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EXCEL - IDEA: XBRL DOCUMENT - IN Media CorpFinancial_Report.xls
EX-32 - IN Media Corpex32-2.txt
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EX-31 - IN Media Corpex31-2.txt
EX-32 - IN Media Corpex32-1.txt

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

                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURUTIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2012

                        Commission File Number 000-54359

                              IN Media Corporation
             (Exact name of Registrant as specified in its charter)



                                                                     
           Nevada                               1711                        20-8644177
(State or Other Jurisdiction of      (Primary Standard Industrial        (I.R.S. Employee
Incorporation or Organization)        Classification Code Number)       Identification No.)

4920 El Camino Real, Suite 100, Los Altos, CA 94022                         408-849-9499
       (Address of principal executive offices)                    (Registrant's telephone number,
                                                                          including area code)


           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to section 12(g) of the Act:
                          Common Stock, $.001 par value

Indicate by check mark if the  registrant  is a  well-known  seasoned  issuer as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files). Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S- K is not contained  herein,  and will not be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer or a smaller reporting company.  See
definitions  of "large  accelerated  filer,"  "accelerated  filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]                        Accelerated filer [ ]
Non-accelerated filer [ ]                          Smaller reporting company [X]
(Do not check if a smaller reporting company)

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

As of March 11, 2013, the registrant had 57,713,837shares of common stock issued
and  outstanding.  The current  market value of our common stock as of March 11,
2013 is $0.16 per share.  The aggregate market value of the common stock held by
non-affiliates,  as of June 30, 2012 (the last business day of the  registrant's
most recently  completed  second  fiscal  quarter) was  $6,539,000  based on the
closing price of the common stock of $0.23.

Documents Incorporated by Reference:  None

IN MEDIA CORPORATION TABLE OF CONTENTS Page No. -------- Part I Item 1. Business 3 Item 1A. Risk Factors 6 Item 1B. Unresolved Staff Comments 14 Item 2. Properties 14 Item 3. Legal Proceedings 15 Item 4. Mine Safety Disclosures 15 Part II Item 5. Market for Common Equity and Related Stockholder Matters 16 Item 6. Selected Financial Data 18 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and qualitative disclosures about market risk 21 Item 8. Financial Statements 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 33 Item 9A. Controls and Procedures 33 Item 9B. Other Information 34 Part III Item 10. Directors and Executive Officers 35 Item 11. Executive Compensation 37 Item 12. Security Ownership of Certain Beneficial Owners and Management 42 Item 13. Certain Relationships and Related Transactions 43 Item 14. Principal Accounting Fees and Services 44 Part IV Item 15. Exhibits 46 Signatures 47 2
As used in this report, the terms "we", "us", "our" and "our company" refer to IN Media Corporation. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Our disclosure and analysis in this Current Report on Form 10-K contains some forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Certain of the matters discussed concerning our operations, cash flows, financial position, economic performance and financial condition, and the effect of economic conditions include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions are forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flow, research and development costs, working capital, capital expenditures and other projections, they are subject to several risks and uncertainties. Investors are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainty of estimates, forecasts and projections may be better or worse than projected. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results contained in the forward-looking statements. The risks included herein are not exhaustive. The annual report on Form 10-K, and quarterly reports on Form 10-Q, current reports on Form 8-K and other documents filed with the SEC include additional factors which could impact our business and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors. Except as required by law, we expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events. PART I ITEM 1. BUSINESS BACKGROUND IN Media Corporation (the "Company") is a Nevada corporation incorporated on March 5, 2007 as Tres Estrellas Enterprises, Inc. ("Tres Estrellas"). Effective February 3, 2010, we changed our name to IN Media Corporation. On October 30, 2009 (the "Acquisition Date"), we executed an agreement between IN Media Corporation ("IN Media") and Tres Estrellas whereby IN Media shareholders acquired shares of the Company's common stock, and in return we received all the issued and outstanding stock of IN Media, and IN Media was merged into Tres Estrellas.. Upon consummation of the merger, we adopted the business plan of IN Media. Accordingly, the consolidated statements of operations include the results of operations of IN Media from its inception on October 27, 2008 and the results of operations of Tres Estrellas from the Acquisition Date through December 31, 2012. Our fiscal year end is December 31. With our registered office in Reno, Nevada, and principal executive office in Los Altos, California, we are a development stage company positioned to exploit the emerging market for Internet Protocol Television ("IPTV") services for cable, satellite, internet, telephony and mobile services. IPTV delivers video content from public domain and premium content sources over the internet to consumer display devices ranging from large screen TVs in the home, to mobile display devices such as the I-Phone or I-Pad. Our goal is to become a global leader of IPTV implementation systems through the design and delivery of a combination of hardware, software, manufacturing and content services at competitive prices. Our systems may be offered to communications channel providers, and governmental organizations, content owners such as publishers, 3
movie and video game owners, and other premium content databases providers, or distributors and re-sellers who support such channels to either complete their own proprietary offerings or provide an all-in-one solution. TRENDS AND MARKET OPPORTUNITIES * In recent years the opportunity for IPTV has been fuelled by various factors including, but not limited to improvements in broadband technology and infrastructure and consequent reduced cost, * Growth of mass market adoption of broadband access including mobile applications, * Consumer expectations and pressure for video on demand rather than general broadcast distribution which has become increasingly expensive and generally poor quality content, * Fragmentation and specialization of content ownership encouraging content owners to make their content available by subscription, advertising sponsorship, or as a message delivery medium. These trends have taken place in the North American market, but even more so in developing countries around the world according to EMARKETER, the total worldwide broadband subscriber base over 500,000,000 subscribers, and each broadband subscriber is a potential IPTV viewer. We have focused our efforts on developing business opportunities in China and India and although we have received several verbal or written expressions of interest in purchasing our products, we have not actually fulfilled any orders or shipped any of our products as of December 31, 2012. Our ability to fulfill sales orders is directly linked to our lack of financial resources and inability to secure credit terms from our sub-contract manufacturers and component suppliers, and despite our best efforts to raise working capital through debt and equity transactions, extended supplier credit, and customer advances, we have not yet managed to solve these problems, and initial orders have subsequently lapsed. We currently have an advance from one customer and are continuing to explore credit arrangements with our sub-contract manaufacturer to finance production of this order and hope, although we cannot guarantee, to move beyond our development stage into an operational stage during fiscal 2013. PRODUCTS We offer our customers fully integrated plug-and-play solutions comprising hardware devices, operating software, and access to a library of video content. As of December 31, 2012, we are currently offering a choice of three hardware devices: IPTV SET TOP BOX(IPSTB): The IPSTB enables a user to access video contant such as movies, videos, games, and eductational or other promotional content simply connecting the IPSTB to ethernet cable from a home Internet source such as a outmoded modems on one side to Hi Definition Televsion set, or other convenient display, on the other. Once connected, the user gains access to Internet content like YouTube, Yahoo, Google or premium distribution sites like NetFlix which stream video over the internet. TABLET PC : Our Tablet PC, offered in both 7 inch or 10 inch screen models works in exactly the same way as our IPSTB enabling the user to access video over the internet, however, because the display and the STB functionality are both integrated into the device, the Tablet PC can also be used as a regular browser for web surfing and other internet enabled functions like checking emails, or making phone calls, in the same way as a consumer might use an Apple iPad. PREMIUM VIDEO CONTENT: Numerity Corporation owns the rights to over 4,000 video titles and, as an inducement to enter into the Licensing and Maintenance Agreement, entered into a formal agreement with IN Media, as of December 31, 2010, to make this content available to IN Media without charge, thereby enabling the provision of this content to IN Media customers, either as a direct subscription service, or as part of a purchased bundled hardware system. This library includes digital master files of old movies, concerts, speeches, and sports events which can be downloaded over the internet by consumers who wish to subscribe to our content service. In addition, for the issuance of 250,000 fully paid shares of common stock in a prior fiscal year, we have also purchased the rights to access approximately two thousand additional video titles which we are currently editing and formatting for distribution. We are currently designing and setting up a web based server to distribute selected content on-line to subscribers among our future installed base of customers who purchase our set top box. Although our launch and ramp-up of hardware sales has been delayed by limited financial resources, we believe we may also have an opportunity to sell video content subscriptions to consumers and third party distributors through our web site, inmediacorp.com (such website and its contents are not to be incorporated by reference to this report). 4
DEVELOPMENT STAGE OPERATIONS To date, we have built our business by focusing on outsourcing to an experienced and well established third party provider to reduce the risk of product development problems and delays, market and employee acquisition, and up-front cash flow. This provider has been responsible for designing our products and operating software, QA testing, customer demonstration and evaluation support, as well as market analysis, channel development and sales promotion. They also provide general and operational support, such that we have no full time employees, or full time employee equivalents. By adopting this approach, we have managed to develop, test, and bring to market three distinct product offerings in the highly competitive global market for IP TV at a significantly lower cost than if we had carried out these activities in-house. This provider, Numerity Corporation, is owned and controlled by Mr. Karnick, one of our shareholders, directors and officers, and provides contract executive, administration and business development services (the "Service Agreement") to the Company. Initially, the Service Agreement provided for contract service fees of $40,000 per month, but subsequently, as of January 1, 2011, the Company and Numerity agreed to discontinue contract service charges, and instead had Numerity bill the Company for the actual cost of any goods or services provided wholly, exclusively, and necessarily for the benefit of the Company. The amendments were approved by the Board of Directors, including Mr. Danny Mabey, a member of the Board of Directors with no interest in Numerity. Starting September 2012, Numerity resumed billing the Company for its management services at the rate of $40,000 per month. The Company does not have the resources to pay these billings and accordingly, the billing has been added to the balance of notes payable to related party in the December 31, 2012 financial statements. Additionally, in November 2008, we licensed our engineering technology, IP and set top box designs (the "Licensing and Maintenance Agreement") from Numerity and committed to pay maintenance and royalties of $415,000 per annum. On July 1, 2010, the Company agreed to amend that licensing agreement to provide a deferral of any further maintenance dues, and an extension of credit until three months after first commercial shipment. The amendment to the Licensing and Maintenance Agreement was additionally approved by the Board of Directors, including Mr. Danny Mabey, a member of the Board of Directors with no interest in Numerity. One of our shareholders, Guifeng Qui, who owns approximately 13 million shares of restricted common stock, has a controlling interest in the Chinese distributor who we have appointed to represent us in developing our business in China. The agreement with this distributor provides that we will receive a margin of $20 on each unit of set-top box sold through that distribution channel, and an additional $5 per month per subscriber for content distribution contracts using our content library. At the same time, we have been working with other distribution channels in China and other international markets to demonstrate and prove our products and our integrated platform which includes hardware, software, and content. The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to purchase the inventory required to fulfill purchase order commitments and make on-account payments to vendors, while continuing to service our current debt obligations and cover our overhead expenses. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. THE COMPETITION AND COMPETITIVE ADVANTAGE The competitive landscape for IPTV services is very crowded as the market potential is very large. The key players are the platform providers who control access to telephony, television, internet and content for consumers. However, new players like Microsoft, Apple, Amazon, and the major Hollywood studios are moving forward on their own solutions to monetize content and services over the Internet. Key hardware vendors like Motorola, Cisco, Intel, etc. are also potential competitors for set-top box solutions as they have previously established relationships with the platform providers. Although our competitors have strong brands and significant engineering and marketing budgets we believe that we will have an opportunity to compete because we have outsourced our manufacturing and distribution function in China to local partners who know and operate in the Chinese market where our cost is low and the power of established United States brands may not be so powerful. Since we 5
