred stock are issued and outstanding as of March 31, 2012, and December 31, 2011.
 
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Common Stock

The Company is authorized to issue 250 billion shares of common stock, par value of $0.0001.

On December 15, 2010, the Board of Directors approved the forward-split of the issued and outstanding common stock on the basis of seven new shares for each share, effective upon the approval of the regulatory authorities.  The Company’s common stock was forward-split effective as of December 30, 2010.

On January 14, 2010, the Board of Directors approved the forward-split of the issued and outstanding common stock on the basis of three new shares for each share, effective upon the approval of the regulatory authorities.  The Company’s common stock was forward-split effective as of February 5, 2010.

On September 18, 2009, the Board of Directors approved the consolidation of the issued and outstanding common stock on the basis of one new share for each 600 shares, effective upon approval of the regulatory authorities.  The Company’s common stock was consolidated effective as of October 20, 2009.

On June 19, 2008, the Board of Directors approved the consolidation of the issued and outstanding common stock on the basis of one new share for each 250 shares, effective upon approval of the regulatory authorities.  The Company’s common stock was consolidated effective July 21, 2008.

The application of these stock consolidations and forward-splits has been shown retroactively in these consolidated financial statements.

During the three months ended March 31, 2012, the Company issued 61,471,814 shares of common stock as settlement in full for acquisition of all the issued and outstanding shares of GIM with a fair value of $1,383,000.

Stock Purchase Warrants

At March 31, 2012, the Company had reserved 53,900 shares of its common stock for the following outstanding warrants:

Number of Warrants
Exercise Price
Expiry
     
1,400
$571.43
2012
17,500
         0.031
2013
35,000
         0.018
2013

Pursuant to a prior year debt arrangement, the Company is obligated to issue warrants, as commission fees, entitling the holder to purchase 18,480 shares of common stock.  There were no warrants issued or exercised during the three months ended March 31, 2012.

Note 11.  Stock-Based Compensation

Although the Company does not have a formal stock option plan, it issues stock options to directors, employees, advisors, and consultants.
 
17
 
 

 

A summary of the Company’s stock options as of March 31, 2012, is as follows:

 
Number of
 
Weighted Average
 
Options
 
Exercise Price
       
Outstanding at December 31, 2011
2,184
 
$0.008
Options exercised
-
 
-
Options forfeited
-
 
-
Outstanding at March 31, 2012
2,184
 
$0.008

The following table summarizes stock options outstanding at March 31, 2012:

   
Number
 
Average
 
Number
 
Intrinsic
   
Outstanding
 
Remaining
 
Exercisable
 
Value
   
at
 
Contractual
 
at
 
at
   
March 31,
 
Life
 
March 31,
 
March 31,
Exercise Price
 
2012
 
(Years)
 
2012
 
2012
$0.008
 
2,184
 
0.33
 
2,184
 
$52

During the three months ended March 31, 2012, no options to purchase shares of common stock were issued, and no options were forfeited.

At March 31, 2012, 2,184 shares of common stock were reserved for outstanding options.

The fair value of each option granted is estimated at the date of grant using the Black-Scholes option-pricing model.  The assumptions used in calculating the fair value of the options granted were: risk-free interest rate of 5.0%, a 2.5 year expected life, a dividend yield of 0.0%, and a stock price volatility factor of 226% to 260%.

Note 12.  Commitments and Contingencies

Pursuant to a financing agreement entered into in February 2008, the Company is obligated to issue warrants, exercisable for five years from date of issue, for a number of shares of common stock equal to 10% of the number of shares issued under the financing.  As of March 31, 2012, the Company is obligated to issue warrants to purchase 18,480 shares of common stock.

Pursuant to an agreement entered into in August 2008, the Company is obligated to issue shares of common stock equivalent to 1% of the issued and outstanding shares of the Company at each of March 1, 2009, June 1, 2009, and September 1, 2009.

Lease Commitments

The Company incurred total rent expense of $792 and $9,000, for the three months ended March 31, 2012 and 2011, respectively.  There are no future lease commitments for 2012 or beyond.

18
 
 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the accompanying unaudited consolidated financial statements for the three-month periods ended March 31, 2012 and 2011, and our annual report on Form 10-K for the year ended December 31, 2011, including the consolidated financial statements and notes thereto.

Forward-Looking Information May Prove Inaccurate

This report contains statements about the future, sometimes referred to as “forward-looking” statements.  Forward-looking statements are typically identified by the use of the words “believe,” “may,” “could,” “should,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “intend,” and similar words and expressions.  Statements that describe our future strategic plans, goals, or objectives are also forward-looking statements.

Readers of this report are cautioned that any forward-looking statements, including those regarding our management’s current beliefs, expectations, anticipations, estimations, projections, proposals, plans, or intentions, are not guarantees of future performance or results of events and involve risks and uncertainties.  The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, that may not occur, or that may occur with different consequences from those now assumed or anticipated.  Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors.  The forward-looking statements included in this report are made only as of the date of this report.  We are not obligated to update such forward-looking statements to reflect subsequent events or circumstances.

