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EX-31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRESIDENT - ROKWADER, INC.exhibit_31-1.htm
EX-31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER - ROKWADER, INC.exhibit_31-2.htm
EX-32.1 - SECTION 1350 CERTIFICATION OF PRESIDENT AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER - ROKWADER, INC.exhibit_32-1.htm

 

 

  UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549   

FORM 10-K   

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal year ended December 31, 2015
     

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
   
  For the transition period from _____________ to ____________
     

 

Commission file number 000-51867

 

ROKWADER, INC.

(Exact name of small business issuer as specified in its charter)

 

Delaware 73-1731755
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)

 

15466 Los Gatos Blvd., #109-352, Los Gatos, CA 95032

(Address of principal executive offices) (Zip Code)

 

(408) 429-8419

(Issuer’s telephone number)

 

Securities registered under Section 12(b) of the Exchange Act:     None.

 

Securities registered under Section 12(g) of the Exchange Act:     Common Stock, par value $0.001

 

Indicate by check mark if 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 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 (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in the 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 shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a small.  See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer Accelerated filer

Non-accelerated filer

(Do not check if smaller reporting company)

Smaller reporting company

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of March 28, 2016 was $1,457,463.

 

As of March 28, 2016, there were 18,267,777 shares of Common Stock, $0.001 par value, outstanding.

 

Documents Incorporated By Reference. None.


 
 

 

TABLE OF CONTENTS

Page

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS 3  
PART I   3  
Item 1. Description of Business 3  
Item 1A. Risk Factors 8  
Item 1B. Unresolved Staff Comments 10  
Item 2. Properties 10  
Item 3. Legal Proceedings 10  
Item 4. Mine Safety Disclosures 10  
       
PART II   11  
Item 5. Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities 11  
Item 6. Selected Financial Data 13  
Item 7. Management’s Discussion and Analysis Of Financial Condition and Results  of Operation 13  
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 14  
Item 8. Financial Statements and Supplementary Data 14  
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 15  
Item 9A (T). Controls and Procedures 15  
Item 9B. Other Information 15  
       
PART III   16  
Item 10. Directors, Executive Officers and Corporate Governance 16  
Item 11. Executive Compensation 18  
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 19  
Item 13. Certain Relationships and Related Transactions 20  
Item 14 . Principal Accountant Fees and Services 20  
       
Part IV       21  
       Item 15.       Exhibits; Financial Statement Schedules 21  
SIGNATURES 22  

 

 

 

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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

The information contained in this Report includes some statements that are not purely historical and that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, perceived opportunities in the market and statements regarding our mission and vision. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, but the absence of these words does not mean that a statement is not forward-looking.

 

Forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions. Our expectations, beliefs and forward-looking statements are expressed in good faith on the basis of management’s views and assumptions as of the time the statements are made, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished.

 

In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements: technological advances, impact of competition, dependence on key personnel and the need to attract new management, effectiveness of cost and marketing efforts, acceptances of products, ability to expand markets and the availability of capital or other funding on terms satisfactory to us. We disclaim any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

 

 For a discussion of the risks, uncertainties, and assumptions that could affect our future events, developments or results, you should carefully review the “Risk Factors” set forth under “Item 1. Description of Business” below. In light of these risks, uncertainties and assumptions, the future events, developments or results described by our forward-looking statements herein could turn to be materially different from those we discuss or imply.

 

PART I

 

Item 1. Description of Business.

 

History

 

ROKWADER, INC. (the “Company”), was organized under the laws of the State of Delaware on March 18, 2005 as a vehicle to seek, investigate and, if such investigation warrants, acquire a target company or business that primarily desires to seek the perceived advantages of a publicly-held corporation. On April 23, 2007, Rokwader completed an acquisition of all of the issued and outstanding capital stock of Latigo Shore Music, Inc. (“Latigo”). Substantially all of the business conducted by Rokwader is through Latigo, its wholly-owned subsidiary. In May and June 2015, the Company underwent a change of control when it sold an aggregate of 15,250,000 shares of its common stock, together with a warrant to purchase an additional 5,900,000 shares of its common stock to Coco Partners, LLC. As a result of this transaction and the change of control of the Company, our business strategies and plan of operations have evolved into two segments: (i) the continuation of the Latigo music publishing business; and (ii) the investment and acquisition vehicle through Coco Partners.

 

Corporate Overview

 

Since our acquisition of Latigo Shore Music, Inc. in 2007, our principal business objective has been to achieve long-term growth of Latigo’s music publishing business.  Latigo’s primary activity is the acquisition and exploitation of music copyrights for the purpose of creating viable entertainment assets, such as a music catalog, that is capable of generating revenue through various publishing outlets. The current Latigo catalog (including copyrights and publishing rights) consists of 263 original songs written in whole or in part by Andrew Dorff (106), Gary Harju (50) and Jeston Cade (107).  Other songwriters and their publishing designees own the balance of the percentages of these songs.  Typically, total income from a song is split 50% each between the publisher and the writer in a music publishing catalog. Publishers generally collect all income except for the “writers share” from public performance income. Writer’s receive their share of royalties for public performance directly from performing rights organizations such as Broadcast Music, Inc. and the publishers only collect the “publisher’s share” of public performance income.  As Latigo’s business is still in its early stage of development, we have generated only a minimal amount of revenue from our operations.

 

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As discussed in more detail below, on May 7, 2015, we completed a transaction with Coco Partners, LLC (“Coco Partners”) in which Coco Partners acquired a controlling interest in the Company by purchasing newly issued shares of our common stock and warrants to purchase shares of our common stock (the “Transaction”).  The Transaction is part of an investment strategy of Coco Partners in which the Company may serve as an investment vehicle to acquire other operating companies with significant revenue streams and cash flow. We believe such acquisition and investment strategy, if executed successfully, would increase our ability to access capital and accelerate our music publishing business, while continuing to pursue other businesses and acquisition opportunities to enhance shareholder value.

 

Transactions with Coco Partners

 

In May 2015, Coco Partners and the Company entered into an agreement pursuant to which Coco Partners would purchase (i) a maximum of 15,250,000 shares of our common stock and (ii) a warrant to purchase an aggregate of 5,900,000 shares of our common stock (the “Warrant”) for an aggregate maximum purchase price of $6,100,000  (the “Purchase Price”).   The Purchase Price is payable as follows: (a) $3,050,000 for 7,625,000 shares and the Warrant upon the closing (the “Closing”) and (b) an additional 7,625,000 shares for $3,050,000 on or before June 30, 2015.  The Closing occurred on May 7, 2015 and the Company received the initial purchase price of $3,050,000 and the second $3,050,000 for an additional 7,625,000 shares on June 30, 2015.

 

The terms of the Warrant provide that Coco Partners has the right to purchase, at any time after the Closing until April 1, 2020, up to (i) 5,000,000 shares of our common stock at an exercise price of $0.60 per share, (ii) 500,000 shares of our common stock at an exercise price of $1.00 per share and (iii) 400,000 shares of our common stock at an exercise price of $1.25 per share.  The Warrant includes certain anti-dilution adjustments to the exercise prices in the event of payment of dividend, subdivision and combination with respect to outstanding shares of our common stock.

