UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2015 

 

Commission File Number   333-157010

 

STATIONDIGITAL CORPORATION

(formerly known as Alarming Devices, Inc.)

(Exact name of registrant as specified in its charter)

 

Delaware	26-3062327
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

  

Highlands Plaza Two, 5700 Oakland Ave, #200

St. Louis, Missouri, 63110

(Address of principal executive office and zip code)

 

(855) 782-8466

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the issuer (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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

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

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
(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 June 3, 2015, 85,060,827 shares of the Registrant's common stock, par value $0.001 per share, were issued and outstanding. 

 

 

STATIONDIGITAL CORPORATION

FORM 10-Q

For the period ended March 31, 2015

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II - OTHER INFORMATION		28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
SIGNATURES		32

 

 

Item 1. Financial Statements.

 

StationDigital Corporation

Index to Financial Statements

 

	Page
Balance Sheets as of March 31, 2015 and December 31, 2014 (Unaudited)	4
Statements of Operations for the Three Months Ended March 31, 2015 and 2014 (Unaudited)	5
Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (Unaudited)	6
Notes to the Financial Statements	7

 

 

StationDigital Corporation

Balance Sheets

  

		March 31, 2015				December 31, 2014
Assets
Current assets
Cash		$	39,538			$	8,325
Prepaid expenses			30,184				26,293
Financing cost			128,216				122,868
Deposit			47,840				47,840
Total current assets			245,778				205,326
Property and equipment, net			44,190				48,690
Website development costs, net			656,694				317,119
Trademarks			32,209				28,105
Total assets		$	978,871			$	599,240
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable		$	4,554,744			$	4,409,464
Advances from stockholder			85,837				85,837
Accrued expenses			420,678				348,235
Accured interest			161,626				83,637
Derivitive liability - warrants			1,883,943				1,732,881
Derivitive liability - convertible notes			2,007,326				1,775,404
Notes payable - related party, net of unamortized debt discount of $148,780 and $312,500, respectively			351,220				187,500
Notes payable, net of unamortized debt discount of $1,255,159 and $1,333,081, respectively			1,482,341				354,419
Related party payable			239,758				168,627
Total current liabilities			11,187,473				9,146,004
Total Liabilities			11,187,473				9,146,004
Stockholders' deficit
Preferred stock par value $0.001: 10,000,000 shares authorized; 0 and 0 shares issued and outstanding, respectively			-				-
Common stock par value $0.001: 500,000,000 shares authorized; 84,077,827 and 83,527,827 shares issued and outstanding, respectively			84,078				83,528
Stock payable			504,234				202,359
Additional paid-in capital			8,388,390				8,193,940
Accumulated deficit			(19,185,304	)			(17,026,591	)
Total stockholders' deficit			(10,208,602	)			(8,546,764	)
Total liabilities and stockholders' deficit		$	978,871			$	599,240

 

See accompanying notes to the financial statements.

 

 

StationDigital Corporation

Statements of Operations

 

		For the Three				For the Three
		Months				Months
		Ended				Ended
		March 31, 2015				March 31, 2014
Revenue		$	704			$	16,507
Cost of revenue			46,439				212,932
Gross loss			(45,735	)			(196,425	)
Operating expenses
Product development costs			202,036				89,248
Sales and marketing			238,566				938,432
General and administrative			960,189				196,923
Total operating expenses			1,400,791				1,224,603
Loss from operations			(1,446,526	)			(1,421,028	)
Other income (expense)
Gain/(Loss) on change in derivitive			167,015				-
Interest expense			(879,202	)			-
Total other income (expense)			(712,187	)			-
Net loss		$	(2,158,713	)		$	(1,421,028	)
Net loss per common share:
- Basic		$	(0.03	)		$	(0.03	)
Weighted average common shares outstanding
- Basic			83,782,827				44,883,600

 

See accompanying notes to the financial statements.

 

 

StationDigital Corporation

Statements of Cash Flows

 

		For the Three				For the Three
		Months				Months
		Ended				Ended
		March 31, 2015				March 31, 2014
Cash flows from operating activities:
Net loss		$	(2,158,713	)		$	(1,421,028	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			4,500				24,669
Amortization of interest expense			791,641				30,178
Amortization of financing cost			62,102				-
Common stock issued for services			312,600				-
Accrued advisory service fee			184,275				1,666
Conversion of notes payable to equity			-				666,500
Gain on change in derivitive			(167,015	)			-
Changes in operating assets and liabilities:
Increase in prepaid expenses			(3,891	)			-
Decrease in deposits			-				1,000
Increase in accounts receivable			-				(6,851	)
Increase in accounts payable			145,280				1,148,104
Increase in wages payable			-				22,650
Increase in accrued expenses			72,443				-
Increase in accrued interest			77,989				-
Net cash used in operating activities			(678,789	)			466,888
Cash flows from investing activities
Related party receivable			-				(10,761	)
Website development			(339,575	)			-
Loans to shareholders			-				4,045
Trademarks			(4,104	)			-
Net cash used in investing activities			(343,679	)			(6,716	)
Cash flows from financing activities:
Proceeds from promissory notes			500,000				-
Proceeds from related party payable			71,131				-
Proceeds from GoldenHeart Holdings			-				213,266
Payments to GoldenHeart Holdings			-				(947,065	)
Payments to GHH Commerce			-				(10,315	)
Proceeds from convertible notes			482,550				290,000
Net cash provided by financing activities			1,053,681				(454,114	)
Net change in cash			31,213				6,058
Cash, beginning of reporting period			8,325				5,687
Cash, end of reporting period		$	39,538			$	11,745
Supplemental disclosure of cash flows information:
Interest paid		$	-			$	-
Income tax paid		$	-			$	-
Noncash investing and financing activities:
Capitalized financing cost		$	67,450			$	-

 

See accompanying notes to the financial statements.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Note 1 – Nature of Business and Significant Accounting Policies

 

StationDigital Corporation ("StationDigital") was originally organized as a Missouri limited liability company on November 14, 2012 and was subsequently converted to a Delaware C-Corporation on November 18, 2013.

 

On April 23, 2014, StationDigital consummated a Stock Purchase Agreement, as amended and originally entered into on March 12, 2014 (the "Agreement") entered into with Steel Pier Capital Advisors, LLC ("Steel Pier") whereby StationDigital acquired 4,805,067 shares of 5,000,000 shares of Common Stock held by Steel Pier. The acquisition of the Shares resulted in a change in control of the Registrant.