already have a fully functional product offering and have established local distribution we believe our market offering in China is fully competitive with solutions from our competitors. EMPLOYEES We outsource our employees; consequently, we have access to the services of approximately 10 independent contractors including 1 executive and administration, 1 in business development, with the balance working in engineering. WHERE YOU CAN FIND MORE INFORMATION We will make available free of charge any of our filings as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission ("SEC"). We are not including the information contained in our website as part of, or incorporating it by reference into, this report on Form 10-K. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at (http://www.sec.gov). ITEM 1A. RISK FACTORS Our business is subject to a variety of risks and uncertainties, including, but not limited to, the risks and uncertainties described below. If any of the risks described below, or elsewhere in this report on Form 10-K, or our Company's other filings with the Securities and Exchange Commission (the "SEC"), were to occur, our financial condition and results of operations could suffer and the trading price of our common stock could decline. Additionally, if other risks not presently known to us, or that we do not currently believe to be significant, occur or become significant, our financial condition and results of operations could suffer and the trading price of our common stock could decline. You should carefully consider the following risk factors together with the other information contained in this Annual Report on Form 10-K, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended. Our risk factors, including but not limited to the risk factors listed below, are as follows: MINIMAL OPERATING HISTORY AND NO REVENUE MEANS THAT IT IS DIFFICULT TO DETERMINE WHEN, IF AT ALL, WE WILL EVER BE PROFITABLE, AND PROVIDE A RETURN TO INVESTORS. Prior to the merger we had a minimal operating history and have subsequently generated no revenues or earnings from operations. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until we begin selling our product. This will result in us incurring a net operating loss which will increase continuously until we can generate sufficient revenue. There is no assurance that we can generate or sustain profitable operations. THE REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS EXPLANATORY LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN The independent auditor's report on our financial statements contains explanatory language that substantial doubt exists about our ability to continue as a going concern, specifically in Note 2 to the financial statements. The report states that we had accumulated a loss from operations of $3.2 million and have earned no revenues since inception, and our liabilities exceed our assets by over $0.7 million. Management intends to fund its continuing operations through strict expense management and control, a combination of equity or debt financing arrangements, reliance on third party contractors to avoid the need for capital expenditure or commitment to fixed overhead, and extended credit from suppliers and related parties, all of which may be insufficient to fund our capital expenditures, working capital and other cash requirements for the year ending December 31, 2013. If we are unable to obtain sufficient financing in the 6
near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares. SPECULATIVE NATURE OF THE COMPANY'S PROPOSED OPERATIONS MEANS THAT IT IS DIFFICULT TO DETERMINE WHEN, IF AT ALL, OUR BUSINESS MODEL WILL BE ACCEEPTED BY THE MARKET, AND ENABLE US TO EARN PROFITS AND PROVIDE A RETURN TO INVESTORS. The success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the Company. In the immediate future we will spend most of our resources, efforts and expenditures in two primary areas: 1) The securing of key customers in China and India and 2) further development of our IPTV set top box. We have generated no revenue since inception due to the fact that we have not yet made any commercial shipments of our products. The success of our operations will be dependent upon acceptance of our product and numerous other factors beyond our control, including, but not limited to development of our sales channels, competitive features and pricing compared to our competitors in a dynamic and evolving market, the impact of economic and political instability on consumer spending habits, consumer awareness of IPTV and interest in available libraries of content, and our ability to finance and manage production and distribution of inventories for resale. Additionally, even if we succeed in winning orders for our products, we may not be able to finance the building of the inventory necessary to fulfill such orders on acceptable terms, or on any terms at all. OUR COMPANY'S BUSINESS IS IMPACTED BY ANY INSTABILITY AND FLUCTUATIONS IN GLOBAL FINANCIAL SYSTEMS. The recent credit crisis and related instability in the global financial system, although somewhat abated, has had, and may continue to have, an impact on our prospective business and our prospective financial condition. We may face significant challenges if conditions in the financial markets do not continue to improve. Our ability to access the capital markets may be severely restricted at a time when we wish or need to access such markets, which could have a materially adverse impact on our flexibility to react to changing economic and business conditions or carry on our operations. REPORTING REQUIREMENTS MAY UTILIZE A SUBSTANTIAL PORTION OF OUR CASH AND REDUCE THE PERIOD OF TIME WE CAN SURVIVE ON OUR AVAILABLE CASH RESERVES PRIOR TO GENERATING REVENUE. We will incur ongoing costs and expenses for SEC reporting and compliance. To be eligible for quotation on the OTCBB, issuers must remain current in their filings with the SEC. Market Makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. Securities already quoted on the OTCBB that become delinquent in their required filings will be removed following a 30 day grace period if they do not make their required filing during that time. In order for us to remain in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. THE REGULATION OF PENNY STOCKS BY SEC AND FINRA (FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC.) MAY DISCOURAGE THE TRADABILITY OF THE COMPANY'S SECURITIES AND THEREBY MAKE IT HARD FOR INVESTORS TO SELL THEIR SHARES AT THE TIME AND PRICES THEY MIGHT OTHERWISE EXPECT. We are a "penny stock" company. We are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination of the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of purchasers in this offering to sell their securities in any market that might develop, because it imposes additional regulatory burdens on penny stock transactions. 7
In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell their securities in a market that might develop for them because it imposes additional regulatory burdens on penny stock transactions. Shareholders should be aware that, according to the Securities and Exchange Commission Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, leaving investors with losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to the Company's securities. FINRA SALES PRACTICE REQUIREMENTS MAY LIMIT A SHAREHOLDER'S ABILITY TO BUY AND SELL OUR COMMON SHARES. In addition to the "penny stock" rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON THE COMPANY'S STOCK PRICE AS AN INCREASE IN SUPPLY OF SHARES FOR SALE, WITH NO CORRESPONDING INCREASE IN DEMAND WILL CAUSE PRICES TO FALL. All of the outstanding shares of common stock held by the present officers, directors, and affiliate stockholders are "restricted securities" within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act of 1933 and as required under applicable state securities laws. Rule 144 provides in essence that a person who is an affiliate or officer or director who has held restricted securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of a Company's issued and outstanding common stock. There is no limit on the amount of restricted securities that may be sold by a non-affiliate after the owner has held the restricted securities for a period of six months if the Company is a current reporting company under the Securities Exchange Act of 1934. A sale under Rule 144 or under any other exemption from the Securities Act of 1933 , if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have a depressive effect upon the price of the common stock in any market that may develop. In addition, if we are deemed a shell company pursuant to Section 12(b)-2 of the Act, our "restricted securities", whether held by affiliates or non-affiliates, may not be re-sold for a period of 12 months following the filing of a Form 10 level disclosure or registration pursuant to the Securities Act of 1933 . FUTURE ISSUANCES OF SHARES FOR VARIOUS CONSIDERATIONS INCLUDING WORKING CAPITAL AND OPERATING EXPENSES WILL INCREASE THE NUMBER OF SHARES OUTSTANDING WHICH WILL DILUTE EXISTING INVESTORS AND MAY HAVE A DEPRESSIVE EFFECT ON THE COMPANY'S STOCK PRICE. There may be substantial dilution to our shareholders purchasing in future offerings as a result of future decisions of the Board to issue shares without shareholder approval for cash, services, payment of debt or acquisitions. 8
THERE MAY IN ALL LIKLIHOOD BE LITTLE DEMAND FOR SHARES OF OUR COMMON STOCK AND AS A RESULT INVESTORS MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF THEY NEED TO LIQUIDATE THEIR INVESTMENT. There may be little demand for shares of our common stock on the OTC Bulletin Board, or OTC Markets.com, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that it is a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if the Company came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of any of our Securities until such time as it became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in the Company's securities is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on the securities price. We cannot give investors any assurance that a broader or more active public trading market for the Company's common securities will develop or be sustained, or that any trading levels will be sustained. Due to these conditions, we can give investors no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their securities of the Company. FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS. It is time consuming, difficult and costly for us to develop and maintain the internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act, and as our business develops, we may need to hire additional financial reporting, internal auditing and other finance staff in order to remain compliant. The cost of compliance will adversely affect our financial results, while, if we are unable to comply, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies. If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock. Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting and furnish a report by our management on our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price. In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover "material weaknesses" in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines "significant deficiency" as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected. In the event that a material weakness is identified, upon receiving sufficient financing or generating sufficient revenues, we will employ qualified personnel and adopt and implement policies and procedures to address any such material weaknesses. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future. 9
Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. The systems of internal controls and procedures that we have developed and implemented to date are adequate in a business that has no revenue, few purchase and expense transactions, and little in the way of tangible assets and working capital. However, the reliance on third party sub-contractors and lack of employees makes it difficult to ensure segregation of key duties, provide multiple levels of review, and ensure that specified checks and balances exist and are enforced and acted upon where necessary. The current transaction volume and limited transaction channels mean that operating management, financial management, board members and auditor can, and do, efficiently perform a very extensive and detailed transaction review to ensure compliance with the Company's established procedures and controls. When we secure purchase orders and start purchasing product from our sub-contract manufacturers, shipping product to our customers, collecting receivables, and paying our vendors we will need to apply significantly more resources to the management of our controls and procedures and to ensure and continue effective compliance. If our business grows rapidly, we may not be able to keep up with recruiting and training personnel, and enhancing our systems of internal control in line with the growth in transaction volumes and compliance risks which could result in loss of assets, profit, and ability to manage the daily operations of our Company CERTAIN NEVADA CORPORATION LAW PROVISIONS COULD PREVENT A POTENTIAL TAKEOVER, WHICH COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK. We are incorporated in the State of Nevada. Certain provisions of Nevada corporation law could adversely affect the market price of our common stock. Because Nevada corporation law requires board approval of a transaction involving a change in our control, it would be more difficult for someone to acquire control of us. Nevada corporate law also discourages proxy contests making it more difficult for you and other shareholders to elect directors other than the candidate or candidates nominated by our board of directors THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON SHARES MAY NOT BE INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING MARKET. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU. The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or "risky" investment due to our limited operating history and lack of profits to date, shortage of working capital, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our 10