 

The Transaction resulted in a change of control of the Company.  With the purchase of the 15,250,000 shares, Coco Partners acquired approximately 83.8% of the outstanding shares of our common stock (this does not include any potential exercise of the Warrant). Upon the Closing, Mr. Robert Wallace, who has a controlling interest in Coco Partners, was appointed Chief Executive Officer, Chief Financial Officer and Corporate Secretary and as a member of our Board of Directors (the “Board”). Mr. Yale Farar resigned his position as President of the Company but remained a director until December 21, 2015, when he resigned. Mr. Gary Saderup resigned his positions as the Secretary of the Company and a director of the Board.  

 

Business Strategy and Plan of Operations

 

As a result of the Transaction and the change in control of the Company, our business strategies and plan of operations have evolved into two segments: (i) to transform the Company into an investment and acquisition vehicle, in order to acquire operating earnings through acquisitions of operating businesses (“OPCOs”), in select industries and (ii) the continuation of the Latigo music publishing business.

 

Strategy and Operation as Investment Vehicle

 

The Transaction represents a first phase of a unique investment strategy developed by Coco Partners to use the Company as an acquisition vehicle to acquire equity stakes of other operating companies in order to add net operating income to the Company. .  The Company will serve as the investment vehicle to acquire operating businesses of certain consumer facing lifestyle businesses in the U.S. that the Company believes are being driven by identifiable economic and demographic trends. The Company intends to target operating companies that have demonstrated the ability to execute scalable business models, particularly those companies in which the real estate component of the business is mission critical to the business, and where such real estate assets may be used as part of an OPCO-PROPCO strategy, to provide part of the financing for the acquisitions of the underlying operating business (“OPCOs”).

  

The Company will seek to acquire equity stakes in operating companies with an asymmetrical risk/reward profile where we can accelerate growth, amplify valuation and create liquidity. The Company intends to partner with senior management that are leaders in their industry with deep domain expertise and proven, scalable business models. In some cases, the Company will identify a talented operator with deep domain expertise and build a platform around the operator upon identifying a platform acquisition.  We believe that serving as an investment vehicle for such strategy would benefit the Company by enhancing our ability to generate revenue and net income, and providing more predictable financing as the Company’s credibility and financial stability become more secured.

 

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On February 19, 2016, we announced a Letter of Intent (“LOI”) to acquire a leading express car wash platform with 11 locations. This announcement represents the initial industry opportunity that we are intending to execute a consolidation strategy. The “Express Car Wash” model has been disruptive to the car wash industry in general, pressuring the “Full Serve” model due to price and convenience, and becoming crippling competition to the self-serve, or “Wand Wash” sector. Full serve car washes have adapted with a competitive strategy known as “Flex”, whereby a customer, can, for a reduced rate, get an exterior wash only, just as an “Express” offer. An express car wash allows a driver to remain in the car, while it moves through a tunnel about 120-150 feet in length, providing a quality external wash. Vacuum stations are available for customers to do self-serve vacuuming at no additional charge. The advantage of the express model to the customer is speed, convenience and price, while the advantage to the operator is the minimal number of employees required to operate it (usually 2-3), due to the automation and self-serve nature of the units, and low fixed costs, which results in high net margins.

 

The two fundamental economic drivers to an express car wash are the number of cars washed per month, and the average sales price (“ASP”) per wash. Net margins are a function of the number of cars washed per month and ASP. Loyalty programs, common to the industry have the effect of increasing both metrics that affect margin. Consolidation can have a significant effect on both price and volume.

 

Small car wash operators do not usually possess the scale to have a voice in the market, and therefore usually compete on price alone. In markets that have numerous small 1-4 unit owners, consolidating the market with significant market share has the added benefit of using brand preference and market share to become the price leader, which can lift the whole market, as price competition among lots of small owners is replaced by small owners pricing off the leader.

 

The Company has identified Express and Flex car wash operators in select MSAs that we believe can be acquired, in clusters within the select markets, which we believe is key to consolidating the industry. The Company formed a private subsidiary, Acquisition Corporation (“CW” or “Acquisition Subsidiary”) to be used to acquire the operating car wash platform (“CW Platform”) currently under LOI. CW intends to acquire the Car Wash portfolio, for cash initiating the consolidation strategy of the car wash industry in select Metropolitan Strategic Areas (“MSA”s). Future acquisitions will be pursued to grow CW, with flexible financial options for funding, including sale-leaseback, cash and possibly shares of CW as acquisition currency, depending on needs of sellers.

 

 The Company intends to acquire the car washes in its existing Acquisition Subsidiary, and the board of directors of the Company has authorized the Company to invest cash in the Acquisition Subsidiary in exchange for shares of capital stock in the Acquisition Subsidiary, for the purpose of funding the acquisition of the first car wash portfolio, as described below. The Company believes it will need to raise additional capital in the Acquisition Subsidiary in order to meet its goal of making acquisitions of several additional car washes in the target MSAs.

 

For the acquisition currently under LOI, it is the intent for CW to acquire 5 of the mature locations of the CW Platform, which generated EBITDA of approximately $1.6 million in FYE 2015. The remaining 6 locations are expected to be acquired under forward purchase contracts at a fixed multiple of EBITDAR. As the new sites mature to stabilized profitability, CW intends to exercise its right to acquire the sites. The 6 forward purchase sites are expected to generate similar results as the first 5 locations in annual EBITDA at the time of acquisition exercise. All of the acquisitions are subject to final due-diligence and definitive agreements (“Definitive Documents”). There is no assurance that the acquisition will be completed or if completed that future operational results will be consistent with prior results of operations.

 

Through the end of this fiscal year, we intend to pursue diligently the investment vehicle strategy with a particular focus on the car wash consolidation.  As such, we expect our expenses to increase due to additional costs associated with the execution of such strategy, including additional legal, accounting and consulting fees.

 

Latigo Music Publishing Business

 

After the completion of the Transaction in May 2015, our music publishing business continued uninterrupted.  The music publishing business includes copywriting musical compositions that are written by various songwriters and composers. Music publishers exploit the copyrights to produce revenues via sales of recordings and other musical usages such as commercials, radio plays and television shows.  We believe that emerging technologies and the introduction of innovative business relationships in the current market provides a unique opportunity for Latigo to expand its operations.  Revenues for Latigo should be realized through publishing income on copyrights that we acquire.  In the past we have mostly marketed our catalog through contacts and associates of our directors. We have two musical consultants that are marketing our songs for radio air play, for TV and radio commercials, for TV shows and for movies. These consultants are on month to month letter agreement with a small base pay and a commission override on songs actually distributed and generating revenues. There is no assurance that these consultants will be successful in placing our catalog songs for the generation of revenues.

 

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As a small company we can operate with a creative hands-on approach to the selected few composers and songwriters that are part of our catalog. The music publishing business is primarily an intellectual property business focused on the exploitation of the song itself. In return for promoting, placing, marketing and the administration of the songwriter’s creativity, we receive a share of the revenues generated from the use of the song(s). We expect that our publishing revenue will be derived from two principal sources:

 

· · Mechanical: Latigo, as licensor receives royalties with respect to songs embodied in recordings sold in any format or configuration, including physical recordings (e.g. CD’s, DVD’s, video cassettes), online and wireless downloads.
· · Performance: Latigo, as licensor, receives royalties if the song is performed publicly through broadcast of music on television, radio, cable and satellite, live concert performances or other venues, such as nightclubs and stage theatrical productions.

 

In addition, we seek to provide creative services to commercial songwriters in music publishing. We also intend to attend music award ceremonies and music and songwriters conventions to further market our catalog of songs. We believe that even with this additional marketing effort, our generation of revenues may remain minimal until we can raise more funds for more aggressive marketing activities.