Introduction

Management believes the most significant feature of our financial condition is that during the three months ended March 31, 2012, we completed the acquisition of Global Integrated Media Ltd. (GIM) for consideration of 61,471,814 shares of our common stock with a fair value of $1,383,000.

We acquired GIM for its business of custom publishing, advertising design, brand building, media representation, and website design and development.  The objective of the acquisition is to expand our service offerings and enhance the development of our Modizo line of business.

Results of Operations

Comparison of the Three Months Ended March 31, 2012,
with the Three Months Ended March 31, 2011

We had no gross revenue from continuing operations for the three-month periods ended March 31, 2012, and 2011.

Our operating expenses from continuing operations for the three months ended March 31, 2012, were $191,510, as compared to $1,028,984 for the comparable period ended March 31, 2011, a decrease for the three months ended March 31, 2012, of 81% due to a reduction of third-party consulting.

Overall, we have a net loss of $195,367 for the three-month period ended March 31, 2012, as compared to a net loss of $1,177,138 in the corresponding period of the preceding year.

We had 20 full-time employees as of March 31, 2012.  Of these, 14 are employed by GIM.
 
19
 
 

 

Liquidity and Capital Resources

As of March 31, 2012, our current assets were $121,344, as compared to $71,027 at December 31, 2011.  As of March 31, 2012, our current liabilities were $801,980, as compared to $592,640 at December 31, 2011.  Operating activities from continuing operations used net cash of $61,506 for the three months ended March 31, 2012, as compared to using net cash of $134,830 for the three months ended March 31, 2011.

During the three months ended March 31, 2012, investing activities provided net cash of $25,155, comprised of cash acquired in the acquisition of GIM.  This is compared to net cash of $8,262 used by investing activities for the three months ended March 31, 2011.

Net cash of $11,100 was provided by financing activities during the three months ended March 31, 2012, as compared to net cash provided by financing activities of $162,700 during the comparable three months ended March 31, 2011.

Our current balances of cash will not meet our working capital and capital expenditure needs for the whole of the current year.  Because we are not currently generating sufficient cash to fund our operations, we will need to rely on external financing to meet future capital and operating requirements.  Any projections of future cash needs and cash flows are subject to substantial uncertainty.  Our capital requirements depend upon several factors, including the rate of market acceptance, our ability to get to production and generate revenues, our level of expenditures for production, marketing, and sales, purchases of equipment, and other factors.  We can make no assurance that financing will be available in amounts or on terms acceptable to us, if at all.  Further, if we issue equity securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences, or privileges senior to those of existing holders of common stock, and debt financing, if available, may involve restrictive covenants that could restrict our operations or finances.  If we cannot raise funds, when needed, on acceptable terms, we may not be able to continue our operations, grow market share, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements, all of which could negatively impact our business, operating results, and financial condition.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


ITEM 4.  CONTROLS AND PROCEDURES

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this quarterly report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officers (our “Certifying Officers”), as appropriate, to allow timely decisions regarding required disclosure.  Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of March 31, 2012, pursuant to Rule 13a-15(b) under the Exchange Act.  Based upon that evaluation, our Certifying Officers concluded that, as of March 31, 2012, our disclosure controls and procedures were not effective.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2012, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
 
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PART II—OTHER INFORMATION

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended March 31, 2012, we issued the following unregistered securities:

On March 5, 2012, we issued 61,471,814 shares of common stock, with a fair value of $1,383,000, for the acquisition of GIM.  These securities were previously reported as issued in our current report on Form 8-K filed December 12, 2011; however, an unexpected delay in the completion of the acquisition resulted in their not being issued until March 5, 2012.

In the issuance above, no general solicitation was used and the transaction was negotiated directly with our executive officers.  The recipient of the common stock represented in writing that it was not a resident of the United States, acknowledged that the securities constituted restricted securities, and consented to a restrictive legend on the certificates to be issued.  This transaction was made in reliance on Regulation S.


ITEM 6.  EXHIBITS

The following exhibits are filed as a part of this report:

Exhibit
Number*
 
 
Title of Document
 
 
Location
         
Item 31
 
Rule 13a-14(a)/15d-14(a) Certifications
   
31.01
 
Certification of Principal Executive Officer Pursuant to Rule 13a-14
 
Attached
         
31.02
 
Certification of Principal Financial Officer Pursuant to Rule 13a-14
 
Attached
         
Item 32
 
Section 1350 Certifications
   
32.01
 
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
 
Attached
         
32.02
 
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
 
Attached
         
Item 101
 
Interactive Data File
   
101
 
Interactive Data File
 
Attached
_______________
*
All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
Registrant
   
 
INTELLIGENT COMMUNICATION
ENTERPRISE CORPORATION
     
     
Date: May 15, 2012
By:
/s/ Victor Jeffery
   
Victor Jeffery, President and
   
Chief Executive Officer
     
     
Date: May 15, 2012
By:
/s/ Sarocha Hatthasakul
   
Sarocha Hatthasakul
   
Chief Financial Officer
 
22