common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price. VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS. As discussed in the preceding risk factor, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources. WE DO NOT HAVE KEY MAN INSURANCE ON OUR CEO, ON WHOM WE RELY FOR THE MANAGEMENT OF OUR BUSINESS AND IT MAY BE DIFFICULT, OR TIME CONSUMING TO FIND A SUITABLE REPLACEMENT WHICH COULD LEAD TO LOSS OF BUSINESS MOMENTUM. We depend, to a large extent, on the abilities and participation of our current management team, but have a particular reliance upon Nitin Karnik, the Company's Chief Executive Officer. The loss of the services of Nitin Karnik for any reason may have a material adverse effect on our business and prospects. We cannot assure you that his services will continue to be available to us, or that we will be able to find a suitable replacement if required. We do not carry key man life insurance for any key personnel. WE MAY NOT BE ABLE TO HIRE AND RETAIN QUALIFIED PERSONNEL TO SUPPORT OUR GROWTH AND IF WE ARE UNABLE TO RETAIN OR HIRE SUCH PERSONNEL IN THE FUTURE, OUR ABILITY TO IMPROVE OUR PRODUCTS AND IMPLEMENT OUR BUSINESS OBJECTIVES COULD BE ADVERSELY AFFECTED. Due to lack of cash resources we have not been able to pay any of our directors or executives for the services they have provided to date, and should one or more of our these executives be unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. Competition for senior management and senior technology personnel is intense, the pool of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or senior technology personnel, or attract and retain high-quality senior executives or senior technology personnel in the future. Considering our current cash position, we do not have adequate cash resources to hire and retain key personnel should we fail to raise additional funding or generate cash flow from operations. Such failure could materially and adversely affect our future growth and financial condition. WE HAVE ISSUED CONVERTIBLE NOTES WHICH COME DUE FOR CONVERSION OR REPAYMENT BASED ON A VARIABLE AVERAGE SHARE PRICE AT THAT TIME, AND SHAREHOLDERS MAY SUFFER SIGNIFICANT DILUTION IF OUR STOCK PRICE IS THEN LOW. The Company has issued convertible notes which can be converted into common stock after twelve months from the issuance date based at 60% of the lowest closing bid price over the twenty-five days preceding the conversion date. We have at times experienced considerable volatility in our share price and if the share price falls in advance of a note conversion date, investors could suffer significant dilution when the notes are converted into shares of common stock. We are required to maintain an available pool of three million common shares in anticipation of conversion. As at December 31, 2012, we would require 227,273 shares of common stock to cover the conversion of the then outstanding convertible notes and accrued interest. 11
WE ARE RESPONSIBLE FOR THE INDEMNIFICATION OF OUR OFFICERS AND DIRECTORS AND IN THE EVENT OF CLAIMS NOT COVERED BY OUR DIRECTORS AND OFFICERS INSURANCE, WE MAY HAVE TO SPEND OUR LIMITED RESOURCES ON LEGAL FEES DIVERTING CASH FROM FUNDING BUSINESS OPERATING EXPENSES AND WORKING CAPITAL. Our Bylaws provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against costs and expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. Consequently, we may be required to expend substantial funds to satisfy these indemnity obligations. WE ARE SUBJECT TO ADDITIONAL DISCLOSURE RELATING TO THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT OF 2012 As a result of the enactment of the Iran Threat Reduction and Syria Human Rights Act of 2012, our company is subject to additional disclosure requirements in its annual and quarterly Exchange Act reports filed after February 6, 2013. If our company or its affiliates engaged in specified types of behavior during the period covered by the report, we will be required to disclose those activities. Please contact Chief Financial Officer of our company immediately if you know or have any reason to believe that any of the activities or types of conduct listed below have been or may have been engaged in at any time during the period from October 1, 2012 up to the date of this report. Please note that this inquiry relates to the activities or conduct of the company, any affiliate of the company, as well as to the conduct of any person who has acted or is acting on behalf of or for the benefit of any of them. For purposes of this question an "affiliate" is defined as a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with a person. Specified activities requiring disclosure: (a) activities or transactions relating to Iran's ability to develop petroleum resources, maintain or expand Iran's domestic production of refined petroleum products, or import refined petroleum products; (b) activities or transactions contributing to Iran's ability to acquire or develop weapons of mass destruction or participating in a joint venture with the Government of Iran and certain other persons to mine, produce or transport uranium. (c) activities or transactions by foreign financial institutions (i) facilitating the ability of Iran and related persons to acquire or develop weapons of mass destruction or support terrorism, (ii) facilitating activities of persons subject to financial sanctions under certain United Nations Security Council Resolutions, or (iii) participate in money laundering or facilitate efforts by Iranian financial institutions to carry out activities described in (i) or (ii). (d) activities or transactions by foreign financial institutions or persons owned or controlled by a domestic financial institution, facilitating or providing financial services for certain persons, including Iran's Revolutionary Guard Corps, whose property is blocked under the International Emergency Economic Powers Act; (e) activities or transactions supporting Iran's acquisition or use of goods or technologies that are likely to be used to commit human rights abuses against the Iranian people or to restrict, disrupt or monitor the free flow of information; and/or (f) activities or transactions with persons who commit or support terrorism or who are or who support weapons of mass destruction proliferators, or the Government of Iran, any entity owned or controlled directly or indirectly by the Government of Iran, or any person acting or purporting to act on behalf of either of the foregoing, without the specific authorization of a U.S. Government agency. THE COMPANY IS PLANNING ON DOING A SIGNIFICANT PORTION OF ITS BUSINESS IN THE PEOPLE'S REPUBLIC OF CHINA ("PRC"). GIVEN A HISTORY OF POLITICAL AND ECONOMIC INSTABILITY, IT IS POSSIBLE THAT MEASURES BEYOND OUR CONTROL COULD AFFECT OUR OWNERSHIP OF ASSETS, ABILITY TO DO BUSINESS, ACQUIRE NECESSARY LICENSES AND PERMITS, COMPLY WITH IMPORT LEGISLATION AND DUTIES, REMIT PROFITS, OR IN OTHER WAYS ADVERSELY AFFECT OUR PROFFITABILITY, OR ABILITY TO CONTINUE TO DO BUSINESS IN THIS MARKET. The PRC is passing from a planned economy to a market economy. The Chinese government has confirmed that economic development will follow a model of market economy under socialism. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans adopted by the government that set down national economic development goals. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. This refining and re-adjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC's economic and social conditions as well as by changes in the policies of the PRC government, which we may not be able to foresee, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the rate or method of taxation, and imposition of additional restrictions on currency conversion. 12
THE RECENT NATURE AND UNCERTAIN APPLICATION OF MANY PRC LAWS APPLICABLE TO US CREATE AN UNCERTAIN AND POTENTIALLY ADVERSE ENVIRONMENT FOR BUSINESS OPERATIONS AND THEY COULD HAVE A NEGATIVE EFFECT ON OUR ABILITY TO SELL OUR PRODUCTS PROFITABLY IN THE PRC MARKET. The PRC legal system is a civil law system. Unlike the common law system, such as the legal system used in the United States, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty. IF RELATIONS BETWEEN THE UNITED STATES AND CHINA WORSEN, INVESTORS MAY ANTICIPATE FUTURE ECONOMIC TRADE RESTRICTIONS OR OTHER DIFFICULTIES AND DECIDE TO SELL OR AVOID BUYING SHARES OF COMPANIES OPERATING IN PRC. THIS WOULD LIKELY LEAD TO A DECLINE IN OUR STOCK PRICE AND WE MAY HAVE DIFFICULTY ACCESSING THE U.S. CAPITAL MARKETS. At various times during recent years, the United States and China have had disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China could adversely affect the market price of our common stock and our ability to access U.S. capital markets. GOVERNMENTAL CONTROL OF CURRENCY CONVERSION MAY AFFECT THE DOLLAR VALUE OF REVENUES EARNED IN PRC, AND THE REALISED VALUE OF REMITTANCES WHICH COULD REDUCE THE PROFITABILITY OF OUR BUSINESS AND THE VALUE OF YOUR INVESTMENT. The PRC government imposes controls on the convertibility of RMB ("RMB") into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Currently, the RMB is not a freely convertible currency. Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends, or otherwise satisfy foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans and corporate debt obligations denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay certain of our expenses as they come due. THE FLUCTUATION OF THE RMB ("RMB") MAY MATERIALLY AND ADVERSELY AFFECT THE DOLLAR VALUE OF REVENUES EARNED IN PRC, AND THE REALISED VALUE OF REMITTANCES WHICH COULD REDUCE THE PROFITABILITY OF OUR BUSINESS AND THE VALUE OF YOUR INVESTMENT. The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC's political and economic conditions. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert our RMB into U.S. dollars for business purposes and the U.S. dollar appreciates against the RMB, the U.S. dollar equivalent of the RMB we convert would be reduced. Any significant evaluation of RMB may reduce our operation costs in U.S. dollars but may also reduce our earnings in U.S. dollars. In addition, the depreciation of significant U.S. dollar denominated assets could result in a charge to our income statement and a reduction in the value of these assets. 13
PUBLIC DISCLOSURE REQUIREMENTS AND COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE POSE CHALLENGES FOR OUR MANAGEMENT TEAM AND RESULT IN ADDITIONAL EXPENSES AND COSTS WHICH MAY REDUCE THE FOCUS OF MANAGEMENT AND THE PROFITABALITY OF OUR COMPANY. Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities. SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This filing contains forward-looking statements about our business, financial condition and prospects that reflect our management's assumptions and good faith beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements. The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our proposed services and the products we expect to market, our ability to establish a customer base, managements' ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry. There may be other risks and circumstances that management may be unable to predict. When used in this filing, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. ITEM 1B. UNRESOLVED STAFF COMMENTS This Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer. ITEM 2. PROPERTIES Our principal executive office address is 4920 El Camino Real, Suite 100, Los Altos, CA 94022. Effective December 31, 2010, we entered into an agreement with Numerity Corporation under which they agreed to allow us, without charge, to share their office space for the duration of their current lease. As a consequence, we currently have no long term lease obligations. Our properties are adequate for our current needs. We currently have no investment policies as they pertain to real estate, real estate interests or real estate mortgages. 14
ITEM 3. LEGAL PROCEEDINGS We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, or of our company's officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 15
PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION Our Common stock is currently traded on the OTC Bulletin Board (OTCBB) under the symbol "IMDC". The following table sets forth, for the periods indicated, the high and low inter-dealer closing prices per share of our common stock as reported on the OTC Bulletin Board, without retail mark-up, mark-down or commission and may not represent actual transactions. The following table sets forth the high and low bid prices for our common stock for the last two years. Year Quarter High Low ---- ------- ---- --- 2011 First $ 0.45 $ 0.13 2011 Second $ 0.17 $ 0.10 2011 Third $ 0.22 $ 0.08 2011 Fourth $ 0.18 $ 0.05 2012 First $ 0.09 $ 0.05 2012 Second $ 0.30 $ 0.04 2012 Third $ 0.41 $ 0.18 2012 Fourth $ 0.39 $ 0.16 HOLDERS As of December 31, 2012, there were 57,713,837 shares of our common stock issued and outstanding with 13 shareholders of record. TRANSFER AGENT Our Transfer Agent is TranShare Corporation. DIVIDEND POLICY Dividends, if any, will be contingent upon our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends, if any, will be within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, for use in our business operations. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS Number of securities remaining available for Number of Securities to be Weighted-average exercise future issuance under issued upon exercise of price of outstanding equity compensation plans outstanding options, options, warrants and (excluding securities Plan Category warrants and rights rights reflected in column (a)) ------------- ------------------- ------ ------------------------ (a) (b) (c) Equity compensation plans approved by security holders 1,600,000 0.15 2,583,000 Equity compensation plans not approved by security holders -- -- -- Total 1,600,000 2,583,000 16