 

Furthermore, we intend to fully explore the synergy and opportunities resulting from the Transaction as Coco Partners execute its investment strategy.   Future acquisitions under such strategy may provide us with greater access to capital to accelerate growth through the acquisition of existing music copyright catalogs with existing income streams, and provide strong financial support in establishing new songwriters.

 

Our expenses associated with our music publishing business for the quarter ended September 30, 2015, were $155,009.  We expect such expenses to increase as we continue to expand and grow the music business.

 

One of Latigo’s assets is a music catalog (the "Latigo Catalog") that was acquired as part of our acquisition of Latigo on April 23, 2007.  The current Latigo catalog (including copyrights and publishing rights) consists of 263 original songs written in whole or in part by Andrew Dorff (106), Gary Harju (50) and Jeston Cade (107). Andrew Dorff, an adult son of Steve Dorff, a director of the Company and President of Latigo.  Other songwriters and their publishing designees own the balance of the percentages of these songs.  This is standard procedure in the music industry as many songs are collaborations of more than one writer.  Other songwriters also sometimes have their own publishing designees.  

As a rule, total income is typically split 50% each between the publisher and the writer in a music publishing catalog. Publishers generally collect all income except for the “writers share” from public performance income. Writer’s receive their share of royalties for public performance directly from performing rights organizations such as Broadcast Music, Inc. (“BMI”) and the publishers only collect the “publisher’s share” of public performance income.

 

In March, 2014, the Company signed Jeston Cade to a worldwide exclusive songwriting agreement. Under the agreement 100% of the copyright music publishing interest will belong to Latigo. Through December 31, 2015, Mr. Cade has by himself or in collaboration with others written 107 songs that have been added to the Latigo catalog. The agreement was for one year with two one year options. The Company has exercised its option for another year. We are currently promoting several of Mr. Cade’s songs and although they are currently being well received in the industry there is no assurance that they will be successful.

 

We have also begun to receive minimal royalties (revenues) from the Latigo acquisition of the Gary Harju music catalog in December, 2010.  The Gary Harju acquisition is helping to diversify our existing music catalog to give us a broader based platform going forward.  This catalog acquisition consists of all right, title and interest in 50 musical compositions from the Gary Harju music catalog to the extent of his writer's and publisher's share.  The total catalog (including copyrights and publishing rights) consists of original songs written in whole or in part by Gary Harju. It is important to note that some of the songs are co-written by other songwriters and the other songwriters and their publishing designees own the balance of the percentages of these songs.  Rokwader owns 100% of Mr. Harju’s writer’s share of the royalties. Songwriting is collaborative, so other co-writers usually have their own music publisher who collects their royalties, in addition to the writer’s receipt of monies from his own performing rights organization. Latigo collects only the income attributable to its writer’s co-writing share. This is standard procedure in the music industry since many songs are collaborations of more than one writer." Our total catalog, including the Latigo and Harju Catalog, consists of 263 songs of which we own 100% of the writers share. In addition, we own between 16.67% and 100% of the publishing rights of the songs in the catalog. Through December 31, 2015, we have received $2,342 in royalties and fees from all of our catalog’s songs.

 

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We are hopeful of generating income from our songs through air play on radio, television and streaming music services, public performance at venues and restaurants, sales of CDs and digital downloads, and from synchronization licenses for film, television and commercials. In this regard we have commenced the marketing of our songs through music consultants and our contacts that call upon music professionals that are seeking new musical material (songs) for artists’ albums and for uses in films, television programs and commercials.

 

On January 24, 2013, Rokwader, the owner of 50% interest of the Andrew Dorff Catalog (the “Catalog”), acquired the remaining 50% interest of the catalog from Dillonpark, LLC, an entity of which Mr. Farar, the president and principal shareholder of Rokwader, is a member and manager. The purchase price for the Catalog was $22,000, which is the same amount that Dillonpark paid to acquire the Catalog. Furthermore, the purchase price is only required to be paid if and when the Catalog produces cash through royalties or sales. Fifty percent of any revenue received from the Catalog, up to $22,000, will be paid to Dillonpark, LLC as full consideration for the purchase of its 50% interest in the Catalog.

 

Rokwader, Inc. acquired 100 percent of Andrew Dorff’s writer's share of the 106 musical compositions written or co-written by Andrew Dorff that mirror those same songs that are published and owned by Latigo, as per the agreement of May 2013 between Andrew Dorff and Latigo (the "Writer's Share") for $40,000. As stated above, some of the songs are co-written by other songwriters and the other songwriters and their publishing designees own the balance of the percentages of these collaborative written songs. Music publishing and songwriter's share represent two different ownership interests. Rokwader believes that owning the publishing rights and 100 percent of Andrew Dorff and Gary Harju writer's share could be advantageous to the future of the Company and could make the Company stronger in its acquisition of additional music assets.

 

 

Music Industry Overview

 

Music is one of the primary entertainment forms of the modern era. The industry is highly competitive, based on consumer preferences, and changes rapidly due to consumer demand and advancements in technology. To be competitive, companies must be able to discover and develop artists and talents that have appeal beyond a domestic audience. They must also be able to successfully promote and market these acts, and maintain strong music publishing catalogues. These catalogues provide for lucrative business opportunities that can be exploited year after year, are not at the mercy of changing technologies. The nature of copyrights is for their value to possibly increase over years with very minimal expense. For example: one song that gets recorded and sells units can generate income that can continue for many years. This one song can raise the value of the entire catalog. The top five music consuming countries continue to be the United States, England, France, Japan, and Germany.

 

Digital Piracy has grown dramatically, enabled by the increasing penetration of broadband Internet access and the ubiquity of powerful microprocessors, fast optical drives (particularly with writable media, such as CD-R) and large inexpensive disk storage in personal computers. The combination of these technologies has allowed consumers to easily, flawlessly and almost instantaneously make high quality copies of music using a home computer by “ripping” or converting musical content from CDs into digital files, stored on local disks. International Federation of the Phonographic Industry (“IFPI”) estimates that billions of songs are illegally downloaded every year. 

 

 

 

The music publishing market has proven to be more resilient than the recorded music market in recent years as revenue streams other than mechanical royalties are largely unaffected by piracy, and are benefiting from additional sources of income from digital exploitation of music in downloads.  Piracy is generally referred to when the publishers and writers are not being paid for physical product, such as CD’s and records. Performance royalties collected by PRO’s (Performing Rights Organizations) such as BMI, ASCAP & SESAC are paid directly to writers and publishers of musical compositions. These royalties are fees paid by broadcast entities, such as radio stations, restaurants, concert halls, television networks any venue where music is publicly performed. These revenues are not subject to stolen or pirated records or CD’s.

 

In addition, we have the opportunity to generate significant value by the acquisition of small publishers by extracting cost savings (as acquired libraries can be administered with little or no incremental cost) and by increasing revenues through more aggressive marketing efforts.

 

Competition

 

We encounter intense competition in our business. The competition is experienced, competent and they have far greater financial and marketing resources than we do. Our ability to compete effectively may be adversely affected by the ability of these competitors to devote greater resources to the development, sales and marketing of their services and artists than are available to us.

 

 

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Almost all of our competitors offer a wider range of services and have greater name recognition and more extensive artist base and marketing outlets for their products than Latigo. We compete with other well-known music companies and music publishers to identify and sign new artists and songwriters. In addition, our competitors may from time to time reduce their prices in an effort to expand market share and introduce new services, or improve the quality of their products or services. Our music publishing business competes not only with other music publishing companies, but also with songwriters who publish their own works. We are also dependent on securing artists that appeal to the music buying customers, and the competition with other music companies for such talent is intense.