 

Also on April 23, 2014, the Registrant authorized an amendment to its Articles of Incorporation to (i) change its name to StationDigital Corporation, (ii) to increase the number of its authorized shares of capital stock from 75,000,000 to 510,000,000 shares of which 500,000,000 shares were designated common stock, par value $0.001 per share and 10,000,000 shares were designated "blank check" preferred stock, par value $0.001 per share and (iii) to effect a forward split such that 17.6471 shares of Common Stock and Preferred Stock were issued for every 1 share of Common Stock and Preferred Stock issued and outstanding immediately prior to the Amendment. The Registrant also authorized a conversion of its corporate domicile to the State of Delaware.

 

Also on April 23, 2014, the Registrant entered into and consummated the Agreement and Plan of Merger with StationDigital, whereby StationDigital merged with the Registrant for approximately 3,400,000 pre-Split shares of the Company's Common Stock and 56 shares of a newly-created Series A Preferred Stock. Further, the Registrant amended its By-laws to change its fiscal year end to December 31^st; the change is intended to align the Registrant's fiscal periods with that of StationDigital's business.

 

StationDigital is a multimedia digital broadcast company that offers free music streaming for millions of songs. StationDigital features both genre-based and artist-based music discovery stations to suit an endless variety of musical tastes and a personal recommendation service - all available both online and through its iOS and Android mobile apps.

 

Our StationDigital Listener Rewards Program is designed to incentivize our users to play an active part in the growth of our customer base and brand. The StationDigital Listener Rewards Program allows our registered users to earn rewards points when they listen to StationDigital on the Internet or through our mobile apps, and every time they share StationDigital with friends through social media. Rewards points can be redeemed through the StationDigital online superstore for a variety of physical or digital merchandise designed to appeal to users of all kinds.

 

StationDigital is guided by the ambition to be the first free Internet radio platform to evolve into a comprehensive digital media broadcast platform, available on any device, anywhere, anytime. To that end, StationDigital intends to steadily add music videos, movies, television programming, specialty programming and video games to our platform of digital media and entertainment which will be available to our users at all times. We intend our rewards program to extend to each additional digital media offering on the StationDigital platform.

 

The StationDigital mobile app is now available for both iTunes and Android. We expect the mobile app will soon be available in the other app stores, with the ultimate goal of increasing our reach to 100% of the mobile devices in use. Mobility is at the heart of our growing listener base in internet radio, and our marketing efforts are expanding beyond our browser focused initiatives and into a series of highly targeted mobile ad campaigns across multiple ad platforms with the goal of aggressively promoting brand recognition and increasing mobile app installs of StationDigital.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Additionally, as the markets for digital media consumption expand beyond laptops and mobile devices to the living room and the car, StationDigital intends to compete for those consumers as well.

 

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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to the recoverability of deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

 

Financial Instruments

 

The fair values of financial instruments, which include cash and amounts due to related parties, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.

 

The Company's operations and financing activities are conducted primarily in United States dollars, and as a result the Company is not subject to significant exposure to market risks from changes in foreign currency rates.  Management has determined that the Company is not exposed to significant credit risk.

 

Business Segments

 

The Company operates in one segment and therefore segment information is not presented.

 

Loss Per Share

 

The Company computes net loss per share in accordance with ASC 260 "Earnings per Share". ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including warrants and stock options, using the treasury stock method, and convertible notes, convertible preferred stock, using the if-converted method.

 

In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Income Taxes

 

The Company accounts for income under FASB accounting standards codification No. 740 income taxes. Under FASB accounting standards codification No. 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. The tax return for the period ended December 31, 2014 is subject to examination by the Internal Revenue Service.

 

Fair Value of Financial Instruments

 

The Company measures the fair value of its assets and liabilities under the guidance of ASC 820, Fair Value Measurements and Disclosures, which establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement. ASC 820 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820 requires the Company to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

 

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets;

 

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly such as quoted prices for similar assets or liabilities or market-corroborated inputs; and

 

Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities. The valuation techniques that may be used to measure fair value are as follows:

 

A.

Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

 

B.

Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method.

 

C.

Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Pursuant to ASC 825, the fair value of cash and marketable securities is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of cash, accounts receivables, marketable securities, accounts payable and accrued liabilities, and notes payable approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

 

Assets measured at fair value on a recurring basis were presented on the Company’s balance sheets as of March 31, 2015 and December 31, 2014 as follows:

 

		Fair Value Measurements as of March 31, 2015 Using:
		Total Carrying Value as of				Quoted Market Prices in Active Markets				Significant Other Observable Inputs				Significant Unobservable Inputs
		03/31/15				(Level 1)				(Level 2)				(Level 3)
Liabilities:
Convertible note payable derivative liability		$	2,007,326			$	0			$	0			$	2,007,326
Warrant derivative liability			1,883,943				0				0				1,883,943
Total		$	3,891,269			$	0			$	0			$	3,891,269

 

		Fair Value Measurements as of December 31, 2014 Using:
		Total Carrying Value as of				Quoted Market Prices in Active Markets				Significant Other Observable Inputs				Significant Unobservable Inputs
		12/31/14				(Level 1)				(Level 2)				(Level 3)
Liabilities:
Convertible note payable derivative liability		$	1,775,404			$	0			$	0			$	1,775,404
Warrant derivative liability			1,732,881				0				0				1,732,881
Total		$	3,508,285			$	0			$	0			$	3,508,285

 

Change in convertible note payable derivative liability during the 3 months ended March 31, 2015 were as follows:

 

Opening balance at December 31, 2014		$	1,775,404
Initial valuation of additional derivatives			344,153
Gain on change in fair value of derivative liability			(112,231	)
Closing balance at March 31, 2015		$	2,007,326

 

Change in warrant derivative liability during the 3 months ended March 31, 2015 were as follows:

 

Opening balance at December 31, 2014		$	1,732,881
Initial valuation of additional derivatives			205,847
Gain on change in fair value of derivative Liability			(54,785	)
Closing balance at March 31, 2015		$	1,883,943

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Product Development

 

Product development consists primarily of software engineering and design, metadata, information technology and costs associated with supporting consumer connected-device manufacturers in implementing our service in their products. We have incurred product development expenses primarily to develop and improve our system, website and the StationDigital app.

 

We account for our development costs in accordance with ASC 350-50-25, which sets forth the appropriate method of accounting for each of the five stages of website development. The costs incurred during the planning stage were expensed as incurred; the costs incurred for activities during the website application and infrastructure development stage were capitalized in accordance with ASC 350-40; costs incurred during the graphics development stage were capitalized for costs that were for the creation of initial graphics for the website, subsequent updates to the initial graphics were expensed as incurred, unless they provided additional functionality; costs incurred during the content development stage were expensed as incurred unless they were for the integration of a database with our website, which were capitalized; and generally, the costs incurred during the operating stage have been expensed as incurred.