RECENT SALES OF UNREGISTERED SECURITIES SUMMARY ISSUANCE OF COMMON STOCK Year ended Year ended ended ended December 31, December 31, 2012 2011 ---------- ---------- # SHARES Payment of consultants 80,000 400,000 Purchase of assets -- 250,000 Conversion of notes 1,961,944 1,403,904 Settlement of debt 3,500,000 4,500,000 Payment of note interest -- 55,371 ---------- ---------- TOTAL 5,541,944 6,609,275 ========== ========== Year ended Year ended ended ended December 31, December 31, 2012 2011 ---------- ---------- VALUE OF SHARES Payment of consultants $ 24,000 $ 64,000 Purchase of assets -- 40,000 Conversion of notes 55,000 143,000 Settlement of debt 350,000 675,000 Payment of note interest -- 6,120 ---------- ---------- TOTAL $ 429,000 $ 928,120 ========== ========== During the year ended December 31, 2012, we issued 1,961,944 fully-paid shares of our common stock in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act, based on the following: (a) the debt holder confirmed to us that they were "accredited investors," as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the conversion of the debt and issuance of the shares; (c) the debt holder acknowledged that the shares being issued were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act. Other than the 1,961,944 fully-paid shares issued in conversion of $55,000 of convertible debt, we did not sell any equity securities which were not registered under the Securities Act of 1933 during the year ended December 31, 2012 that were not otherwise disclosed in this annual report on Form 10-K, in our quarterly reports on Form 10-Q, or in our current reports on Form 8-K filed during the year ended December 31, 2012. ISSUER REPURCHASES OF EQUITY SECURITIES None PENNY STOCK RULES The Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Our shares are considered penny stock under the Securities and Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer 17
engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document, which: * contains a description of the nature and level of risk in the market for penny stock in both public offerings and secondary trading; * contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the Securities Act of 1934, as amended; * contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" price for the penny stock and the significance of the spread between the bid and ask price; * contains a toll-free telephone number for inquiries on disciplinary actions; * defines significant terms in the disclosure document or in the conduct of trading penny stocks; and * contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation; The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer: * the bid and offer quotations for the penny stock; * the compensation of the broker-dealer and its salesperson in the transaction; * the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and * monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities. SHARES AVAILABLE UNDER RULE 144 There are currently 28,730,392 shares of common stock that are considered restricted securities under Rule 144 of the Securities Act of 1933 of which 28,430,392 shares are held by affiliates, as that term is defined in Rule 144(a)(1) and other shareholders. Under Rule 144, such shares can be publicly sold, subject to volume restrictions and certain restrictions on the manner of sale, commencing six months after their acquisition for those companies that have been subject to the reporting requirements of section 13 or 15(d) of the Securities Exchange Act of 1934 for a period of at least 90 days before the sale. ITEM 6. SELECTED FINANCIAL DATA Not required for smaller reporting companies. 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto included elsewhere in this annual report. The following discussion and analysis should be read in conjunction with the financial statements of In Media Corporation, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those presented under the heading of "Risk Factors" and elsewhere in this annual report, including the Cautionary Note Regarding Forward Looking Statements preceding Item 1. As used in this report, "we", "us", "our", "In Media", "Company" or "our company" refers to In Media Corporation, unless the context requires otherwise. The Company adopted at management's discretion, the most conservative recognition of revenue based on the most astringent guidelines of the SEC. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements. Our financial statements have been prepared in accordance with United States generally accepted accounting principles. We urge you to read this report in conjunction with the risk factors described herein. RESULTS OF OPERATIONS To date, we have built our business by focusing on outsourcing to an experienced and well established third party provider to reduce the risk of product development problems and delays, market and employee acquisition, and up-front cash flow. This provider has been responsible for designing our products and operating software, QA testing, customer demonstration and evaluation support, as well as market analysis, channel development and sales promotion. They also provide general and operational support, such that we have no full time employees, or full time employee equivalents. By adopting this approach, we have managed to develop, test, and bring to market three distinct product offerings in the highly competitive global market for IP TV at a significantly lower cost than if we had carried out these activities in-house. This provider, Numerity Corporation, is owned and controlled by Mr. Karnick, one of our shareholders, directors and officers, and provides contract executive, administration and business development services (the "Service Agreement") to our company. Initially, the Service Agreement provided for contract service fees of $40,000 per month, but subsequently, as of January 1, 2011 the Company and Numerity agreed to discontinue contract service charges, and instead have Numerity bill our company for the actual cost of any goods or services provided wholly, exclusively and necessarily for the benefit of our company. The amendments were approved by the Board of Directors, including Mr. Danny Mabey, a member of the Board of Directors with no interest in Numerity. Starting September 2012, Numerity resumed billing the Company for its management services at the rate of $40,000 per month. The Company does not have the resources to pay these billings and accordingly, the billing has been added to the balance of notes payable to related party in the December 31, 2012 financial statements. Additionally, in November 2008, we licensed our engineering technology, IP and set top box designs (the "Licensing and Maintenance Agreement") from Numerity and committed to pay maintenance and royalties of $415,000 per annum. On July 1, 2010, we agreed with Numerity to amend that licensing agreement to provide a deferral of any further maintenance dues, and an extension of credit until three months after first commercial shipment. The amendment to the Licensing and Maintenance Agreement was approved by the Board of Directors, including Mr. Danny Mabey, a member of the Board of Directors with no interest in Numerity. . 19
One of our shareholders, Guifeng Qui, who owns approximately 13 million shares of restricted common stock, has a controlling interest in the Chinese distributor who we have appointed to represent us in developing our business in China. The Agreement with this distributor provides that we will receive a margin of $20 on each unit of set-top box sold through that distribution channel, and an additional $5 per month per subscriber for content distribution contracts using our content library. At the same time, we have been working with other distribution channels in China and other international markets to demonstrate and prove our products and our integrated platform which includes hardware, software, and content. We have accumulated a deficit of $3.2 million during our development through December 31, 2012. Our ability to emerge from the development stage is dependent upon, among other things, obtaining additional financing to purchase the inventory required to fulfill purchase order commitments and make on-account payments to vendors, while continuing to service our current debt obligations and cover our overhead expenses. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. We incurred $431,912 and $502,987 in general administrative expenses for the years ended December 31, 2012 and 2011, respectively. These costs consisted of sub-contracted general and administrative, engineering designs and business development expenses, and professional and administrative expenses associated with our financial reports and SEC filings. The decrease of 17% over the same period in 2011 was principally due to the revised terms of the Service Agreement with Numerity Corporation. Additionally, we incurred development expense of $24,000 in the year ended December 31, 2012 compared to $207,500 in the year ended December 31, 2011. The expense in 2012 related to third party development consultants whereas the expense in 2011 was for software maintenance expenses in connection with our IPTV operating platform license. This license agreement, which commenced in the second half of 2009, was renegotiated with Numerity Corporation to reflect delays in commercial shipments of our hardware and related licensed software. As a result, maintenance fees for the years commencing after December 31, 2011 will not resume until first commercial shipments of our products. During the years ended December 31, 2012 and December 31, 2011, we incurred interest and debt discount amortization expenses of $14,653 and $148,086, respectively. This decrease followed reductions in outstanding convertible notes during 2012, by repayment or conversion. The following table provides selected financial data about our company as of December 31, 2012 . Balance Sheet Data: December 31, 2012 ------------------- ----------------- Cash $ 950 Total assets $ 40,950 Total liabilities $ 782,771 Shareholders' equity (deficit) $(741,821) LIQUIDITY AND CAPITAL RESOURCES Our cash balance at December 31, 2012 was $950. During the year ended December 31, 2012, we expended $211,705 in cash as a result of operating activities which included $457,796 of operating losses partially offset by $24,000 of common stock issued to consultants in lieu of cash settlements. Cash was contributed principally by the increase in certain operating liabilities, and by the issuance of $50,000 in convertible promissory notes. Since inception, $290,000 has been raised through the issuance of our common stock. We are a development stage company and have generated no revenue to date. Although we have managed to raise $290,000 through the issuance of common stock, secured advances from directors and officers of the Company, obtained extended credit from related parties in connection with services provided, and raised funding from the issuance of convertible notes, aggregating $398,000, net of repayments, as of December 31, 2012, there is no assurance that we can secure 20
additional funding to cover our expenses or working capital requirements in the future. As a result of the loss of our original market maker, and delays in finding a replacement and completing the required approval with FINRA, our stock was temporarily listed for approximately six months on the OTCQB exchange rather than on the OTC Bulletin Board which hampered our ability to raise additional note financing from our current note finance partner and other potential investors. Our access to capital is therefore severely limited until such time as we start to generate cash flow from operations, and if we are no longer able to raise capital by the issuance of convertible notes, or obtain services for stock, or secure extended credit, there would be a severe risk that we would not be able to pay our bills, and the Company may be forced into liquidation. Our operating expenses, in managements' opinion, are very low, with management and consultants working for equity or deferred compensation, using their own phones, office equipment and supplies, paying their own travel expenses, and working in a rent-free office location. Our remaining overhead expenses relate to compliance costs, and our audit, legal, EDGAR filings and share registration and communication service are currently approximately eighty thousand dollars a year. We believe that we can continue to finance these costs, and pay off overdue accounts payable through the sale of convertible promissory notes, and we raised an aggregate $50,000, net of repayments, by this means during the year ended December 31, 2012. In addition to our overheads, we have costs of marketing, sales support, and production as well as ongoing product design and development. We are relying on our customers, distribution partners and manufacturing sub-contractors to assist us by providing their support and hope that we can match customer and supplier letters of credit to cover future order transactions. We have accumulated significant debt from Numerity Corporation and as a result of the common link with our CEO, Nitin Karnik, Numerity has agreed to continue to extend credit subject to notice of one year and one day. Whenever creditors become more pressing, we plan to offer settlement by means of issuing restricted stock in lieu of cash payment. We are currently seeking other available sources of funding to provide secured, back-to-back financing of our purchase order commitments with production inventory. If we are unable to secure adequate capital to continue, our business will likely fail, and our shareholders could lose some or all of their investment. We cannot continually incur operating losses in the future and may decide that we can no longer continue with our business operations as detailed in our business plan because of a lack of financial results and a lack of available financial resources. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Other than the derivative conversion options on our convertible notes described in Note 6 to our Financial Statements we do not hold any derivative instruments and do not engage in any hedging activities. 21