 

We also anticipate significant competition from other recording companies, most of which have substantial financial, technical, marketing, and management resources. This has created a greater degree of difficulty in securing proven artists and acquiring musical works by well-known artists in ways that are economically viable. Due to the continuing limitation of platforms for their artists, there is no guarantee the various music companies like Latigo can successfully compete within the music business marketplace.

 

Employees

 

As of December 31, 2015, we had one employee. The Company utilizes various independent contractors for marketing and accounting services. 

 

 

 

Item 1A.  Risk Factors

 

An investment in our securities is highly speculative and subject to numerous and substantial risks. Readers are encouraged to review these risks carefully before making any investment decision.

 

Concentration of ownership will allow one shareholder to control Rokwader’s business

 

Coco Partners, of which our President is the majority owner, is the largest shareholder of Rokwader, currently owning approximately 87% of the outstanding stock of Rokwader. As a result, this shareholder will be able to exercise control over virtually all matters requiring shareholder approval, including the election of directors and approval of significant corporation transactions. Thus, the present management will be able to maintain their positions as Directors and effectively operate Rokwader’s business, regardless of other investors’ preferences.  

 

There is only a limited trading market for our common stock, which may adversely impact your ability to sell your shares.

 

There currently is only a limited trading market for our stock. There is no assurance that a more active public market will ever develop. You will likely not be able to sell your securities if a regular trading market for our securities does not develop and we cannot predict the extent, if any, to which investor interest will lead to the development of a viable trading market in our shares.

 

The music and entertainment business is highly speculative and there is a consequent risk of loss of your investment.

 

The success of Rokwader’s plan of operation in the music and entertainment business will depend to a great extent on the operations, financial condition and management of its sole subsidiary Latigo. Latigo does not have an established operating history. The music and entertainment industry is a very speculative one with changing trends, music and movie themes, contemporary issues, age and gender preferences and other factors determining the success or failure of various types of music, theatre and movies. Consequently, there is no assurance that the interest in the musical catalogue or master recordings currently owned by Latigo will find a significant audience or be commercial successes. Therefore, the success of our operations will be dependent upon management of Latigo’s business and numerous other factors beyond our control.

 

There will be additional dilution as additional shares are issued which may decrease the market price of our common stock.

 

Additional offerings of our common stock will likely have to be made in the future to raise capital to meet operating cash flow needs. Such offerings may include warrants for issuance of additional common stock, further diluting the number of shares of common stock outstanding from time to time. An increase in the number of our shares from these events or others may result in a decrease of the future potential market price for our common stock and will dilute the ownership interest of current shareholders.  

 

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We will incur increased costs and may have difficulty attracting and retaining qualified directors and executive officers as a result of being a public company.

 

As a public company, we incur significant legal, accounting, reporting and other expenses that we did not incur as a private company. We also incur costs associated with recently adopted corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 as well as new rules implemented by the Securities and Exchange Commission. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage. As a result, we may experience difficulty attracting and retaining qualified individuals to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur as a result of these requirements or when such costs may be incurred.

 

 

 

We lack business diversification, as we are only operating one business in one industry the music/entertainment industry, which makes us subject to all the risks and uncertainties of that industry.

 

Although we are seeking to invest in other business, currently, Latigo is our sole operating business. Accordingly, the prospects for our success are entirely dependent upon the future performance of a single business in the music/entertainment industry. Unlike other entities with resources to consummate several business combinations or entities operating in multiple industries, we do not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. Consequently, our business is subject to the variable and speculative nature of the music/entertainment business. There is no assurance that our musical inventory, theatrical productions or future artists will achieve a commercially viable audience.

  

There is intense competition in Latigo's industry which may adversely affect the music business operations of Rokwader.

 

There are numerous competitors in the music industry in which Latigo is currently involved or in which it intends to enter, most of which have developed product lines, strong marketing systems and established customer followings. In almost all cases, Latigo's competitors have far greater financial and other resources. Latigo also expects competition to increase in the future due to evolving media technologies which are reducing the barriers to entry into the music and video industries. Increased competition is likely to result in price reductions, reduced gross margins and loss of market share, any of which could harm Latigo's net revenue and results of operations. Latigo competes or will potentially compete with a variety of entertainment and music companies, most of which have operated for a longer period of time and have significantly greater financial, technical, marketing and other resources. Some of these competitors have established relationships with leading record labels. These competitors include national and independent record distributors, none of which has any existing relationship with Latigo. Further, Latigo may face a significant competitive challenge from alliances entered into between and among its competitors, as well as from larger competitors created through industry consolidation.

 

 

Efforts to protect intellectual property or the alleged misuse of the intellectual property of others may cause Latigo to become involved in costly and lengthy litigation which could divert needed resources away from its operations.

 

Latigo's success depends in part on its ability to obtain and preserve copyright, trademark and other intellectual property rights, in connection with its music inventory, and services. Latigo currently has trademark or copyright protection relating to its musical catalog and may seek such protections with respect to other music or to its trade logos. The process of seeking trademark and copyright protection can be time consuming and expensive and no assurances can be given that (i) copyrights or trademarks applied for in the future will actually be issued, (ii) new copyrights will be sufficient in scope to provide meaningful protection or any commercial advantage or (iii) others will not independently develop similar products or design around any copyrights Latigo is issued. If Latigo fails to protect its intellectual property from infringement, other companies may offer competitive products. Protection of our intellectual property if such should become necessary could result in costly and lengthy litigation, diverting resources which would otherwise be dedicated to operating the business.

 

The recorded music industry has been declining and may continue to decline which may adversely affect our prospects and results of operations.

 

Since 1999 the recorded music industry has been unstable, which has adversely affected our operating results. The industry-wide decline can be attributed primarily to digital piracy. Other reasons for this decline are the bankruptcies of record retailers and wholesalers, growing competition for consumer discretionary spending and retail shelf space, and the maturation of the CD format, which has slowed the historical growth pattern of recorded music sales. While CD sales still generate most of the recorded music revenues, CD sales continue to decline industry-wide and we expect that trend to continue. While new formats for selling recorded music product have been created, including the legal downloading of digital music using the Internet, DVD-Audio formats and the distribution of music on mobile devices, significant revenue streams from these new formats are just beginning to emerge. The recorded music industry performance may continue to negatively impact our operating results. In addition, a declining recorded music industry could continue to have an adverse impact on the music publishing business. This is because our music publishing business intends to generate a portion of its revenues from mechanical royalties received from the sales of music in recorded music formats such as the CD. The industry may continue to decline. In addition, there can be no assurances as to the timing or the extent of any improvement in the industry.

 

9


 
 

 

 

 

 

Item 1B.  Unresolved Staff Comments.

 

None

 

Item 2.  Properties.

  

Our corporate and operational offices are located at 15466 Los Gatos Blvd., #109-352, Los Gatos, CA 95032. The office was rented on a year lease commencing September 30, 2015 for $1,161.00 per month. In addition, music studio facilities, if needed, are provided to us at no cost to the Company by Mr. Dorff, the Director and President of Latigo. We believe these spaces are currently adequate and plans to move to expanded office space are contingent upon raising additional capital, increasing revenues and the hiring of additional employees.

 

Item 3. Legal Proceedings.

 

We are not a party to any legal proceedings.

 

Item 4. Mine Safety Disclosures.

 

None. 