 

Capitalized amounts are amortized over the useful life of the related application.

 

Revenue Recognition

 

The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, "Revenue Recognition". In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company will recognize revenue from advertising and online sales at the time services are rendered.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded net of an allowance for doubtful accounts. Our allowance for doubtful accounts will be based upon historical loss patterns, the number of days that billings are past due and an evaluation of the potential risk of loss associated with delinquent accounts. We also consider any changes to the financial condition of our customers and any other external market factors that could impact the collectability of our receivables in the determination of our allowance for doubtful accounts.

 

Property and Equipment

 

Property and equipment is recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, which is three years.

 

Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If property and equipment are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Website Development Costs

 

Costs incurred to develop software for internal use are required to be capitalized and amortized over the estimated useful life of the asset if certain criteria are met. Costs related to preliminary project activities and post implementation activities are expensed as incurred. We evaluate the costs incurred during the application development stage of website development to determine whether the costs meet the criteria for capitalization. As of March 31, 2015 and December 31, 2014, we had approximately $656,694 and $317,119, respectively, of capitalized internal use software and website development costs, net of accumulated amortization. These costs are being amortized over their three year estimated useful lives. For the three month period ended March 31, 2015 and 2014, the Company recorded amortization expense of $0 and $20,922 respectively.

 

Derivative Financial Instruments

 

The Company has executed convertible notes and warrants that are deemed derivative financial instruments and are accounted for according to Financial Accounting Standards Board's ("FASB") Accounting Standards Codification's ("ASC") 815 "Derivatives and Hedging". Derivative financial instruments are assessed both at inception and quarterly thereafter to ensure they are effective in offsetting changes in the cash flows of the related underlying exposures; the effective portion of the change in fair value of the derivative instruments are reported as a component of "Other income (expense)" and reclassified into earnings in the period during which the transaction affects earnings.

 

Beneficial Conversion Feature

 

The conversion features are first analyzed for bifurcation under ASC 815, then if the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.

 

Stock-Based Compensation

 

The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.

 

The Company follows ASC Topic 505-50, formerly EITF 96-18, "Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services," for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.

 

Recent Accounting Pronouncements

 

Company management does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position or cash flow.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Note 2 – Going Concern

 

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize it assets and discharge its liabilities in the normal course of business. From inception (November 14, 2012) through March 31, 2015, the Company has an accumulated deficit of $19,185,304. The continuation of the Company as a going concern is dependent upon the continued financial support from its lenders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 3 – Property and Equipment

 

Property and equipment consisted of the following as of March 31, 2015 and December 31, 2014:

 

		March 31, 2015				December 31, 2014
Computer & office equipment		$	53,994			$	53,994
Computer software			-				-
Property & Equipment, Total			53,994				53,994
Less accumulated depreciation			9,804				5,304
Property & Equipment, Net		$	44,190			$	48,690

 

Depreciation expense during the three months ended March 31, 2015 and the three months ended March 31, 2014 was $4,500 and 3,748, respectively.

 

Note 4 - Related Party Transactions

 

As of March 31, 2015 and December 31, 2014, the Company was indebted to the Company's Chief Operating Officer in the amounts of $239,758 and $168,627, respectively. On May 1, 2015, the amount of indebtedness was $332,853 and, on this date, the Company executed a convertible promissory note for this amount. The note accrues interest at the rate of 15%, was due on June 1, 2015 which was subsequently extended to July 31, 2015 and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in the Company’s assets, and is subordinate to the security interest pledged to Steel Pier Capital Advisors, LLC. The Company will evaluate the terms of the convertible note under FASB ASC 815 to determine if the convertible note requires derivative accounting treatment.

  

As of March 31, 2015 and December 31, 2014, the Company was indebted to Steel Pier Capital Advisors, LLC in the amounts of $550,959 and $532,466, respectively. The Company’s Chief Operating Officer as well as a Company Director are Venture Partners of Steel Pier Capital Advisors, LLC. The note accrues interest at a rate of 15% is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 1,000,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment, which resulted in recognizing a discount of $500,000 on the note which is being amortized over the life of the note and derivative liability in the amount of $634,526 as of March 31, 2015.

  

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Note 5 - Convertible Promissory Notes

 

On January 26, 2015, the Company borrowed $50,000 under a convertible senior secured note.  The note accrues interest at the rate of 15%, is due on October 27, 2015 and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share.  The note is secured by a security interest in all of the Company's assets.  In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 100,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance.  The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment which resulted in recognizing a discount of $50,000 on the note which is being amortized over the life of the note and derivative liability in the amount of $77,702 as of March 31, 2015.

 

On March 17, 2015, the Company borrowed $500,000 under a convertible senior secured note. The note accrues interest at the rate of 15%, is due on December 16, 2015 and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 1,000,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment which resulted in recognizing a discount of $500,000 on the note which is being amortized over the life of the note and derivative liability in the amount of $797,513 as of March 31, 2015.

 

(A) Derivative liability- convertible notes

 

The Convertible Promissory Notes with Steel Pier Capital Partners, LLC with an issue date of June 30, 2014, Gene Salkind with an issue date of August 15, 2014, 25 NB LLC with an issue date of September 25, 2014, Alan Miller Living Trust with an issue date of September 25, 2014, Robert Coven, with an issue date of September 25, 2014, Pjake301LLC with an issue date of September 25, 2014, Mark Neuberger with an issue date of September 25, 2014, Irwin Blitt Revocable Trust with an issue date of September 25, 2014, FETRA with an issue date of November 2, 2014, Frederick Daniel Gable with an issue date of November 2, 2014, Beneficial Capital Corp. with an issue date of November 2, 2014, Eagle Venture Management, LLC with an issue date of November 7, 2014, Steve Gosch with an issue date of January 26, 2015 and WS Irrevocable Trust with an issue date of March 17, 2015 have an initial conversion price that is subject to anti-dilution adjustments that allow for the reduction in the Conversion Price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than original conversion price.

 

The Company’s convertible promissory note derivative liabilities due to anti-dilution adjustments has been measured at fair value at March 31, 2015 using a binomial model. The value of the derivative liability as of March 31, 2015 is $2,007,326. Since the Conversion Price contains an anti-dilution adjustment, the probability that the Conversion Price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation.