ITEM 8. FINANCIAL STATEMENTS GEORGE STEWART, CPA 316 17TH AVENUE SOUTH SEATTLE, WASHINGTON 98144 (206) 328-8554 FAX(206) 328-0383 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors In Media Corp. I have audited the accompanying balance sheets of In Media Corp. (A Development Stage Company) as of December 31, 2012 and 2011, and the related statements of operations, stockholders' equity and cash flows for the years ended December 31, 2012 and 2011 and for the period from October 27, 2008 (inception), to December 31, 2012. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of In Media Corp., (A Development Stage Company) as of December 31, 2012 and 2011, and the results of its operations and cash flows for the years ended December 31, 2012 and 2011 and the period from October 27, 2008 (inception), to December 31, 2012 in conformity with generally accepted accounting principles in the United States of America. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note # 2 to the financial statements, the Company has had no operations and has no established source of revenue. This raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters is also described in Note # 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ George Stewart -------------------------------- George Stewart Seattle, Washington March 13, 2013 22
In Media Corporation (A Development Stage Company) Balance Sheets December 31, December 31, 2012 2011 ------------ ------------ ASSETS CURRENT ASSETS Cash $ 950 $ 52 ------------ ------------ 950 52 Movie distribution systems 40,000 40,000 ------------ ------------ TOTAL ASSETS $ 40,950 $ 40,052 ============ ============ LIABILITIES & STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 535,204 $ 368,791 Accrued interest 466 7,797 Advances and deposits received from customers 47,650 47,650 Derivative liability on option grants 23,980 23,780 Convertible note, principal amount 50,000 55,000 Less discount (26,280) (19,782) ------------ ------------ Notes payable, net 23,720 35,218 ------------ ------------ TOTAL CURRENT LIABILITIES 631,020 483,236 LONG TERM LIABILITIES Long term accounts payable to related party 151,751 339,148 STOCKHOLDERS' EQUITY Common stock - 75,000,000 shares authorized at $0.001 par value; 57,713,837 and 52,171,893 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively 57,714 52,172 Additional paid-in Capital 2,355,170 1,862,405 Deficit accumulated during the development stage (3,154,705) (2,696,909) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY (741,821) (782,332) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 40,950 $ 40,052 ============ ============ The accompanying footnotes are an integral part of these financial statements. 23
In Media Corporation (A Development Stage Company) Statements of Operations Inception October 27, 2008 Year Ending Year Ending Through December 31, December 31, December 31, 2012 2011 2012 ------------ ------------ ------------ EXPENSES General & administrative $ 419,143 $ 502,987 $ 2,314,213 Development expenses 24,000 207,500 642,250 Interest and debt discount expense 14,653 148,086 211,011 ------------ ------------ ------------ NET (LOSS) $ (457,796) $ (858,573) $ (3,167,474) ============ ============ ============ BASIC AND FULLY-DILUTED (LOSS) PER SHARE* $ (0.01) $ (0.02) ============ ============ WEIGHTED AVERAGE NUMBER OF BASIC COMMON SHARES OUTSTANDING 56,271,476 47,687,536 ============ ============ ---------- * The fully-diluted loss per share is not presented since the result would be anti-dilutive. The accompanying footnotes are an integral part of these financial statements. 24
In Media Corporation (A Development Stage Company) Statements of Cash flows Inception October 27, 2008 Year ended Year ended Through December 31, December 31, December 31, 2012 2011 2012 ------------ ------------ ------------ Restated CASH FLOW FROM OPERATING ACTIVITIES Net loss $ (457,796) $ (858,573) $ (3,167,474) Adjustments to reconcile net income to net cash used in operating activities Stock issued for services in lieu of cash 24,000 64,000 527,999 Amortization of prepaid maintenance expenses -- 207,500 Non cash stock compensation expense 46,026 47,687 46,026 Discount on convertible notes, net of amortization (2,210) (33,083) (2,210) Extinguishment of derivative liability on convertible notes, net 19,193 52,794 60,751 Accrual of note interest (7,331) -- Note interest paid by common stock -- 7,202 6,715 Increase (decrease) in operating liabilities Accounts payable 166,413 320,313 535,204 Advances and deposits from customers -- 47,650 -- ------------ ------------ ------------ TOTAL CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (211,705) (144,510) (1,992,989) ------------ ------------ ------------ CASH FLOW FROM INVESTING ACTIVITIES TOTAL CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -- -- -- ------------ ------------ ------------ CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issuance of common stock -- -- 290,000 Net proceeds from sale of convertible notes 50,000 85,000 250,500 Advances from related party 162,603 61,600 162,603 Loan/(repayment of loan) from a director -- (2,100) 2,100 ------------ ------------ ------------ TOTAL CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 212,603 144,500 705,203 ------------ ------------ ------------ Net increase (decrease) in cash 898 (10) (1,287,786) Cash at beginning of period 52 62 -- ------------ ------------ ------------ CASH AT END OF PERIOD $ 950 $ 52 $ (1,287,786) ============ ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Interest Paid $ -- $ -- $ -- ============ ============ ============ Taxes Paid $ 800 $ 800 $ 800 ============ ============ ============ The accompanying footnotes are an integral part of these financial statements. 25
In Media Corporation (A Development Stage Company) Restated Statements of Shareholders' Equity and Retained Earnings Accumulated Deficit Common Additional During the Common Stock Paid-in Development Stock # Amount Capital Stage Total ------- ------ ------- ----- ----- Balance December 31, 2007 33,500,000 $ 33,500 $ 221,500 $ (20,759) $ 234,241 Net loss, year ended December 31, 2008 (32,038) (32,038) ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2008 33,500,000 33,500 221,500 (52,797) 202,203 ----------- ----------- ----------- ----------- ----------- Merger of Tres Estrellas and In Media Corporation, October 30, 2009 11,500,000 11,500 23,500 (50,965) (15,965) Net loss through Dec 31, 2009 (716,586) (716,586) ----------- ----------- ----------- ----------- ----------- Balance December 31, 2009 45,000,000 45,000 245,000 (820,348) (530,348) ----------- ----------- ----------- ----------- ----------- Net loss for year ended December 31, 2010 (1,017,988) (1,017,988) Issuance of Common stock to consultants 417,000 417 503,582 503,999 Isuance of Common Stock in conversion of notes 145,618 146 29,854 30,000 ----------- ----------- ----------- ----------- ----------- Balance December 31, 2010 45,562,618 45,563 778,436 (1,838,336) (1,014,337) ----------- ----------- ----------- ----------- ----------- Net loss for year ended December 31, 2011 (858,573) (858,573) Issuance of Common stock to settle accounts payable 4,500,000 4,500 670,500 675,000 Issuance of Common stock to settle accrued interest 55,371 55 6,065 6,120 Issuance of Common stock in lieu of payment to consultants 400,000 400 63,600 64,000 Issuance of Common stock to purchase assets 250,000 250 39,750 40,000 Isuance of Common Stock in conversion of notes 1,403,904 1,404 141,596 143,000 Options expense during the period 47,687 47,687 Extinguishment of derivative liability on notes repaid and converted 114,771 114,771 ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2011 52,171,893 52,172 1,862,405 (2,696,909) (782,332) ----------- ----------- ----------- ----------- ----------- Net loss for year ended December 31, 2012 (457,796) (457,796) Issuance of Common stock to settle accounts payable 3,500,000 3,500 346,500 350,000 Issuance of Common stock in lieu of payment to consultants 80,000 80 23,920 24,000 Isuance of Common Stock in conversion of notes 1,961,944 1,962 53,038 55,000 Options expense during the period 46,026 46,026 Extinguishment of derivative liability on notes repaid and converted 23,281 23,281 ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2012 57,713,837 $ 57,714 $ 2,355,170 $(3,154,705) $ (741,821) =========== =========== =========== =========== =========== The accompanying footnotes are an integral part of these financial statements. 26
IN MEDIA CORPORATION NOTES TO RESTATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 1. ORGANIZATION IN Media Corporation (the "Company") is a Nevada corporation incorporated on March 5, 2007 as Tres Estrellas Enterprises, Inc. ("Tres Estrellas"). Effective February 3, 2010, the Company changed its name to IN Media Corporation. The Company is a development stage company. On October 30, 2009 ("the Acquisition Date"), we executed an agreement between IN Media Corporation ("IN Media") and Tres Estrellas whereby IN Media shareholders acquired thirty-three million, five hundred thousand (33,500,000) shares of the Company's common stock and the Company acquired all the issued and outstanding shares of In Media and IN Media was merged into Tres Estrellas. The Company reported this event on Form 8-K, filed with the Securities and Exchange Agreement on November 2, 2009. For financial accounting purposes, the acquisition was a reverse merger of the Company by IN Media, under the purchase method of accounting, and was treated as a recapitalization with IN Media as the acquirer. Upon consummation of the merger, the Company adopted the business plan of IN Media. Accordingly, the consolidated statements of operations include the results of operations of IN Media from its inception on October 27, 2008 and the results of operations of Tres Estrellas from the Acquisition Date through December 31, 2012. The Company's fiscal year end is December 31. 2. GOING CONCERN AND LIQUIDITY CONSIDERATIONS The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As at December 31, 2012, the Company had accumulated a loss from operations of $3.2 million and has earned no revenues since inception, and our liabilities exceed our assets by over $740,000. The Company intends to fund its continuing operations through strict expense management and control, a combination of equity or debt financing arrangements, reliance on third party contractors to avoid the need for capital expenditure or commitment to fixed overhead, and extended credit from suppliers and related parties, all of which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending December 31, 2013. We have focused our efforts on developing business opportunities in China and India and although we have received several verbal or written expressions of interest in purchasing our products we have not actually fulfilled any orders or shipped any of our products as of December 31, 2012. Our ability to fulfil sales orders is directly linked to our lack of financial resources and inability to secure credit terms from our sub-contract manufacturers and component suppliers, and despite our best efforts to raise working capital through debt and equity transactions, extended supplier credit, and customer advances, we have not yet managed to solve these problems, and initial orders have subsequently lapsed. We currently have an advance from one customer and are continuing to explore credit arrangements with our sub-contract manaufacturer to finance production of this order and hope, although we cannot guarantee, to move beyond our development stage into an operational stage during 2013. The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to purchase the inventory required to fulfill current purchase order commitments, to make on-account payments to vendors, and to service our current debt obligations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. 3. SIGNIFICANT ACCOUNTING POLICIES A) BASIS OF PRESENTATION The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (US GAAP) applicable to development stage companies. 27
B) USE OF ESTIMATES The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. C) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. D) FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at December 31, 2012. FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1. Observable inputs such as quoted prices in active markets; Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions. The Company does not have any assets or liabilities measured at fair value on a recurring basis at December 31, 2012 and December 31, 2011. E) INCOME TAXES The Company accounts for income taxes under ASC 740 "Income Taxes" which codified SFAS 109, "Accounting for Income Taxes" and FIN 48 "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109." Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. F) EARNINGS (LOSS) PER SHARE FASB ASC 260, "Earnings Per Share" provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. Reported basic and diluted loss per share was the same at the reporting dates, as the diluted loss would be anti-dilutive. G) STOCK-BASED COMPENSATION ASC 718 "Compensation - Stock Compensation" which codified SFAS No. 123 prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity. The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity 28
Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date. H) DERIVATIVE INSTRUMENTS The Company recognizes the underlying value of embedded derivatives in accordance with ASC 815-15-25-1. The value of the option for noteholders to convert their notes into shares of common stock is calculated and credited as a derivative liability for the duration of the notes, while an offsetting amount is classified as a discount to the principal value of the notes. The derivative value added to the discount reserve and derivative value was $ 23,980 and $61,978 during the years ended December 31, 2012 and 2011, respectively. The value of the debt discount is amortized as interest expense on a straight line basis over the life of the notes. During the years ended December 31, 2012 and 2011, the Company amortized $ 13,089 and $65,388, respectively, as debt discount expense. At December 31, 2012, the Company valued the derivative liability and determined that the carrying value approximated market value. I) REVENUE RECOGNITION The Company recognizes revenue from the sale of products and services in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition in Financial Statements." Revenue will consist of services income and will be recognized only when all of the following criteria have been met: (i) Persuasive evidence for an agreement exists; (ii) Service has occurred; (iii) The fee is fixed or determinable; and (iv)Revenue is reasonably assured. J) PREPAID EXPENSES AND LICENSE FEES In November 2008, the Company and Numerity Corporation entered into a license agreement ("License Agreement") under which Numerity agreed to grant the Company a non-exclusive, perpetual license to the software and source code for the design of our IPTV set top box ("STB") including streaming, storage, encoding and billing modules as well as the designs and schematic drawings for the actual STB. The License provided for the first one hundred thousand units to be shipped royalty free, the next one hundred thousand units shipped to be subject to a royalty payment of $50 per unit, and additional units thereafter subject to a royalty payment of $20 per unit. To date the Company has not shipped any STB units, and has therefore not incurred any royalty expense, however, as and when STBs are shipped in future periods, the Company will accrue all royalty obligations payable, and charge the cost of royalties to cost of sales in the periods incurred. Additionally, as part of the License Agreement, Numerity agreed to provide technical support, upgrades and enhancements in exchange for a maintenance fee of $415,000 per annum. The Company capitalized the maintenance fee as a prepaid license expense, and amortized the prepayment in installments over the term of the maintenance agreement. On June 30, 2010 the Company renegotiated the terms of the License Agreement such that Numerity would provide technical support through June 30, 2011 for no additional charge, and the amortization rate was adjusted to amortize the remaining prepaid balance in equal installments over the contractual year ended June 30, 2011. No further maintenance fees are payable until the Company commences first commercial shipments of its products. 4. CAPITAL STOCK A) AUTHORIZED STOCK The Company has authorized 75,000,000 common shares with $0.001 par value. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought. On June 17, 2010 the Company filed an S-8 registration with the SEC reserving 2,500,000 common shares for issuance under the Company's 2010 Stock Option Plan. During the period from registration to December 31, 2012, the Company issued 817,000 shares to consultants as payment for services provided, and 1,600,000 options to employees. On November 21, 2012 the Company filed a second S-8 registering an additional 2,500,000 common shares, and at December 31, 2012 has 2,083,000 registered shares available for future issuance. B) SHARE ISSUANCES Since inception (October 27, 2008) to December 31, 2012, the Company has issued the following shares: 29
(i) A total of 5,500,000 common stock shares to an officer and director at $0.002 per share for a total of $11,000. The shares bear a restrictive transfer legend in accordance with Rule 144 under the Securities Act. (ii) A total of 6,000,000 common stock shares to 40 unaffiliated investors at $.004 per share for a total of $24,000 pursuant to an SB-2 Registration Statement. (iii)A total of 33,500,000 common stock shares to the shareholders of IN Media Corporation pursuant to the terms and conditions of a Merger Agreement. This issuance of stock did not involve any public offering, general advertising or solicitation. At the time of the issuance, IN Media had fair access to and was in possession of all available material information about our Company. The shares bear a restrictive transfer legend in accordance with Rule 144 under the Securities Act. In addition, the Company has issued common stock instead of cash to make purchases or settle liabilities as follows: SUMMARY ISSUANCE OF COMMON STOCK Year ended Year ended ended ended December 31, December 31, 2012 2011 ---------- ---------- # SHARES Payment of consultants 80,000 400,000 Purchase of assets -- 250,000 Conversion of notes 1,961,944 1,403,904 Settlement of debt 3,500,000 4,500,000 Payment of note interest -- 55,371 ---------- ---------- TOTAL 5,541,944 6,609,275 ========== ========== Year ended Year ended ended ended December 31, December 31, 2012 2011 ---------- ---------- VALUE OF SHARES Payment of consultants $ 24,000 $ 64,000 Purchase of assets -- 40,000 Conversion of notes 55,000 143,000 Settlement of debt 350,000 675,000 Payment of note interest -- 6,120 ---------- ---------- TOTAL $ 429,000 $ 928,120 ========== ========== 5. NOTES PAYABLE During the years ended December 31, 2012 and December 31, 2011, the Company issued, repaid and converted convertible notes as set out in the following table. Date of Original Note Balance of Issuance Proceeds Converted Repaid Notes Outstanding -------- -------- --------- ------ ----------------- 2011 $147,500 $(30,000) $(62,500) $ 55,000 2012 $ 50,000 $(55,000) $ -- $ 50,000 The notes outstanding at December 31, 2012 are unsecured, have a term of one year, carry interest at 10% per annum and, if not repaid at maturity, will be converted into shares of common stock at a price of 60.0% of the lowest closing prices over the twenty-five days preceding the conversion date. The Company is required to maintain an available pool of 3 million common shares as a reserve for conversion. The Company recognizes the underlying value of embedded derivatives in accordance with ASC 815-15-25-1. The value of the option for noteholders to convert their notes into shares of common stock is calculated and credited as a derivative liability for the duration of the notes, while an offsetting amount is classified as a discount to the principal 30
value of the notes. The derivative value added to the discount reserve and derivative value was $ 23,980 and $61,978 during the years ended December 31, 2012 and 2011, respectively. The value of the debt discount is amortized as interest expense on a straight line basis over the life of the notes. During the years ended December 31, 2012 and 2011, the Company amortized $ 13,089 and $65,388, respectively, as debt discount expense. At December 31, 2012, the Company valued the derivative liability and determined that the carrying value approximated market value. 6. INCOME TAXES The Company has incurred operating losses of approximately $3.2 million since inception, which, if unutilized, will begin to expire in 2027. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance. Details of future income tax assets are as follows: December 31, 2012 ----------------- Future income tax assests: Net operating loss from October 27, 2008 (inception) to December 31, 2012 $3,167,474 Statutory tax rate (combined federal and state) 38.8% Non-capital tax loss 1,229,741 Valuation allowance (1,229,741) ---------- $ -- ========== The potential future tax benefits of these losses have not been recognized in these financial statements due to uncertainty of their realization. When the future utilization of some portion of the carry forwards is determined not to be "more likely than not," a valuation allowance is provided to reduce the recorded tax benefits from such assets. 7. NEW ACCOUNTING PRONOUNCEMENTS The Company does not expect any recent accounting pronouncements to have a material impact on its financial statements. 8. RELATED PARTY TRANSACTIONS From time to time, Mr. Karnick, though his wholly owned Company, Numerity, has advanced cash to pay off supplier balances on behalf of the Company and the balance is reported as a loan from related party. The loan is unsecured, interest-free, and has been or will be repaid when the Company raises sufficient cash to do so. One of our shareholders, directors and officers, Mr Karnick, who, together with his wife, owns approximately 15 million shares of restricted common stock, also owns a 100% interest in Numerity Corporation from whom we have licensed our engineering technology, IP and set top box ("STB") designs, and to whom we are committed to pay royalties of $50 per STB after the first 100,000 units have been shipped, and $20 per STB after 200,000 units have been shipped. No royalty payments have been made through December 31, 2012 since no STBs have been shipped as at that date. In addition, the Company committed to pay $415,000 per annum to Numerity Corporation in respect of a maintenance agreement on the licensed software, but has not made any such payments to Numerity as at December 31, 2012. On July 1, 2010, the Company and Numerity agreed to amend that licensing agreement to provide a deferral of maintenance dues, and an extension of credit until the earlier of three months after first commercial shipment, or June 30, 2011. The amendment was authorized for the Company by Mr Danny Mabey, a board director with no interest in Numerity. One of our shareholders, directors and officers, Mr Karnick, who, together with his wife, owns approximately 15 million shares of restricted common stock, also owns a 100% interest in Numerity Corporation, a provider of contract executive, administration and business development services (the "Service Agreement") to the Company. Initially, the Service Agreement provided for contract service fees of $40,000 per month, but subsequently, as of January 1, 2011 the Company and 31
Numerity agreed to discontinue contract service charges, and instead have Numerity bill the Company for the actual cost of any goods or services provided wholly, exclusively and necessarily for the benefit of the Company. The amendments were authorized by Mr. Danny Mabey, a board director with no interest in Numerity. Starting September 2012, Numerity resumed billing the Company for its management services at the rate of $40,000 per month. The Company does not have the resources to pay these billings and accordingly, the billing has been added to the balance of notes payable to related party in the December 31, 2012 financial statements. In the years ended December 31, 2012 and 2011, the Company accrued $160,000 and $91,500, respectively for services provided by Numerity Corporation. During 2012, the Company paid $350,000 off the balance of the debt through the issuance of fully paid shares of common stock, leaving a balance due to Numerity at December 31, 2012 of $151,751. In order to regularize a de facto extended credit arrangement between IN Media and Numerity Corporation, we have obtained a formal agreement from Numerity Corporation, effective as of December 31, 2010, agreeing to interest-free, revolving credit terms of one year and one day on all amounts due to Numerity. This extended credit can be terminated at any time subject to either party giving notice to the other, and subject to repayment of the balance being made one year and one day after receipt of notice. One of our shareholders, Guifeng Qui, who owns approximately 13 million shares of restricted common stock, has a controlling interest in the Chinese distributor who we have appointed to represent us in developing our business in China. The Agreement with this distributor provides that we will receive a margin of $20 on each unit of set-top box sold through that distribution channel, and an additional $5 per month per subscriber for content distribution contracts using our content library. One of our shareholders, directors and officers, Mr Karnick, who, together with his wife, owns approximately 16 million shares of restricted common stock, also owns a 100% interest in Numerity Corporation which owns the library of film content which we intend to include as part of our product offerings. Numerity has agreed to make the library available to us at no charge. 9. SUBSEQUENT EVENTS On January 10, 2013, the Company received $37,500 from the issuance of an unsecured convertible note to a third party. The note accrues interest at 8% per annum, and is due for repayment or conversion by September 16, 2013. The note is convertible into shares of common stock at a 50% discount to the average of the three lowest closing prices during the ten trading days preceding the conversion date. Also on January 10, 2013 the Company received $25,000 from the issuance of an additional unsecured convertible note from a separate third party. The note accrues interest at a flat rate of 10%, and is due for repayment or conversion by January 10, 2014. The note is convertible into shares of common stock at the lower of $0.25 or a 37.5% discount to the lowest closing price during the consecutive twenty-five trading days preceding the conversion date. 32
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Management reviewed our disclosure controls and procedures, and internal control over financial reporting and concluded that they were effective as at the end of the period covered by this report. Following a weakness identified in relation to the year ended December 31, 2010, the Company corrected and issued an Amended and Restated Form 10-K/A for that year, and has subsequently extended the scope of its engagement with its professional advisors to focus more closely on ensuring compliance with GAAP. EVALUATION OF DISCLOSURE CONTROLS RESPONSIBILITY FOR FINANCIAL STATEMENTS Our principal executive officer and principal financial officer are responsible for the integrity and objectivity of all information presented in this annual report. They were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on our principal executive officer and principal financial officer's best estimates and judgments. Our principal executive officer and principal financial officer believe the Amended and Restated Financial Statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company's financial position and results of operations. DISCLOSURE CONTROLS AND PROCEDURES We have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify the Company's financial reports and to the Board of Directors. Based on their evaluation as of December 31, 2012, our principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Currently, as a small development stage company, we maintain our internal controls through a segregation of duties between our principal executive officer and principal financial officer. For example, all incoming supplier invoices are delivered direct to the principal financial officer for recording in the books, checking, and processing. The principal financial officer must submit all payment requests to the principal executive officer for approval, allocation of cash and presentation of a check for mailing to the payee. The principal financial officer conducts regular reconciliations of the bank account to make sure that all receipts and disbursements have been identified, supported by appropriate documentation and payment approvals, and the transactions are matched to postings in the books of account. As a small development stage company, we have very limited financial activity during the year. Thus, the current check and balance of the financial activity by our principal executive officer and principal financial officer provide sufficient controls to ensure fairness, accuracy and proper disclosure. Any documentation as it relates to the Company's assessment is very limited as there are only a limited number of business transactions. No testing was performed on the limited transactions within the Company by our principal executive officer and principal financial officer since 100% of the transactions were actually performed by our principal executive officer and principal financial officer. Our principal executive officer and principal financial officer concluded that adequate procedures were in place to approve and monitor all disbursements distributed by the Company and confirm all funds received by the Company. Our principal executive officer and principal financial officer are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Our principal executive officer and principal financial officer have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the above evaluation, our principal executive officer and principal financial officer concluded that our internal control over financial reporting was effective as of December 31, 2012. 33