 

 

 

 

10


 
 

 

PART II

 

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

The Company's common stock, par value, $0.001 per share ("Common Stock") began trading on the Over the Counter NASDAQ Electronic Bulletin Board ("OTC:BB") under the symbol "ROKR” beginning in November 2008. Since that time there has been only limited trading. The following table sets forth, for the period indicated, the range of high and low closing “Bid” prices reported by the OTC. Such quotations represent prices between dealers and may not include markups, markdowns, or commissions and may not necessarily represent actual transactions.

 

 

 

 

       
Fiscal Year Ending December 31, 2013  High Bid  Low Bid
       
Quarter Ended  March 31, 2013  $0.50   $0.50 
Quarter Ended  June 30, 2013  $0.50   $0.40 
Quarter Ended  September 30, 2013  $0.40   $0.40 
Quarter Ended  December 31, 2013  $0.51   $0.30 
           
Fiscal Year Ending December 31, 2014          
           
Quarter Ended March 31, 2014  $0.40   $0.40 
Quarter Ended June 30, 2014  $0.40   $0.40 
Quarter Ended September 30, 2014  $0.45   $0.40 
Quarter Ended December 31, 2014  $0.45   $0.40 
           
Fiscal Year Ending December 31, 2015          
           
Quarter Ended March 31, 2015  $0.44   $0.40 
Quarter Ended June 30, 2015  $0.54   $0.44 
Quarter Ended September 30, 2015  $0.74   $0.51 
Quarter Ended December 31, 2015  $0.78   $0.25 
           
Fiscal Year Ending December 31, 2016          
           
January thru March 28, 2016  $0.51   $0.51 

 

 

 

Penny Stock Considerations

 

The trading of our common stock is deemed to be "penny stock" as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus are subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

 

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to:

 

11


 
 

  Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

 

  Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

  

  Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value and information regarding the limited market in penny stocks; and

 

  Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

 

Because of these regulations, broker-dealers may encounter difficulties in their attempt to buy or sell shares of our common stock, which may affect the ability of selling stockholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock in the market place. In addition, the liquidity for our common stock may be decreased, with a corresponding decrease in the price of our common stock. Our shares are likely to be subject to such penny stock rules for the foreseeable future.

 

Common Stock Currently Outstanding

 

As of March 28, 2016, 18,267,777 shares were issued and outstanding.

 

Holders

 

As of the date of this Report, we had 68 stockholders of record of our common stock.

 

Dividends

 

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. We plan to retain future earnings, if any, for use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such other facts, as the Board of Directors deems relevant.

 

 

Reports to Stockholders

 

We are currently subject to the information and reporting requirements of the Securities Exchange Act of 1934 and will continue to file periodic reports, and other information with the SEC. We intend to send annual reports to our stockholders containing audited financial statements.

 

Transfer Agent

 

Computershare Trust Company, Inc., located at 8742 Lucent Blvd., Suite 225, Highlands Ranch, Colorado 80129 is the registrar and transfer agent for our common stock.

 

 

 

Issuer Purchases of Equity Securities

 

None.

 

Additional Information

 

Copies of our annual reports on Form 10−K, quarterly reports on Form 10−Q, current reports on Form 8−K, and any amendments to those reports, are available free of charge on the Internet at www.sec.gov. All statements made in any of our filings, including all forward-looking statements, are made as of the date of the document, in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

 

12


 
 

   

Item 6. Selected financial Data.

 

Not required under Regulation S-K for “smaller reporting companies.” 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

This 10−K contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events. Refer also to “Risk Factors” and "Cautionary Note Regarding Forward Looking Statements" in Item 1 above.

 

Plan of Operations

 

Our principal business objective for the next 12 months will be to achieve long-term growth through Latigo, our wholly-owned subsidiary and to transform the Company into an investment and acquisition vehicle, in order to acquire operating earnings through acquisitions of operating businesses (“OPCOs”), in select industries

 

Rokwader completed the acquisition of all of the issued and outstanding capital stock of Latigo on April 23, 2007. Latigo’s primary activity is the development of a production company for the purpose of creating viable entertainment assets. One of Latigo’s major functions will be to discover new musical talent. With the new talent, Latigo can make Master quality recordings and function as a conduit either selling or leasing such recordings to major record companies and distributors. Latigo would pay the costs of producing three or four songs per artist, garnering enough interest to then have a major label pick up the remaining costs to finish the project.

 

Latigo is also interested in acquiring music catalogues. Latigo acquired a 50% interest in its first music catalogue consisting of 106 songs. Latigo hopes to be able to receive publishing fees on the copyrights as other singers, movies, television, or other theatrical outlets utilize the songs in the catalogue.

 

Latigo’s expenses associated with its business through December 31, 2015, were $ 212,850. Steve Dorff has a fully equipped recording studio where Master Recordings and demos can be produced. From the current interest in Andrew Dorff’s recordings and in the 263 song musical catalogue, Latigo projects minimal revenues to commence in the second quarter of 2016.

 

During the years ended December 31, 2015 and 2014, the Company had revenues of $2,342 and $403, respectively. During the years ended December 31, 2015 and 2014, the Company incurred net losses of $(744,696) and $(256,703), respectively. As of December 31, 2015, the Company had stockholders’ equity of $5,200,755.

 

Equity and Capital Resources

 

We have incurred losses since inception of our business (March 18, 2005), and as of December 31, 2015, we had an accumulated deficit of $2,226,838. As of December 31, 2015, we had cash of $5,165,219 and working capital of $5,150,265.

 

To the extent that the Company's capital resources are insufficient to meet current or planned operating requirements, the Company will seek additional funds through equity or debt financing, collaborative or other arrangements with corporate partners, licensees or others, and from other sources, which may have the effect of diluting the holdings of existing shareholders. The Company has no current arrangements with respect to, or sources of, such additional financing and the Company does not anticipate that existing shareholders will provide any portion of the Company's future financing requirements. 

 

Off-balance Sheet Arrangements

 

Since our inception through December 31, 2015, we have not engaged in any off-balance sheet arrangements.

 

Recent Accounting Pronouncements

 

We have adopted all applicable recently issued accounting pronouncements. The adoption of the accounting pronouncements did not have a material effect on our operations.

 

13


 
 

 

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

 

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 8. Financial Statements and Supplementary Data.

 

Our audited consolidated financial statements are set forth in this Annual Report beginning on page F-1. 

 

 

 

 

 

 

14


 
 

ROKWADER, INC.

Index to audited financial statements

 

  Page
   
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets as of December 31, 2015 and 2014 F-3
Consolidated Statements of Operations for the years ended December 31, 2015 and December 31, 2014 F-4
Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2015 and December 31, 2014  F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and December 31, 2014 F-6
Notes to Consolidated Financial Statements F-7

 

 

 

F-1


 

 
 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors of Rokwader, Inc.