 

The inputs into the binomial models are as follows:

 

Conversion price	$	0.36
Risk free rate	0.14		%
Expected volatility	130% - 176		%
Dividend yield	0		%
Expected life	0.12 years – 0.71 years

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

(B) Derivative liability- warrants

 

In conjunction with the issuance of the Convertible Promissory Note issued to Steel Pier Capital Partners, LLC with an issue date of June 30, 2014, Gene Salkind with an issue date of August 15, 2014, 25 NB LLC with an issue date of September 25, 2014, Alan Miller Living Trust with an issue date of September 25, 2014, Robert Coven, with an issue date of September 25, 2014, Pjake301LLC with an issue date of September 25, 2014, Mark Neuberger with an issue date of September 25, 2014, Irwin Blitt Revocable Trust with an issue date of September 25, 2014, FETRA with an issue date of November 2, 2014, Frederick Daniel Gable with an issue date of November 2, 2014 Beneficial Capital Corp. with an issue date of November 2, 2014, Eagle Venture Management, LLC with an issue date of November 7, 2014, Steve Gosch with an issue date of January 26, 2015 and WS Irrevocable Trust with an issue date of March 17, 2015, the Company issued warrants to purchase 5,475,000 shares of common stock with an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share and a life of five years.

 

The warrant is subject to anti-dilution adjustments that allow for the reduction in the conversion price in the event the Company subsequently issues equity securities including common stock or any security convertible or exchangeable for shares of common stock for no consideration or for consideration less than price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share. The Company accounted for the conversion option in accordance with ASC Topic 815. Accordingly, the Conversion Option is not considered to be solely indexed to the Company’s own stock and, as such, is recorded as a liability.

 

The warrant derivative liability has been measured at fair value at March 31, 2015 using a Black-Scholes model. The value of the derivative liability as of March 31, 2015 is $1,883,944. Since the Conversion Price contains an anti-dilution adjustment, the probability that the exercise price of the Notes would decrease as the share price decreased was incorporated into the valuation calculation.

 

The inputs into the Black-Scholes model are as follows:

 

Risk free rate	1.37	%
Expected volatility	74	%
Dividend yield	0	%
Expected life	4.61 - 4.96 years

 

Note 6 - Promissory Notes

 

On February 6, 2015, the Company borrowed $500,000 under a promissory note. The note accrues interest at the rate of 15% and was originally due on March 23, 2015 and was in default as of March 31, 2015; on May 6, 2015, the maturity date was extended to June 19, 2015.

 

Note 7 - Equity

 

(A) Stock Issued for Services

 

On February 2, 2015, the Company issued 150,000 shares of restricted common stock for services to a consultant having a fair value of $52,500 ($0.35 per share).

 

On February 5, 2015, the Company issued 250,000 shares of restricted common stock for services to a consultant having a fair value of $82,500 ($0.33 per share).

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

On March 20, 2015, the Company issued 50,000 shares of restricted common stock for services to a consultant having a fair value of $20,000 ($0.40 per share).

 

On March 20, 2015, the Company issued 100,000 shares of restricted common stock for services to a consultant having a fair value of $40,000 ($0.40 per share).

 

(B) Stock Options and Warrants

 

The following is a summary of the common stock options and warrants granted, forfeited or expired and exercised:

 

						Weighted
						Average
						Exercise
		Number of				Price
		Options/Warrants				Per Share
Outstanding  - December 31, 2014			4,875,000			$	0.30
Granted			1,100,000			$	0.36
Forfeited or expired			-			$	-
Exercised			-			$	-
Outstanding- March 31, 2015			5,975,000			$	0.38
Exercisable - March 31, 2015			5,975,000			$	0.38

 

The following table summarizes information on stock options exercisable as of March 31, 2015:

 

				Number				Average
				Outstanding				Remaining				Aggregate
Exercise				at				Life				Intrinsic
Price				March 31, 2015				(Years)				Value
$	0.36				5,475,000				4.62			$	854,100
$	0.50				500,000				2.02			$	10,000

 

The 1,100,000 warrants were issued in conjunction with convertible notes entitling the Holder to purchase shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment which results in recognizing discounts of $205,847 on the notes to be amortized over the life of the note; as of March 31, 2015, the Company has accrued a warrant derivative liability of $1,883,561 for these warrants. See Note 5 (B) for additional disclosure.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

(C) Stock Payable

 

The following is a summary of the common stock shares accrued, earned and issued as compensation for members of the Company’s Advisory Board:

 

						Price
		Number				Per				Stock
		of Shares				Share				Payable
Accrued as of December 31, 2014			505,898			$	0.4000			$	202,359
Earned			267,369								184,275
Less: issued			-
Accrued as of March 31, 2015			773,267			$	0.5000			$	386,634

 

The following are additional common stock shares that have been accrued and earned but not issued as of March 31, 2015:

 

On January 15, 2015, the Company accrued 15,000 shares of restricted common stock for services to a consultant having a fair value of $6,000 ($0.40 per share).

 

On February 15, 2015, the Company accrued 15,000 shares of restricted common stock for services to a consultant having a fair value of $6,000 ($0.40 per share).

 

On March 5, 2015, the Company accrued 25,000 shares of restricted common stock for services to a consultant having a fair value of $9,750 ($0.39 per share).

 

On March 10, 2015, the Company accrued 150,000 shares of restricted common stock for services to the Company’s Chief Executive Officer having a fair value of $54,000 ($0.36 per share); the Company realized a $16,000 loss on this share issuance.

 

On March 15, 2015, the Company accrued 15,000 shares of restricted common stock for services to a consultant having a fair value of $5,850 ($0.39 per share).

 

On March 20, 2015, the Company accrued 50,000 shares of restricted common stock for services to a consultant having a fair value of $20,000 ($0.40 per share).

 

Note 8 – Commitments and Contingencies

 

Legal Proceedings

 

We are from time to time subject to various legal proceedings and claims arising in the ordinary course of our business. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Our management periodically evaluates developments that could affect the amount, if any, of liability that we have previously accrued and make adjustments as appropriate. Determining both the likelihood and the estimated amount of a loss requires significant judgment, and management's judgment may be incorrect. We do not believe the ultimate resolution of any pending legal matters is likely to have a material adverse effect on our business, financial position, results of operations or cash flows.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

On September 8, 2014, Andrew Gladney filed a complaint against the Company and a co-defendant, CloudWebStore, Inc. in the 21^st Judicial Circuit Court of the County of St. Louis, State of Missouri, alleging that the Company and CloudWebStore failed to compensate him for services rendered pursuant to a consulting agreement and related correspondence. Mr. Gladney is seeking damages in excess of $25,000 and 5 million shares of common stock. The Company intends to vigorously defend its interests.

 

On April 15, 2015, Performance Revenue, LT filed a Notice of Filing of Foreign Country Money Judgment against the Company in the 21^st Judicial Circuit Court of the County of St. Louis, State of Missouri, in connection with a Foreign Country Money Judgment entered by the Magistrate Court of Tel-Aviv-Yaffo in the State of Israel in favor of Performance Revenue, LT for indebtedness in the amount of approximately NIS 653,868.37 (approximately US $168,910.24). The Company has accrued a $169,309 liability related to this indebtedness.