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In response to our restatement, the Company has extended the scope of its engagement with its professional advisors to focus more closely on ensuring compliance with GAAP. ITEM 9B. OTHER INFORMATION None. 34
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS As at December 31, 2012 our Officers and Board of Directors were comprised of the following: Name Age Served Since Positions With Company ---- --- ------------ ---------------------- Nitin Karnik 50 October 2008 CEO & Director Danny Mabey 62 April 2, 2010 COO & Director Simon Westbrook 64 February 18, 2010 CFO & Principal Accounting Officer There are currently no employment contracts in place for any officers. The following is a brief description of the business experience of our executive officers, director and significant employees: Dr. Nitin Karnik has been the Chief Executive Officer of IN Media from October 2008 to present. From 2007 through 2009, Dr. Karnik served as the Chief Executive Officer of RSR Consulting Inc., a California company covering media consulting in the area of IPTV, broadband, voice over IP technology, video on demand technology, and streaming technology with clients in India and China. From 2002 through 2007, Dr. Karnik was the Senior Vice President of Mars Entertainment Group, Singapore, where his assignments included content production, distribution, movie production, designing technology for media, digital cinema technology development, and business development to Hollywood studios, Bollywood studios and world-wide television networks. Mr. Mabey was hired in April 2010 as a member of the board of directors, and COO, based on his extensive industry experience and knowledge of IPTV technology and markets. Mr. Mabey has been the President of 121View USA, a Utah corporation since 2009. He directed the development process of 121View, a Singapore based company, into the U.S. market. In addition, since 2004, Mr. Mabey has been President of Interactive Devices Inc., a California corporation that directs the business operations and development team of software developers in California, Israel and Utah. From 2003 through 2009, Mr. Mabey was the Vice President of Broadcast International, a Utah corporation in which Mr. Mabey was involved in patent development and intellectual property management, product development, business and network expansion and corporate funding development. Mr. Mabey received his Bachelors of Arts at Boise State University and his Masters of Public Administration at Idaho State University. Mr. Westbrook served as CFO of Public Wireless, Inc., a wireless communication infrastructure business from 2005-2009. From 2004-2005, Mr. Westbrook served as CFO of Nanoamp Solutions Inc., a memory IC company. Prior to 2004, Mr. Westbrook served as CFO at Sage, Inc., (NASDAQ: SAGI), a company specializing in flat panel display controller ICs. Mr. Westbrook is a Chartered Accountant and holds a masters degree in Economics from Trinity College, Cambridge in the United Kingdom. COMPENSATION OF DIRECTORS Our bylaws provide that, unless otherwise restricted by our certificate of incorporation, our Board of Directors has the authority to fix the compensation of directors. The directors may be paid their expenses, if any, related to attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as our director. Our bylaws further provide that no such payment will preclude any director from serving our Company in any other capacity and receiving compensation therefore. Further, members of special or standing committees may be given compensation for attending committee meetings. 35
AUDIT COMMITTEE FINANCIAL EXPERT We do not have an audit committee or a compensation committee of our board of directors. In addition, our board of directors has determined that we do not have an audit committee financial expert serving on the board. When we develop our operations, we will create an audit and a compensation committee and will seek an audit committee financial expert for our board and audit committee. CONFLICTS OF INTEREST Our officers and directors are now and may in the future become shareholders, officers or directors of other companies, which may be formed for the purpose of engaging in business activities similar to ours. Accordingly, additional direct conflicts of interest may arise in the future with respect to such individuals acting on behalf of us or other entities. Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise. Currently, we do not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations. Our officers and directors are, so long as they are our officers or directors, subject to the restriction that all opportunities contemplated by our plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to us and the companies that they are affiliated with on an equal basis. A breach of this requirement will be a breach of the fiduciary duties of the officer or director. If we or the companies with which the officers and directors are affiliated both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity. However, all directors may still individually take advantage of opportunities if we should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions. One of our shareholders, directors and officers, Mr Karnick, who, together with his wife, owns approximately 15 million shares of restricted common stock, has a controlling interest in Numerity Corporation from whom we have licensed our engineering technology, IP and set top box designs, and to whom we are committed to pay maintenance and royalties. On July 1, 2010, the Company agreed to amend that licensing agreement to provide a deferral of maintenance dues, and an extension of credit until the earlier of three months after first commercial shipment, or June 30, 2012. The amendment was authorized for the Company by Mr Danny Mabey, board director with no interest in Numerity. One of our shareholders, directors and officers, Mr Karnick, who, together with his wife, owns approximately 15 million shares of restricted common stock, has a controlling interest in Numerity Corporation with whom we have contracted the provision of executive, administration and business development services and to whom we committed to pay contract service fees of $40,000 per month. On July 1, 2010, the Company agreed to amend that service agreement such that the next $330,000 of service fees payable would be waived by Numerity, and the corresponding fees would be payable directly to Numerity's sub-contractors, either in cash or common stock at the option of the Company. Additionally, the parties agreed to extend credit for amounts due to Numerity on a rolling term of a year and one day until further agreement between the parties. The amendment was authorized by Mr Danny Mabey, a board director with no interest in Numerity. Starting September 2012, Numerity resumed billing the Company for its management services at the rate of $40,000 per month. In March 2012 and September 2011, Numerity assigned $350,000 and $675,000 respectively, of amounts then due from the Company to third parties, which debts were subsequently extinguished by the issuance of 2.9 million and 4.5 million shares of fully-paid common stock. The balance due to Numerity at December 31, 2012 is $151,751. One of our shareholders, Guifeng Qui, who owns approximately 13 million shares of restricted common stock, has a controlling interest in the Chinese distributor who we have appointed to represent us in developing our business in China. The Agreement with this distributor provides that we will receive a margin of $20 on each unit of set-top box sold through that distribution channel, and an additional $5 per month per subscriber for content distribution contracts using our content library of over four thousand titles. One of our shareholders, directors and officers, Mr Karnick owns the library of film content which has been made available for our use at no charge to us, which we intend to include as part of our product offerings. 36
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director or executive officer of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the commodities futures trading commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. CODE OF ETHICS The Company has adopted a code of business conduct and ethics that applies to its directors, officers, and employees, including its principal executive officers, principal financial officer, principal accounting officer, controller or persons performing similar functions. The Financial Code of Ethics was filed as Exhibit 14.1 to the Annual Report for the year ended December 31, 2011, filed March 21, 2012. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT 9.A. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS: The Company believes that all filings of Form 4 and 5 required of Section 16(a) of the Exchange Act of Directors, Officers or holders of 10% of the Company's shares have been timely. ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE Change in Pension Value and Non-Equity Nonqualified Name and Incentive Deferred Principal Stock Option Plan Compensation All Other Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($) -------- ---- --------- -------- --------- --------- --------------- ----------- --------------- --------- Nitin Karnik 2012 $ --(a) $ -- $ -- $ -- $ -- $ -- $ -- $ -- 2011 $ --(a) $ -- $ -- $ -- $ -- $ -- $ -- $ -- 2010 $ --(b) $ -- $ -- $ -- $ -- $ -- $ -- $ -- Danny Mabey 2012 $80,000(c,d) $ -- $ -- $23,428 $ -- $ -- $ -- $103,428 2011 $80,000(c,d) $ -- $ -- $23,364 $ -- $ -- $ -- $103,364 2010 $60,000(c,e) $ -- $ -- $ -- $ -- $ -- $ -- $ 60,000 Simon 2012 $96,000(f,g) $ -- $ -- $23,428 $ -- $ -- $ -- $119,428 Westbrook 2011 $96,000(f,g) $ -- $ -- $23,364 $ -- $ -- $ -- $119,364 2010 $88,000(f,h) $ -- $ -- $ -- $ -- $ -- $ -- $ 88,000 ---------- (a) Mr. Karnik is the CEO and owner of Numerity Corporation. The amounts billed by Numerity for engineering, design and executive services provided by Numerity, and maintenance fees due under the terms of the Numerity License Agreement in 2012, 2011, and 2010, were $160,000, $895,000, and $120,000, respectively. During 2012, 2011 and 2010, the Company paid Numerity $33,100, $29,900 and $136,000, respectively, which was treated as payment of the oldest balance due to Numerity. 37
(b) Mr. Karnik was appointed as CEO in October, 2009. (c) Mr. Mabey's compensation for the provision of services as COO and director of the Company has not been paid due to the lack of cash available. An amount of $220,000 has been included in accounts payable at December 31, 2012 in respect of compensation due to Mr Mabey. (d) In 2011, Mr. Mabey was granted an option to purchase 800,000 shares at $0.15 per share, vesting over two years. Using a Black Scholes valuation model, the Company calculated the value of these options amortized in 2012 was $23,428. (e) Mr. Mabey was appointed as a director of the Company in 2010. (f) Mr. Westbrook's compensation for the provision of services as CFO of the Company has not been paid due to the lack of cash available. An amount of $280,000 has been included in accounts payable at December 31, 2012 in respect of compensation due to Mr. Westbrook. (g) In 2011, Mr. Westbrook was granted an option to purchase 800,000 shares at $0.15 per share, vesting over two years. Using a Black Scholes valuation model, the Company calculated the value of these options amortized in 2012 was $23,428. (h) Mr. Westbrook joined the Company as CFO in February 2010. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE Option Awards Stock Awards ------------------------------------------------------------- -------------------------------------------- Equity Incentive Equity Plan Incentive Awards: Plan Market or Awards: Payout Equity Number of Value of Incentive Number Unearned Unearned Plan Awards; of Market Shares, Shares, Number of Number of Number of Shares Value of Units or Units or Securities Securities Securities or Units Shares or Other Other Underlying Underlying Underlying of Stock Units of Rights Rights Unexercised Unexercised Unexercised Option Option That Stock That That That Options Options Unearned Exercise Expiration Have Not Have Not Have Not Have Not Name Year Exercisable(#) Unexercisable(#) Options(#) Price($) Date Vested(#) Vested($) Vested(#) Vested(#) ---- ---- -------------- ---------------- ---------- ----- ---- --------- --------- --------- --------- Nitin 2012 -- -- -- -- -- -- -- -- -- Karnik 2011 -- -- -- -- -- -- -- -- -- 2010 -- -- -- -- -- -- -- -- -- Danny 2012 800,000 -- -- $0.15 1-Sep-21 -- -- -- -- Mabey 2011 398,904 401,096 -- $0.15 1-Sep-21 401,096 $24,066 -- -- (a) 2010 -- -- -- -- -- -- -- -- -- Simon 2012 800,000 -- -- $0.15 1-Sep-21 -- -- -- -- Westbrook 2011 398,904 401,096 -- $0.15 1-Sep-21 401,096 $24,066 -- -- (b) 2010 -- -- -- -- -- -- -- -- -- ---------- (a) Mr Mabey was appointed in April 2010. (b) M Westbrook was appointed in February 2010 38