We have audited the accompanying consolidated balance sheets of Rokwader, Inc. (the "Company") as of December 31, 2015 and 2014, and the related consolidated statements of operations, consolidated change in stockholders’ deficit and consolidated statements of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/Anton & Chia, LLP

Newport Beach, CA

March 30, 2016

 

 

F-2


 
 
ROKWADER, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
         
ASSETS
    DECEMBER 31,   DECEMBER 31,
CURRENT ASSETS:    2015   2014
         
Cash (Note 1)   $ 5,165,219     $ 7,514  
                 
TOTAL CURRENT ASSETS     5,165,219       7,514  
                 
PROPERTY AND EQUIPMENT                
Property and Equipment, Net of Accumulated Depreciation of $893 and zero, respectively (Note 1 & 5)     8,895       —    
                 
TOTAL PROPERTY AND EQUIPMENT     8,895       —    
                 
OTHER ASSETS                
                 
Intangible Assets, Net of Accumulated Amortization of $13,120 and $9,430, respectively (Note 4)     41,880       45,570  
                 
TOTAL OTHER ASSETS     41,880       45,570  
                 
TOTAL ASSETS   $ 5,215,994     $ 53,084  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:                
                 
Accounts Payable   $ 6,600     $ 3,054  
Accrued Interest Payable     —         61,060  
Accrued Expenses     5,700       —    
Credit Card Payable     2,654       19,998  
Related Party Convertible Notes Payable (Note 3)     —         385,000  
                 
TOTAL CURRENT LIABILITIES     14,954       469,112  
                 
OTHER LIABILITIES                
Deferred Tax Liability (Note 1 &7)     285       —     
                 
TOTAL OTHER LIABILITIES     285       —     
                 
TOTAL LIABILITIES     15,239       469,112  
                 
COMMITMENTS AND CONTINGENCIES (Note 6)                
                 
STOCKHOLDERS’ (DEFICIT):                
Preferred Stock, $.001 par value, 10,000,000 shares were authorized as of December 31, 2015 and December 31, 2014, none issued and outstanding.     —         —    
Common Stock, $.001 par value, 50,000,000 shares authorized, 18,267,777 shares issued and outstanding as of December 31, 2015 and 2,623,718 shares issued and outstanding as of December 31, 2014.     18,267       2,624  
Additional Paid-In Capital     7,409,426       1,063,590  
Accumulated (Deficit)     (2,226,938 )     (1,482,242 )
                 
TOTAL STOCKHOLDERS' EQUITY/(DEFICIT) (Note 2)     5,200,755       (416,028 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)   $ 5,215,994     $ 53,084  
                 
The accompanying notes are an integral part of these consolidated financial statements

F-3


 
 

 

ROKWADER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
       
   YEAR  YEAR
   ENDED  ENDED
   DECEMBER 31, 2015  DECEMBER 31, 2014
       
REVENUE  $2,342   $403 
           
EXPENSES          
General and Administrative   749,944    223,096 
Stock Compensation Expense   —      34,010 
TOTAL EXPENSES   749,944    257,106 
           
OTHER INCOME          
Interest Income   2,906    —   
TOTAL OTHER INCOME   2,906    —   
           
NET LOSS  $(744,696)  $(256,703)
          
NET LOSS PER COMMON SHARE - BASIC & DILUTED  $(0.06)  $(0.10)
           
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING   13,020,859    2,557,526 
           
The accompanying notes are an integral part of these consolidated financial statements

 

F-4


 
 

 

ROKWADER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                
         ADDITIONAL      
   COMMON STOCK  PAID-IN  ACCUMULATED   
   SHARES  AMOUNT  CAPITAL  DEFICIT  TOTAL
                
BALANCE, DECEMBER 31, 2013   2,548,718   $2,549   $995,105   $(1,225,539)  $(227,885)
                          
Issuance of Common Stock on                         
May 22, 2014 (Note 2)   10,000    10    5,290         5,300 
                          
Issuance of Common Stock on                         
December 17, 2014 (Note 2)   65,000    65    29,185         29,250 
                          
Stock based compensation expense             34,010         34,010 
                          
Net Loss   —      —      —      (256,703)   (256,703)
BALANCE, DECEMBER 31, 2014   2,623,718   $2,624   $1,063,590   $(1,482,242)  $(416,028)
                          
Conversion of Debt into Common Stock                         
February 18, 2015 (Note 2)   317,392    317    195,743         196,060 
                          
Issuance of Common Stock on                         
February 24, 2015 (Note 2)   10,000    10    4,390         4,400 
                          
Forgiveness of Debt on April 28, 2015 (Note 3)             62,778         62,778 
                          
Issuance of Common Stock on                         
May 4, 2015 (Note 2)   15,250,000    15,250    6,032,991         6,048,241 
                          
Issuance of Common Stock on                         
December 21, 2015 (Note 2)   66,667    66    49,934         50,000 
                          
Net Loss   —      —      —      (744,696)   (744,696)
BALANCE, DECEMBER 31, 2015   18,267,777   $18,267   $7,409,426   $(2,226,938)  $5,200,755 
                          
The accompanying notes are an integral part of these consolidated financial statements
                          

F-5


 
 
ROKWADER, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
       
   YEAR  YEAR
   ENDED  ENDED
   DECEMBER 31, 2015  DECEMBER 31, 2014
       
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss  $(744,696)  $(256,703)
Adjustments for non-cash items:          
Amortization expense   3,690    3,827 
Depreciation expense   893    —   
Non-cash stock compensation expense   —      34,010 
Issuance of stock for services rendered   4,400    —   
           
Changes in assets and liabilities:          
Accounts payable   3,546    3,054 
Accrued expenses   5,700    —   
Credit card payable   (17,344)   17,195 
Accrued Interest Payable   (61,060)   19,439 
           
Deferred Tax Liability (Note 7)   285    —   
           
           Net Cash Used for Operating Activities   (804,586)   (179,178)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Acquisition of Property & Equipment (Note 5)   (9,788)   —   
           
Net Cash Used for Investing Activities   (9,788)   —   
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Issuance of common stock   6,357,079    34,550 
Proceeds from issuance of note payable   —      125,000 
Repayment of related party note payable   (385,000)   —   
           
           Net Cash Provided by Financing Activities   5,972,079    159,550 
           
NET (DECREASE)/ INCREASE IN CASH   5,157,705    (19,628)
           
CASH AT BEGINNING OF PERIOD   7,514    27,142 
           
CASH AT END OF PERIOD  $5,165,219   $7,514 
           
Cash Paid During the Period for:          
Interest  $818   $22,139 
Income taxes  $5,075   $4,275 
           
Non cash transaction          
           
Issuance of stock for interest payable  $61,060   $—   
           
Forgiveness of notes payable  $62,778   $—   
           
The accompanying notes are an integral part of these consolidated financial statements
           

F-6


 
 

 

ROKWADER, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

HISTORY

 

ROKWADER, INC. (the Company), was organized under the laws of the State of Delaware on March 18, 2005 as a vehicle to seek, investigate and, if such investigation warrants, acquire a target company or business that primarily desires to seek the perceived advantages of a publicly-held corporation. On April 23, 2007, Rokwader completed an acquisition of all of the issued and outstanding capital stock of Latigo Shore Music, Inc. (“Latigo”). Substantially all of the business conducted by Rokwader is through Latigo, its wholly-owned subsidiary. In May and June 2015, the Company underwent a change of control when it sold an aggregate of 15,250,000 shares of its common stock, together with a warrant to purchase an additional 5,900,000 shares of its common stock to Coco Partners, LLC. As a result of this transaction and the change of control of the Company, our business strategies and plan of operations have evolved into two segments: (i) the continuation of the Latigo music publishing business; and (ii) the investment and acquisition vehicle through Coco Partners.

 

BASIS OF CONSOLIDATION

 

The consolidated financial statements include the accounts of Rokwader, Inc. and subsidiary. Inter-Company accounts and transactions have been eliminated.

 

INCOME TAXES

 

The Company follows the guidance of the Financial Accounting Standards Board’s Accounting Standards Codification Topic 740 related to Income Taxes. According to Topic 740, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end.