 

On May 8, 2015, Millennial Media Inc. filed a complaint against the Company in the 21st Judicial Circuit Court of the County of St. Louis, State of Missouri, alleging indebtedness related to goods, wares merchandise and services sold by Millennial Media, Inc. to the Company and seeks damages in the amount of $394,858.38. The Company has accrued a $394,858 liability related to this indebtedness.

 

On May 18, 2015, Yahoo! Inc. filed a complaint against the Company in 22nd Judicial Circuit Court of City of St. Louis County, Missouri alleging indebtedness in relation to a services contract and seeks damages in the amount of $29,999.95, together with annual interest at the rate of 9% beginning on June 1, 2014 and related court costs. The Company has accrued a $39,339 liability related to this indebtedness.

 

Leases

 

On June 30, 2014, the Company executed a lease for 13,268 square feet of office space in St. Louis, Missouri (effective July 5, 2014) under an operating lease that expires in 2021. Minimum future rental payments under the lease are as follows:

 

Year Ending December 31,		$
2015			260,783
2016			417,279
2017			417,279
2018			417,279
2019			447,430
Thereafter			571,851
		$	2,531,901

 

The lease was in default as of March 31, 2015 and is also in default as of the date of this filing. The lease provides for no renewal option. Rent expense for the three months ended March 31, 2015, the three months ended March 31, 2014 was $63,780 and $0, respectively.

 

Financial Advisory Services

 

On March 20, 2015, the Company executed an engagement letter with Halcyon Cabot Partners, Ltd. to provide financial advisory and investment banking services for the Company through May 31, 2015 and, pursuant to which, the Company paid Halcyon a $13,500 fee upon execution of the engagement letter and an aggregate 275,000 shares of common stock, of which, 150,000 shares were due upon execution of the engagement letter and the remaining 125,000 shares due by May 31, 2015.

 

Note 9 - Term Sheet for Acquisition of Assets

 

On January 19, 2015, the Company and Network Foundation Technologies, LLC a private California limited liability company (“NIFTY”), entered into a binding term sheet (the “Term Sheet”) pursuant to which the Company and NIFTY agreed to negotiate toward the execution of definitive transaction agreements whereby the Company will acquire certain assets of NIFTY (the “Acquisition”), including sixteen (16) U.S. patents, of which two are pending patent approval, registered trademarks, registered domains and certain physical assets.

 

As set forth in the Term Sheet, the Company will issue to NIFTY Series B Convertible Preferred Stock (the “Series B Preferred Stock”) convertible into 29% of the Company’s outstanding shares as of closing. The Series B Preferred Stock shall have a conversion price of $0.45 and allow NIFTY to vote on an as converted basis. In addition, NIFTY would be able to appoint two directors to the Company’s Board of Directors. Also pursuant to the Term Sheet, the Company agreed to pay to shareholders who hold the Company’s common stock prior to the acquisition an amount equal to ten percent (10%) of the net proceeds obtained from any patent litigation or patent licensing after the deduction of all related legal fees, costs and expenses, which shall be paid within 120 days after the end of the Company’s fiscal year ending December 31, 2015. The Company will also assume $600,000 of NIFTY’s liabilities as well as issue 2,000,000 shares of common stock to NIFTY for remaining liabilities. The Acquisition is subject to the performance of certain conditions including approval by the Board of Directors of the Company and NIFTY.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

On April 30, 2015, the Company terminated the Acquisition pursuant to the Term Sheet; therefore, this Term Sheet with NIFTY will have no financial impact on the Company.

 

The foregoing description of the Term Sheet does not purport to be complete and is qualified in its entirety by reference to the complete text of the Term Sheet, which was filed as exhibit 10.12 to the Annual Report on Form 10-K for the year ended December 31, 2014.

 

Note 10 - Subsequent Events

 

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through June 5, 2015, the date the financial statements were issued.

 

Convertible Promissory Notes

 

On May 1, 2015, the Company was indebted to the Company's Chief Operating Officer in the amount of $332,854 and, on this date, the Company executed a convertible promissory note for this amount. The note accrues interest at the rate of 15%, was due on June 1, 2015 which was subsequently extended to July 31, 2015 and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in the Company’s assets, and is subordinate to the security interest pledged to Steel Pier Capital Advisors, LLC. The Company will evaluate the terms of the convertible note under FASB ASC 815 to determine if the convertible note requires derivative accounting treatment.

 

On May 1, 2015, the Company borrowed $30,000 under a convertible senior secured note. The note accrues interest at the rate of 15%, is due on February 2, 2016 and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 60,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. The Company will evaluate the terms of the convertible note and warrants under FASB ASC 815 to determine if the convertible note and warrants require derivative accounting treatment.

 

On May 4, 2015, the Company borrowed $10,000 under a convertible senior secured note. The note accrues interest at the rate of 15%, is due on February 5, 2016 and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 20,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. The Company will evaluate the terms of the convertible note and warrants under FASB ASC 815 to determine if the convertible note and warrants require derivative accounting treatment.

 

On May 14, 2015, the Company borrowed $75,000 under a convertible senior secured note. The note accrues interest at the rate of 15%, is due on February 15, 2016 and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 150,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. The Company will evaluate the terms of the convertible note and warrants under FASB ASC 815 to determine if the convertible note and warrants require derivative accounting treatment.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Defaults on Convertible Promissory Notes

 

On August 26, 2014, the Company borrowed $25,000 under a convertible senior secured note that is currently in default as the maturity date was May 26, 2015; although, no demand for payment has been made by the note holder and the Company is attempting to contact the note holder to get an extension of the maturity date. The note accrues interest at the rate of 12% and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 25,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. On November 7, 2014, the note was amended such that the interest rate of the 12% increased to 15%, the term "Qualified Financing" was redefined to mean an equity or convertible equity financing by the Company after the completion of the Notes and the warrants were amended increasing the number of warrants from 25,000 shares to 50,000 shares. The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment which resulted in recognizing a discount of $25,000 on the note which is being amortized over the life of the note and derivative liability in the amount of $30,783 as of March 31, 2015.

 

On August 26, 2014, the Company borrowed $25,000 under a convertible senior secured note that is currently in default as the maturity date was May 26, 2015; although, no demand for payment has been made by the note holder and the Company is attempting to contact the note holder to get an extension of the maturity date. The note accrues interest at the rate of 12%, and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 25,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. On November 7, 2014, the note was amended such that the interest rate of the 12% increased to 15%, the term "Qualified Financing" was redefined to mean an equity or convertible equity financing by the Company after the completion of the Notes and the warrants were amended increasing the number of warrants from 25,000 shares to 50,000 shares. The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment which resulted in recognizing a discount of $25,000 on the note which is being amortized over the life of the note and derivative liability in the amount of $30,783 as of March 31, 2015.