OPTION EXERCISES AND STOCK VESTED TABLE OPTION AWARDS STOCK AWARDS ---------------------------------------------------------------- ---------------------------------------------- Equity incentive Equity plan awards: incentive market or Equity plan awards: payout Incentive number of value of plan awards Market unearned unearned Number of Number of value of shares, shares, securities Shares or Shares or units or units or Number of Number of underlying units of units of other other Shares Shares unexercised Option Option stock that stock that rights that rights that Acquired On Acquired On unearned exercise expiration have not have not have not have not Name Year Exercise(#) Unexercise(#) options(#) price($) date vested(#) vested(#) vested(#) vested(#) ---- ---- ----------- ------------- ---------- -------- ---- --------- --------- --------- --------- Nitin 2012 -- -- -- -- -- -- -- -- -- Karnik 2011 -- -- -- -- -- -- -- -- -- 2010 -- -- -- -- -- -- -- -- -- Danny 2012 800,000 -- -- $0.15 1-Sep-21 -- -- -- -- Mabey 2011 398,904 401,096 -- -- -- -- -- -- -- a 2010 -- -- -- -- -- -- -- -- -- Simon 2012 800,000 -- -- $0.15 1-Sep-21 -- -- -- -- West- 2011 398,904 401,096 -- -- -- -- -- -- -- brook b 2010 -- -- -- -- -- -- -- -- -- ---------- (a) Mr Mabey was appointed in April 2010. (b) M Westbrook was appointed in February 2010 PENSION BENEFITS TABLE Number of Present Years Value of Payments Plan Credited Accumulated During Last Name Year Name Service(#) Benefit($) Fiscal Year($) ---- ---- ---- ---------- ---------- -------------- Nitin Karnik 2012 -- -- -- -- 2011 -- -- -- -- 2010 -- -- -- -- Danny Mabey (a) 2012 -- -- -- -- 2011 -- -- -- -- 2010 -- -- -- -- Simon Westbrook (b) 2012 -- -- -- -- 2011 -- -- -- -- 2010 -- -- -- -- ---------- (a) Mr Mabey was appointed in April 2010 (b) Mr Westbrook was appointed in February 2010 39
NONQUALIFIED DEFERRED COMPENSATION TABLE Executive Registrant Agregate Aggregate Contributions Contributions Earnings Aggregate Balance in Last Fiscal in Last Fiscal in Last Fiscal Withdrawals at Last Fiscal Name Year Year($) Year($) Year($) Distributions($) Year-end($) ---- ---- ------- ------- ------- ---------------- ----------- Nitin Karnik 2012 -- -- -- -- -- 2011 -- -- -- -- -- 2010 -- -- -- -- -- Danny Mabey (a) 2012 -- -- -- -- -- 2011 -- -- -- -- -- 2010 -- -- -- -- -- Simon Westbrook (a) 2012 -- -- -- -- -- 2011 -- -- -- -- -- 2010 -- -- -- -- -- ---------- (a) Mr Karnik did not receive or accrue any compensation in any year. (b) Mr Mabey was appointed in April 2010. He has accrued, but has not been paid $140,000 for his services as a director, and COO, of the Company. ALL OTHER COMPENSATION TABLE Perquisites Company Change and Other Contributions to Severance in Control Personal Tax Insurance Retirement and Payments / Payments / Name Year Benefits($) Reimbursements($) Premiums($) 401(k) Plans($) Accruals($) Accruals($) Total($) ---- ---- ----------- ----------------- ----------- --------------- ----------- ----------- -------- Nitin Karnik 2012 -- -- -- -- -- -- -- 2011 -- -- -- -- -- -- -- 2010 -- -- -- -- -- -- -- Danny Mabey 2012 -- -- -- -- -- -- -- 2011 -- -- -- -- -- -- -- (a) 2010 -- -- -- -- -- -- -- Simon Westbrook 2012 -- -- -- -- -- -- -- 2011 -- -- -- -- -- -- -- (b) 2010 -- -- -- -- -- -- -- ---------- (a) Mr Mabey was appointed in April 2010 (b) Mr Westbrook was appointed in February 2010 40
DIRECTOR COMPENSATION TABLE Change in Pension Value and Fees Non-Equity Nonqualified Earned Incentive Deferred Paid in Stock Option Plan Compensation All Other Name Year Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($) ---- ---- ------- --------- --------- --------------- ----------- --------------- -------- Nitin Karnik 2012 -- -- -- -- -- -- -- 2011 -- -- -- -- -- -- -- (a) 2010 -- -- -- -- -- -- -- Danny Mabey 2012 -- -- $23,428 -- -- -- $23,428 2011 -- -- $23,263 -- -- -- $23,263 (b) 2010 -- -- -- -- -- -- -- ---------- (a) Mr Mabey was appointed in April 2010 (b) Mr Westbrook was appointed in February 2010 PERQUISITES TABLE Personal Use Financial of Company Planning/ Executive Name Year Car/Parking($) Legal Fees($) Club Dues($) Relocation($) Total($) ---- ---- -------------- ------------- ------------ ------------- -------- Nitin Karnik 2012 -- -- -- -- -- 2011 -- -- -- -- -- 2010 -- -- -- -- -- Danny Mabey 2012 -- -- -- -- -- 2011 -- -- -- -- -- (a) 2010 -- -- -- -- -- Simon Westbrook 2012 -- -- -- -- -- 2011 -- -- -- -- -- (b) 2010 -- -- -- -- -- ---------- (a) Mr Mabey was appointed in April 2010 (b) Mr Westbrook was appointed in February 2010 41
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE Before Change After Change in Control in Control Termination Termination w/o Cause or for w/o Cause or Voluntary Change in Name Year Good Reason($) for Good Reason($) Termination($) Death($) Disability($) Control($) ---- ---- -------------- ------------------ -------------- -------- ------------- ---------- Nitin Karnik 2012 -- -- -- -- -- -- 2011 -- -- -- -- -- -- 2010 -- -- -- -- -- -- Danny Mabey 2012 -- -- -- -- -- -- 2011 -- -- -- -- -- -- (a) 2010 -- -- -- -- -- -- Simon Westbrook 2012 -- -- -- -- -- -- 2011 -- -- -- -- -- -- (b) 2010 -- -- -- -- -- -- ---------- (a) Mr Mabey was appointed in April 2010 (b) Mr Westbrook was appointed in February 2010 EMPLOYMENT AGREEMENTS As of this time, there are no employment agreements with any named executive officer. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, CONFLICTS OF INTEREST. No retirement, pension, profit sharing, or insurance programs or other similar programs have been adopted by us for the benefit of our employees. LEGAL PROCEEDINGS. We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company's or our company's subsidiaries' officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table lists stock ownership of our common stock, as of December 31, 2012 based on an aggregate of 57,713,837 common shares issued and outstanding. The information includes beneficial ownership by (i) holders of more than 5% of our common stock, (ii) each of our directors and executive officers and (iii) all of our directors and executive officers as a group. Except as noted below, to our knowledge, each person named in the table has sole voting and investment power with respect to all shares of our common stock beneficially owned by them. 42
Name and Address Amount of Percentage of Beneficial Owner Beneficial Ownership of Class ------------------- -------------------- -------- Nitin Karnik, CEO & director (1) 11,823,529 20.5% 4944 El Camino Real, Ste 100, Los Altos, CA 94022 Danny Mabey, COO & director (2) 800,000 1.4% 4944 El Camino Real, Ste 100, Los Altos, CA 94022 Simon Westbrook, CFO (2) 800,000 1.4% 4944 El Camino Real, Ste 100, Los Altos, CA 94022 Directors and officers as a group (1) 13,423,529 23.3% Guifeng Qui 13,137,255 25.2% 6-03 Xue Xi Yuan Vanke, New Town Xin Yi Bau Da Doe, Tianjin, PRC 300402 Sulu Karnik (3) 3,469,608 6.0% 255 W El Camino Real, Sunnyvale, CA 94087 Directors,officers and affiliates as a group 30,030,392 52.1% ---------- (1) Excludes holding by Nitin Karnik's spouse, Sulu Karnik (2) Number of shares of common stock exercisable under the Company's 2010 Stock Option plan as of February 15, 2012 (3) Spouse of Nitin Karnik, excludes holdings by Nitin Karnik ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS From time to time, Mr. Karnick, though his wholly owned Company, Numerity, has advanced cash to pay off supplier balances on behalf of the Company and the balance is reported as a loan from related party. The loan is unsecured, interest-free, and will be repaid when the Company raises sufficient cash to do so or has sufficient revenues. One of our shareholders, directors and officers, Mr Karnick, who, together with his wife, owns approximately 15 million shares of restricted common stock, has a controlling interest in Numerity Corporation from whom we have licensed our engineering technology, IP and set top box designs, and to whom we are committed to pay maintenance and royalties. On July 1, 2010, the Company agreed to amend that licensing agreement to provide a deferral of maintenance dues, and an extension of credit until the earlier of three months after first commercial shipment, or June 30, 2012. The amendment was authorized for the Company by Mr Danny Mabey, a board director with no interest in Numerity. Starting September 2012, Numerity resumed billing the Company for its management services at the rate of $40,000 per month. The Company does not have the resources to pay these billings and accordingly, the billing has been added to the balance of notes payable to related party in the December 31, 2012 financial statements. 43
Additionally, the parties agreed to extend credit for amounts due to Numerity on a rolling term of a year and one day until further agreement between the parties. The amendment was approved by the Board of Directors, including Mr. Danny Mabey, a member of the Board of Directors with no interest in Numerity . In March 2012 and September 2011, Numerity assigned $350,000 and $675,000 respectively, of amounts then due from the Company to third parties, which debts were subsequently extinguished by the issuance of 2.9 million and 4.5 million shares of fully-paid common stock. The balance due to Numerity at December 31, 2012 is $151,751. One of our shareholders, Guifeng Qui, who owns approximately 13 million shares of restricted common stock, has a controlling interest in the Chinese distributor who we have appointed to represent us in developing our business in China. The Agreement with this distributor provides that we will receive a margin of $20 on each unit of set-top box sold through that distribution channel, and an additional $5 per month per subscriber for content distribution contracts using our content library of over four thousand titles. One of our shareholders, directors and officers, Mr Karnick owns the library of film content which has been made available for our use at no charge to us, which we intend to include as part of our product offerings. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table sets forth fees related to services performed by George Stewart, CPA: 2012 2011 -------- -------- Audit Fees (1) $ 12,070 $ 9,930 Audit Related Fees (2) -- -- Tax Fees (3) -- -- All Other fees (4) -- -- -------- -------- Total $ 12,070 $ 9,930 ======== ======== ---------- (1) Audit fees represent fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements. (2) During 2012, we did not incur fees for assurance services related to the audit of our financial statements and for services in connection with audits of our benefit plans, which services would be reported in this category. (3) During 2012, we did not incur fees for tax advice, tax planning and tax return preparation. (4) During 2012, we did not incur fees for other services. The Board of Directors has reviewed and discussed with the Company's management and independent registered public accounting firm the audited financial statements of the Company contained in the Company's Annual Report on Form 10-K for the Company's 2012 fiscal year. The Board has also discussed with the auditors the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of the Company's financial statements. The Board has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with its auditors its independence from the Company. The Board has considered whether the provision of services other than audit services is compatible with maintaining auditor independence. Based on the review and discussions referred to above, the Board approved the inclusion of the audited financial statements be included in the Company's Annual Report on Form 10-K for its 2012 fiscal year for filing with the SEC. 44
PRE-APPROVAL POLICIES The Board's policy is to pre-approve all audit services and all permitted non-audit services (including the fees and terms thereof) to be provided by the Company's independent registered public accounting firm; provided, however, pre-approval requirements for non-audit services are not required if all such services (1) do not aggregate to more than five percent of total revenues paid by the Company to its accountant in the fiscal year when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the Board and approved prior to the completion of the audit. The Board pre-approved all fees described above. 45
PART IV ITEM 15. EXHIBITS The following exhibits are included with this filing: Exhibit Number Description ------ ----------- 3(i) Amended and Restated Articles of Incorporation* 3(ii) Amended and Restated Bylaws* 10.1 Numerity licensing and maintenance agreement* 10.2 Numerity licensing and maintenance agreement 1st amendment* 10.3 Numerity service agreement* 10.4 Numerity service agreement 1st amendment* 10.5 Numerity service agreement 2nd amendment * 10.6 IN TV independent sales representation agreement* 10.7 Numerity license to use office agreement* 10.8 Numerity revolving credit agreement* 10.9 Numerity video library license agreement* 14.1 Financial Code of Ethics** 31.1 Sec. 302 Certification of CEO*** 31.2 Sec. 302 Certification of CFO*** 32.1 Sec. 906 Certification of CEO*** 32.1 Sec. 906 Certification of CFO*** 101 Interactive data files pursuant to Rule 405 of Regulation S-T*** ---------- * Incorporated by reference to the Company's Amended Annual Report on Form 10-K/A, filed November 14, 2011. ** Incorporated by reference to the Company's Annual Report on Form 10-K, filed March 21, 2012. *** Filed herein. 46
SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. March 20, 2013 IN Media Corporation By /s/ Nitin Karnik ------------------------------------- Nitin Karnik Chief Executive Officer and Director (Principal Executive Officer) By /s/ Simon P. Westbrook ------------------------------------- Simon P. Westbrook Chief Financial Officer, Chief Financial Officer (Principal Accounting Officer) In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Nitin Karnik March 20, 2013 ------------------------------------- -------------- Nitin Karnik Date Chief Executive Officer and Director (Principal Executive Officer) /s/ Simon P. Westbrook March 20, 2013 ------------------------------------- -------------- Simon P. Westbrook Date Chief Financial Officer, Principal Accounting Officer (Principal Financial Officer) /s/ Danny Mabey March 20, 2013 ------------------------------------- -------------- Danny Mabey Date Director 4