 

For federal income tax purposes, substantially all expenses incurred prior to the commencement of operations must be deferred and then they may be written off over a 180-month period. Tax deductible losses can be carried forward for 20 years until utilized for federal tax purposes. The Company will provide a valuation allowance in the full amount of the deferred tax assets since there is no assurance of future taxable income. Additionally, the Company may reserve a portion of the deferred tax assets due to restrictions of tax benefits related to changes in ownership.

 

The Company utilizes the Financial Accounting Standards Board’s Accounting Standards Codification Topic 740 related to Income Taxes to account for the uncertainty in income taxes. Topic 740 for Income Taxes clarifies the accounting for uncertainty in income taxes by prescribing rules for recognition, measurement and classification in financial statements of tax positions taken or expected to be in a tax return. Further, it prescribes a two-step process for the financial statement measurement and recognition of a tax position. The first step involves the determination of whether it is more likely than not (greater than 50 percent likelihood) that a tax position will be sustained upon examination, based on the technical merits of the position. The second step requires that any tax position that meets the more likely than not recognition threshold be measured and recognized in the financial statements at the largest amount of benefit that is a greater than 50 percent likelihood of being realized upon ultimate settlement. This topic also provides guidance on the accounting for related interest and penalties, financial statement classification and disclosure. The Company’s policy is that any interest or penalties related to uncertain tax positions are recognized in income tax expense when incurred. The Company has no uncertain tax positions or related interest or penalties requiring accrual at December 31, 2015 and December 31, 2014.

 

CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents consist primarily of cash in banks and highly liquid investments with original maturities of 90 days or less.

 

CONCENTRATIONS OF CREDIT RISK

 

The Company maintains all cash in deposit accounts, which at times may exceed federally insured limits. The Company has not experienced a loss in such accounts.

 

As of December 31, 2015, the Company had bank balances of $5,165,219 in two banks. The Company holds more than $250,000 in interest bearing accounts at one bank, thus there is a credit risk related to these cash deposits as of December 31, 2015 of $4,849,763 since these amounts exceed the current federally insured amount of $250,000 per depositor, per insured bank, for each account ownership category.

 

F-7


 
 

 

 

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

EARNINGS PER COMMON SHARE

 

Basic earnings per common share are computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive.

 

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

 

LONG-LIVED ASSETS

 

The realizability of long-lived assets is evaluated periodically as events or circumstances indicate a possible inability to recover the carrying amount. Long-lived assets that will no longer be used in our business are written-off in the period identified since they are no longer expected to generate any positive cash flows for us. Long-lived assets that continue to be used by us are periodically evaluated for recoverability. Such evaluation is based on various analyses, including cash flow and profitability projections. The analyses necessarily involve significant management judgment. In the event the projected undiscounted cash flows are less than net book value of the assets, the carrying value of the assets is written down to its estimated fair value.

 

No impairment loss on intangible assets was recognized for the years ended December 31, 2015 and 2014, respectively.

 

REVENUE RECOGNITION

 

As required by FASB ASC Topic 605, Revenue Recognition (“ASC 605”), the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable.


Revenues are earned from the receipt of royalties relating to the licensing of rights in musical compositions. The receipt of royalties principally relates to amounts earned from the public performance of copyrighted material, the mechanical reproduction of copyrighted material on recorded media including digital formats, and the use of copyrighted material in synchronization with visual images. Consistent with industry practice, music publishing royalties generally are recognized as revenue when cash is received. Revenue generally is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

 

PROPERTY AND EQUIPMENT

 

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets, which are as follows:

 

Equipment 2-10 years

Furniture 2-10 years

 

Expenditures for repairs and maintenance are charged to expense as incurred. The costs of major renewals and betterments are capitalized. The cost and related accumulated depreciation of property and equipment are removed from the accounts upon retirement or other disposition and any resulting gain or loss is reflected in operations of the period.

 

F-8


 
 

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. The amendments in this Update will align the presentation of deferred income tax assets and liabilities with International Financial Reporting Standards (IFRS). IAS 1, Presentation of Financial Statements, requires deferred tax assets and liabilities to be classified as noncurrent in a classified statement of financial position. For public entities, the amendments in ASU 2015-17 will be effective for financial statements issued for annual periods beginning after December 15, 2016 and interim periods within those annual periods. For all other entities, thee amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in this Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. If an entity applies the guidance prospectively, the entity should disclose in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If an entity applies the guidance retrospectively, the entity should disclose in the first interim and first annual period of change the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. The Company is currently assessing this guidance for future implementation.

 

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) Amendments to the Consolidation Analysis. ASU 2015-02 change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amendments in this Update affect the following areas: (1) Limited partnerships and similar legal entities, (2) Evaluating fees paid to a decision maker or a service provider as a variable interest, (3) The effect of fee arrangements on the primary beneficiary determination, (4) The effect of related parties on the primary beneficiary determination, and (5) Certain investment funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this Update using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The Company is currently assessing this guidance for future implementation.

 

In December 2014, the FASB issued ASU 2014-18, Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination. ASU 2014-18 elects the accounting alternative to recognize or otherwise consider the fair value of intangible assets as a result of any in-scope transactions and states that they should no longer recognized separately from goodwill (1) customer-related intangible assets unless they are capable of being sold or licensed independently from other assets of the business and (2) non-competition agreements. The amendments in ASU 2014-18 will be effective prospectively for annual reporting periods beginning after December 15, 2015 and the effective date of adoption will begin on the timing of that first in-scope transaction. The Company has not adopted ASU 2014-18 during the year ended December 31, 2014.

 

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern ". The amendments in this update provide guidance in U.S. GAAP about management's responsibilities to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The main provision of the amendments are for an entity's management, in connection with the preparation of financial statements, to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. Management's evaluation should be based on relevant conditions and events that are known or reasonably knowable at the date the financial statements are issued. When management identifies conditions or events that raise substantial doubt about an entity's ability to continue as a going concern, the entity should disclose information that enables users of the financial statements to understand all of the following: (1) principal conditions or events that raised substantial doubt about the entity's ability to continue as a going concern (before consideration of management's plans); (2) management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations; and (3) management's plans that alleviated substantial doubt about the entity's ability to continue as a going concern or management's plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. The amendments in this update are effective for interim and annual reporting periods after December 15, 2016 and early application is permitted. The Company is currently assessing this guidance for future implementation.

 

F-9


 
 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

 

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders' equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company adopted ASU 2014-10 during the year ended December 31, 2014, thereby no longer presenting or disclosing any information required by Topic 915.

 

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements a five-step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting periods beginning after December 15, 2016, and early adoption is prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We are currently assessing the impact the adoption of ASU 2014-09 will have on our financial statements and disclosures.

 

EQUITY BASED PAYMENTS TO NON-EMPLOYEES

 

The Company applied the Financial Accounting Standards Board’s Accounting Standards Codification Topic 505 related to Equity Based Payments to Non-Employees to account for these options and warrants issued. According to Topic 505, all transactions in which goods or services are the consideration received for the issuance of equity instruments shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The Company believes that fair value of these options and warrants is a more reliable measure of the consideration received for services performed for the Company. We determined the fair value of these equity instruments using the Black-Scholes option-pricing model. Factors used in the determination of the fair value of these equity instruments include, the stock price at the grant date, the exercise price, the expected life of the equity instrument, the volatility of the underlying stock, the expected dividends on it, and the risk-free interest rate over the expected life of the equity instrument.

 

NOTE 2 – STOCKHOLDERS’ DEFICIT

 

The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.