 

Promissory Notes

 

On April 7, 2015, the Company borrowed $20,000 under a promissory note. The note accrues interest at the rate of 1% and was originally due on April 13, 2015; on May 28, 2015, the maturity date was extended to July 15, 2015.

 

On May 1, 2015, the Company borrowed $12,500 under a promissory note. The note was originally due on May 8, 2015; on May 28, 2015, the maturity date was extended to July 15, 2015.

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Stock Issued for Services

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 55,000 shares of restricted common stock for services to a consultant having a fair value of $19,800 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 50,000 shares of restricted common stock for services to a consultant having a fair value of $18,000 ($0.36 per share).

 

On April 30, 2015, the Company issued 5,000 shares of restricted common stock for services to a consultant having a fair value of $18,000 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On May 1, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On May 5, 2015, the Company issued 62,000 shares of restricted common stock for services to a consultant having a fair value of $22,940 ($0.37 per share).

 

On May 11, 2015, the Company issued 21,000 shares of restricted common stock for services to a consultant having a fair value of $6,720 ($0.32 per share).

 

On May 13, 2015, the Company issued 325,000 shares of restricted common stock for services to the Company’s Chief Financial Officer having a fair value of $104,000 ($0.32 per share).

 

On June 2, 2015, the Company issued 125,000 shares of restricted common stock for services to a consultant having a fair value of $38,750 ($0.31 per share).

 

 

STATIONDIGITAL CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

 

Legal Proceedings

 

On April 15, 2015, Performance Revenue, LT filed a Notice of Filing of Foreign Country Money Judgment against the Company in the 21st Judicial Circuit Court of the County of St. Louis, State of Missouri, in connection with a Foreign Country Money Judgment entered by the Magistrate Court of Tel-Aviv-Yaffo in the State of Israel in favor of Performance Revenue, LT for indebtedness in the amount of approximately NIS 653,868 (approximately US $168,910). The Company has accrued a $169,309 liability related to this indebtedness.

 

On May 8, 2015, Millennial Media Inc. filed a complaint against the Company in the 21st Judicial Circuit Court of the County of St. Louis, State of Missouri, alleging indebtedness related to goods, wares merchandise and services sold by Millennial Media, Inc. to the Company and seeks damages in the amount of $394,858. The Company has accrued a $394,858 liability related to this indebtedness.

 

On May 18, 2015, Yahoo! Inc. filed a complaint against the Company in 22nd Judicial Circuit Court of City of St. Louis County, Missouri alleging indebtedness in relation to a services contract and seeks damages in the amount of $30,000, together with annual interest at the rate of 9% beginning on June 1, 2014 and related court costs. The Company has accrued a $39,339 liability related to this indebtedness.

 

 

 

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

 

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words.  Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

 

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission.  Important  factors  currently  known  to us could  cause  actual  results  to differ  materially  from  those in forward-looking  statements.  We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company.  No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions.  Factors that could cause differences include, but are not limited to, expected market demand for the Company's services and competition. 

 

Overview

 

We are a multimedia digital broadcast company that offers free music streaming for millions of songs. StationDigital features both genre-based and artist-based music discovery stations to suit an endless variety of musical tastes, and a personal recommendation service to its more than three million users - all available both online and through its iOS and Android mobile apps.

 

StationDigital is guided by the ambition to be the first free Internet radio platform to evolve into a comprehensive digital media broadcast platform, available on any device, anywhere, anytime. To that end, StationDigital intends to steadily add music videos, movies, television programming, specialty programming and video games to our platform of digital media and entertainment which will be available to our users at all times. We intend our Listener Rewards Program to extend to each additional digital media offering on the StationDigital platform.

 

Recent Developments

 

On January 19, 2015, the Company and Network Foundation Technologies, LLC a private California limited liability company (“NIFTY”), entered into a binding term sheet (the “Term Sheet”) pursuant to which the Company and NIFTY agreed to negotiate toward the execution of definitive transaction agreements whereby the Company will acquire certain assets of NIFTY (the “Acquisition”), including sixteen (16) U.S. patents, of which two are pending patent approval, registered trademarks, registered domains and certain physical assets.

 

 

As set forth in the Term Sheet, the Company will issue to NIFTY Series B Convertible Preferred Stock (the “Series B Preferred Stock”) convertible into 29% of the Company’s outstanding shares as of closing. The Series B Preferred Stock shall have a conversion price of $0.45 and allow NIFTY to vote on an as converted basis. In addition, NIFTY would be able to appoint two directors to the Company’s Board of Directors. Also pursuant to the Term Sheet, the Company agreed to pay to shareholders who hold the Company’s common stock prior to the acquisition an amount equal to ten percent (10%) of the net proceeds obtained from any patent litigation or patent licensing after the deduction of all related legal fees, costs and expenses, which shall be paid within 120 days after the end of the Company’s fiscal year ending December 31, 2015. The Company will also assume $600,000 of NIFTY’s liabilities as well as issue 2,000,000 shares of common stock to NIFTY for remaining liabilities. The Acquisition is subject to the performance of certain conditions including approval by the Board of Directors of the Company and NIFTY.

 

On April 30, 2015, the Company terminated the Acquisition pursuant to the Term Sheet.

 

The foregoing description of the Term Sheet does not purport to be complete and is qualified in its entirety by reference to the complete text of the Term Sheet, which was filed as exhibit 10.12 to the Annual Report on Form 10-K for the year ended December 31, 2014.

 

Results of Operations

 

Comparison of Three Months Ended March 31, 2015 and 2014

 

Revenue

 

We generate advertising revenue primarily from audio, display and video advertising sold on a cost-per-thousand impressions, or CPM, basis. Advertisers generally pay us based on the number of delivered impressions. We have arrangements with advertising agencies under which these agencies sell advertising inventory on our service directly to advertisers; we report revenue net of amounts due to agencies. For the three months ended March 31, 2015 and 2014, advertising revenue accounted for 85% and 100%, of our total revenue, respectively. We expect that advertising will comprise a substantial majority of revenue for the foreseeable future.

 

For the three months ended March 31, 2015 and the three months ended March 31, 2014, the Company generated revenue of $704 and $16,507, respectively. The decrease in revenue was due to a reduction in sales and marketing efforts as the Company did not release version 2 of its platform until March 20, 2015.

 

Cost of Revenue

 

Cost of revenue generally consists of content acquisition, metadata, royalties and hosting costs.

 

For the three months ended March 31, 2015 and the three months ended March 31, 2014, the Company incurred cost of revenue of $46,439 and $212,932, respectively. The decrease in cost of revenue was primarily attributable to a reduction of metadata costs.

 

Operating Expenses

 

For the three months ended March 31, 2015 and the three months ended March 31, 2014, the Company incurred operating expenses in the amount of $1,400,791 and $1,224,603, respectively. These operating expenses were comprised of product development costs, advertising, marketing, compensation, office and general expenses. General and administrative expenses increased from $196,923 for the three months ended March 31, 2014 to $960,189 for the three months ended March 31, 2015 due to increased professional fees and compensation costs, which includes compensation in the form of stock. Sales and marketing decreased from $938,432 for the three months ended March 31, 2014 to $238,566 for the three months ended March 31, 2015 due to a reduction in marketing efforts as the Company did not release version 2 of its platform until March 20, 2015.

 

 

Other Expenses

 

For the three months ended March 31, 2015 and the three months ended March 31, 2014, the Company realized net other expense of $712,187 and $0, respectively. The increase in the other expenses during the three months ended March 31, 2015 is attributable to the expenses associated with derivative liabilities corresponding to convertible notes and warrants executed after the three months ended March 31, 2014.

 

Net Loss

 

The Company incurred a net loss of $2,158,713 for the three months ended March 31, 2015, compared with a net loss of $1,421,028 for the three months ended March 31, 2014. This increase in the net loss from the three months ended March 31, 2014 to the three months ended March 31, 2015 was primarily due to increased general and administrative expenses and increased other expenses.

 

Liquidity and Capital Resources

 

As of March 31, 2015 and December 31, 2014, we had $39,538 and $8,325, respectively, of cash and cash equivalents. Our current cash holdings will not satisfy our liquidity requirements and we will require additional financing to pursue our planned business activities.  

 

In order to continue operations and engage in the development of our company, we will be dependent on raising capital, debt or equity, from outside sources. Such capital may not be available on terms acceptable to us if at all. If credit financing became available, because the Company is a development stage company with minimal revenue to date, it would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. We may also incur substantial costs in pursuing such capital financing, including legal fees, accounting fees, securities law compliance fees and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition. There is no assurance that we will be able to obtain sufficient funds on terms acceptable to us or at all. If the Company cannot obtain the necessary financing, the Company would be required to limit our activities or cease business operations. As a result, investors in the Company common stock would lose all of their investment.

 

The continuation of the Company as a going concern is dependent upon the continued financial support from its lenders, the ability of the Company to obtain necessary financing to continue operations and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  

 

From June 30, 2014 through January 16, 2015, we completed a private placement offering in which we sold 15% secured convertible notes in an aggregate principal amount of $2,237,500 and warrants to purchase 4,475,000 shares of common stock.

 

From March 17, 2015 through May 14, 2015, we sold 15% secured convertible notes in an aggregate principal amount of $615,000 and warrants to purchase 1,230,000 shares of common stock.

 

Cash Flows Provided By (Used In) Operating Activities

 

Cash used in operating activities in the three months ended March 31, 2015 was $678,789, compared to $466,888 cash provided by operating activities in the three months ended March 31, 2014.  The increase in cash used by operating activities was primarily a result of an increase in the net loss, as well as, a less significant increase in accounts payable.

 

 

Cash Flows Used In Investing Activities

 

Net cash used in investing activities for the three months ended March 31, 2015 was $343,679 compared to $6,716 for the three months ended March 31, 2014; the increase is primarily attributable to an increase in website development fees.

 

Cash Flows from Financing Activities

 

Cash provided by financing activities for the three months ended March 31, 2015 was $1,053,681 compared to net cash used of $454,114 for the three months ended March 31, 2014.   The increase in the net cash provided by financing activities for the three months ended March 31, 2015 from the three months ended March 31, 2014 was primarily a result of an increase in the furtherance of convertible notes and other promissory notes.

 

Off Balance Sheet Arrangements

 

We do not have any off balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risks.

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act") are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), the Company's principal executive officer and principal financial officer, respectively, of the design and effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

Based on this evaluation, our CEO and CFO concluded that as of March 31, 2015, our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The conclusion was due to the presence of the following material weaknesses in disclosure controls and procedures due to our small size and limited resources: (i) inadequate segregation of duties and effective risk assessment; (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both U.S. GAAP and SEC Guidelines; (iii) inadequate security and restricted access to computer systems including insufficient disaster recovery plans; and (iv) no written whistleblower policy.

 

 

Our CEO and CFO plan to implement appropriate disclosure controls and procedures to remediate these material weaknesses, including (i) appointing additional qualified personnel to address inadequate segregation of duties and ineffective risk management; (ii) adopt sufficient written policies and procedures for accounting and financial reporting and a whistle blower policy; and (iii) implement sufficient security and restricted access measures regarding our computer systems and implement a disaster recovery plan.

 

Changes in Internal Controls over Financial Reporting

 

During the quarter ended March 31, 2015, there have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Management’s report on internal control over financial reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management 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 this evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2015.

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Other than the following, we are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business:

 

On September 8, 2014, Andrew Gladney filed a complaint against the Company and a co-defendant, CloudWebStore, Inc. in the 21st Judicial Circuit Court of the County of St. Louis, State of Missouri, alleging that the Company and CloudWebStore failed to compensate him for services rendered pursuant to a consulting agreement and related correspondence. Mr. Gladney is seeking damages in excess of $25,000 and 5 million shares of common stock. The Company intends to vigorously defend its interests.

 

On April 15, 2015, Performance Revenue, LT filed a Notice of Filing of Foreign Country Money Judgment against the Company in the 21st Judicial Circuit Court of the County of St. Louis, State of Missouri, in connection with a Foreign Country Money Judgment entered by the Magistrate Court of Tel-Aviv-Yaffo in the State of Israel in favor of Performance Revenue, LT for indebtedness in the amount of approximately NIS 653,868 (approximately US $168,910). The Company has accrued a $169,309 liability related to this indebtedness.

 

On May 8, 2015, Millennial Media Inc. filed a complaint against the Company in the 21st Judicial Circuit Court of the County of St. Louis, State of Missouri, alleging indebtedness related to goods, wares merchandise and services sold by Millennial Media, Inc. to the Company and seeks damages in the amount of $394,858. The Company has accrued a $394,858 liability related to this indebtedness.

 

On May 18, 2015, Yahoo! Inc. filed a complaint against the Company in 22nd Judicial Circuit Court of City of St. Louis County, Missouri alleging indebtedness in relation to a services contract and seeks damages in the amount of $30,000, together with annual interest at the rate of 9% beginning on June 1, 2014 and related court costs. The Company has accrued a $39,339 liability related to this indebtedness.

 

Item 1A. Risk Factors.

 

Not required for smaller reporting companies.

 

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

 

Stock Issued for Services

 

On January 15, 2015, the Company accrued 15,000 shares of restricted common stock for services to a consultant having a fair value of $6,000 ($0.40 per share).

 

On February 2, 2015, the Company issued 150,000 shares of restricted common stock for services to a consultant having a fair value of $52,500 ($0.35 per share).

 

 

On February 5, 2015, the Company issued 250,000 shares of restricted common stock for services to a consultant having a fair value of $82,500 ($0.33 per share).

 

On February 15, 2015, the Company accrued 15,000 shares of restricted common stock for services to a consultant having a fair value of $6,000 ($0.40 per share).

 

On March 5, 2015, the Company accrued 25,000 shares of restricted common stock for services to a consultant having a fair value of $9,750 ($0.39 per share).

 

On March 10, 2015, the Company accrued 150,000 shares of restricted common stock for services to the Company’s Chief Executive Officer having a fair value of $54,000 ($0.36 per share); the Company realized a $16,000 loss on this share issuance.

 

On March 15, 2015, the Company accrued 15,000 shares of restricted common stock for services to a consultant having a fair value of $5,850 ($0.39 per share).

 

On March 20, 2015, the Company accrued 50,000 shares of restricted common stock for services to a consultant having a fair value of $20,000 ($0.40 per share).

 

On March 20, 2015, the Company issued 50,000 shares of restricted common stock for services to a consultant having a fair value of $20,000 ($0.40 per share).

 

On March 20, 2015, the Company issued 100,000 shares of restricted common stock for services to a consultant having a fair value of $40,000 ($0.40 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 55,000 shares of restricted common stock for services to a consultant having a fair value of $19,800 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On April 30, 2015, the Company issued 50,000 shares of restricted common stock for services to a consultant having a fair value of $18,000 ($0.36 per share).

 

 

On April 30, 2015, the Company issued 5,000 shares of restricted common stock for services to a consultant having a fair value of $18,000 ($0.36 per share).

 

On April 30, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On May 1, 2015, the Company issued 10,000 shares of restricted common stock for services to a consultant having a fair value of $3,600 ($0.36 per share).

 

On May 5, 2015, the Company issued 62,000 shares of restricted common stock for services to a consultant having a fair value of $22,940 ($0.37 per share).

 

On May 11, 2015, the Company issued 21,000 shares of restricted common stock for services to a consultant having a fair value of $6,720 ($0.32 per share).

 

On May 13, 2015, the Company issued 325,000 shares of restricted common stock for services to the Company’s Chief Financial Officer having a fair value of $104,000 ($0.32 per share).

 

On June 2, 2015, the Company issued 125,000 shares of restricted common stock for services to a consultant having a fair value of $38,750 ($0.31 per share).

 

Convertible Note

 

On May 1, 2015, the Company issued a secured convertible note to Edward Storm, our Chief Operating Officer and director, in the principal amount of $332,853.74 with a maturity date of June 1, 2015 and bearing interest at the rate of 15% per annum (the “Convertible Note”). The note is convertible into shares of common stock at the lesser of (A) 70% of the per share price of common stock or like securities in a subsequent financing and (B) $0.45 per share, subject to adjustment. The Convertible Note is secured by a security interest in the Company’s assets, and is subordinate to the security interest pledged to Steel Pier Capital Advisors, LLC. On June 2, 2015, the maturity date of the Convertible Note was extended from June 1, 2015 to July 31, 2015.

 

Item 3. Defaults Upon Senior Securities.

 

On August 26, 2014, the Company borrowed $25,000 under a convertible senior secured note that is currently in default as the maturity date was May 26, 2015; although, no demand for payment has been made by the note holder and the Company is attempting to contact the note holder to get an extension of the maturity date.. The note accrues interest at the rate of 12% and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 25,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. On November 7, 2014, the note was amended such that the interest rate of the 12% increased to 15%, the term "Qualified Financing" was redefined to mean an equity or convertible equity financing by the Company after the completion of the Notes and the warrants were amended increasing the number of warrants from 25,000 shares to 50,000 shares. The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment which resulted in recognizing a discount of $25,000 on the note which is being amortized over the life of the note and derivative liability in the amount of $30,783 as of March 31, 2015.

 

On August 26, 2014, the Company borrowed $25,000 under a convertible senior secured note that is currently in default as the maturity date was May 26, 2015; although, no demand for payment has been made by the note holder and the Company is attempting to contact the note holder to get an extension of the maturity date. The note accrues interest at the rate of 12%, and is convertible at the holder's option into like securities of the Company's next offering at the lesser of a 30% discount to such offering price or $0.45 per share. The note is secured by a security interest in all of the Company's assets. In connection with the issuance of the note, the Company also issued warrants to the Holder to purchase 25,000 shares of the Company's common stock at an exercise price equal to the lesser of 70% of the price of the common stock in the subsequent offering or $0.45 per share, which warrant shall expire five years after the date of issuance. On November 7, 2014, the note was amended such that the interest rate of the 12% increased to 15%, the term "Qualified Financing" was redefined to mean an equity or convertible equity financing by the Company after the completion of the Notes and the warrants were amended increasing the number of warrants from 25,000 shares to 50,000 shares. The Company evaluated the terms of the convertible note and warrants under FASB ASC 815 and determined that the convertible note and warrants require derivative accounting treatment which resulted in recognizing a discount of $25,000 on the note which is being amortized over the life of the note and derivative liability in the amount of $30,783 as of March 31, 2015.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

 

Item 6. Exhibits.

 

(a) Exhibit Index

 

Exhibit No.		Description
10.1		Secured Convertible Note, dated May 1, 2015.
10.2		Security Agreement by and between StationDigital Corporation and Edward Storm, dated May 1, 2015.
31.1		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 INS		XBRL Instance Document
101 SCH		XBRL Taxonomy Extension Schema Document
101 CAL		XBRL Taxonomy Calculation Linkbase Document
101 LAB		XBRL Taxonomy Labels Linkbase Document
101 PRE		XBRL Taxonomy Presentation Linkbase Document
101 DEF		XBRL Taxonomy Extension Definition Linkbase Document

 

 

SIGNATURES

 

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

 

Dated:  June 5, 2015
	/s/ Louis Rossi
	Name: Louis Rossi
	Title: Chairman, Chief Executive Officer
	(Principal Executive Officer)
	/s/ Steven Marr
	Name: Steven Marr
	Title: Chief Financial Officer
	(Principal Financial Officer)
	(Principal Accounting Officer)