 

The following assumptions were used to determine the fair value of the options as of December 31, 2015:

 

   December 31, 2015
Dividend Yield   0 
Expected Volatility   100%
Risk-Free Interest Rate   0.49 
Term in Years   1 
Stock Price   0.40 
Option Exercise Price   0.75 

 

The following assumptions were used to determine the fair value of the options at date of original issuance on August 3, 2012:

 

   August 3, 2012
Dividend Yield   0 
Expected Volatility   100%
Risk-Free Interest Rate   0.38 
Term in Years   1.58 
Stock Price   0.75 
Option Exercise Price   0.75 

 

F-10


 
 

NOTE 2 – STOCKHOLDERS’ DEFICIT (CONTINUED)

 

A summary of option activity as is presented below:

 

      Weighted  Average   
      Average  Remaining  Aggregate
      Exercise  Contractual  Intrinsic
   Shares  Price  Life (Years)  Value
Outstanding at December 31, 2014   325,000   $0.65    1.50   $191,323 
                     
Granted   5,900,000   $0.68    4.25   $—   
Exercised   (66,667)  $0.75    —     $—   
Exprired/Cancelled   —     $—      —     $—   
Outstanding at December 31, 2015   6,158,333   $0.68    4.10   $—   
                     
Exercisable at December 31, 2015   6,158,333   $0.68    4.10   $—   

 

As of December 31, 2015, all options are vested.

 

On December 21, 2015, Brooktide, LLC exercised 66,667 of its vested stock options. The Company issued 66,667 shares of its common stock at an exercise price of $0.75 per share for a total of $50,000.

 

On December 22, 2015, the Company extended its remaining 258,333 outstanding stock options through December 31, 2016.

 

On February 18, 2015, the Company issued 317,392 shares of common stock valued at the price of $0.6177 in an agreement to convert $135,000 of the oldest notes payable and accrued interest of $61,060 which were owed to Mr. Yale Farar and Brooktide LLC. As the date herein, the average price between the “bid and “ask” price of the Company’s stock on the OTC:QB market was $0.42 per share.

 

On February 24, 2015, the Company issued 10,000 shares of common stock at the price of $0.44, for services rendered by Jeston Cade. The shares of common stock are restricted shares and were valued at the price of $0.44, the closing price on February 24, 2014 on the OTC:OB market as of the date hereof.

 

In May 2015, Coco Partners and the Company entered into an agreement pursuant to which Coco Partners would purchase (i) a maximum of 15,250,000 shares of our common stock and (ii) a warrant to purchase an aggregate of 5,900,000 shares of our common stock (the “Warrant”) for an aggregate maximum purchase price of $6,100,000 (the “Purchase Price”). The Purchase Price is payable as follows: (a) $3,050,000 for 7,625,000 shares and the Warrant upon the closing (the “Closing”) and (b) an additional 7,625,000 shares for $3,050,000 on or before June 30, 2015. The Closing occurred on May 7, 2015 and the Company received the initial purchase price of $3,050,000 and the second $3,050,000 for an additional 7,625,000 shares was received on June 30, 2015.

 

The terms of the Warrant provide that Coco Partners has the right to purchase, at any time after the Closing until April 1, 2020, up to (i) 5,000,000 shares of our common stock at an exercise price of $0.60 per share, (ii) 500,000 shares of our common stock at an exercise price of $1.000 per share and (iii) 400,000 shares of our common stock at an exercise price of $1.25 per share. The Warrant includes certain anti-dilution adjustments to the exercise prices in the event of payment of dividend, subdivision and combination with respect to outstanding shares of our common stock.

 

 

 

 

F-11


 
 

 

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

The Transaction resulted in a change of control of the Company. With the purchase of the 15,250,000 shares, Coco Partners acquired approximately 83.8% of the outstanding shares of our common stock (this does not include any potential exercise of the Warrant). Upon the Closing, Mr. Robert Wallace, who has a controlling interest in Coco Partners, was appointed Chief Executive Officer, Chief Financial Officer, and Corporate Secretary and as a member of our Board of Directors (the “Board”). Mr. Yale Farar resigned his position as President of the Company and director of the Board and Mr. Gary Saderup resigned his positions as the Secretary of the Company and a director of the Board.

 

On April 14, 2010, Mr. Yale Farar, the President of Rokwader, loaned the Company $25,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.75 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses arising from the Company’s compliance with its public reporting requirements.

 

On May 24, 2013 Brooktide, LLC loaned the Company $50,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.50 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On October 28, 2013 Brooktide, LLC loaned the Company $50,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.50 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On January 31, 2014 Brooktide, LLC loaned the Company $25,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.50 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On May 22, 2014 Brooktide, LLC loaned the Company $35,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.53 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On July 29, 2014 Brooktide, LLC loaned the Company $35,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $.53 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

F-12


 
 

 

 

NOTE 3 – RELATED PARTY TRANSACTIONS (CONTINUED)

 

On October 30, 2014 Brooktide, LLC loaned the Company $30,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $0.45 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On February 18, 2015, the Company issued 317,392 shares of common stock valued at the price of $0.6177 in an agreement to convert $135,000 of the oldest notes payable and accrued interest of $61,060 which were owed to Mr. Yale Farar and Brooktide LLC.

 

On March 17, 2015 Brooktide, LLC loaned the Company $55,500 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $0.47 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On April 16, 2015 Brooktide, LLC loaned the Company $7,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $0.47 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

As of May 4, 2015, Brooktide, LLC and the Company agreed that the loan of $55,500 entered into on March 17, 2015 and the loan of $7,000 entered into on April 16, 2015 be forgiven by Brooktide, LLC. Additionally, accrued interest payable in the amount of $278 was also forgiven by Brooktide, LLC. In accordance with FASB ASC 470-50-40 Debt Modifications and Extinguishments, the Company recorded this forgiveness of debt from a Related Party as a capital transaction and no gain was recognized on the Company’s consolidated statement of operations.

 

NOTE 4 – INTANGIBLES

 

On December 17, 2010, Latigo, a wholly owned subsidiary of the Company, acquired all right, title and interest in 50 musical compositions from the Gary Harju music catalog to the extent of his writer’s and publisher’s share for a cost of $15,000 paid in cash on the closing date of December 17, 2010. The Harju Catalog (including copyrights and publishing rights) consists of 50 original songs written in whole or in part by Mr. Gary Harju. Some of the songs are owned outright by Latigo as a result of the acquisition, and others are and will continue to be subject to publishing agreements with various music publishers, who will continue to collect the publisher’s share of royalties. The other parties who have partial interests in the catalog will continue to receive their share of royalties and other income. The Company will amortize the costs of the Harju Catalog over its estimated useful life based on projected net revenues. The Company projects to generate revenues from the Harju Catalog for an estimate of 20 years based on Mr. Harju’s past accomplishments and the ability of the recorded music to generate revenues for long periods of time. Therefore, the Company estimated the useful life of the Harju Catalog to be 20 years.

 

On June 1, 2013, Latigo, a wholly owned subsidiary of the Company, acquired all right, title and interest in Andrew Dorff’s “writer’s share” of certain musical compositions written and/or co-written by him for a cost of $40,000 paid in cash. The musical compositions include 106 songs total. The Company currently owns the publishing rights from these musical compositions. Some of the songs are owned outright by Latigo as a result of the acquisition, and others are and will continue to be subject to publishing agreements with various music publishers, who will continue to collect the publisher’s share of royalties and other income. The Company will amortize the costs of Andrew Dorff’s “writer’s share” over its estimated useful life based on projected net revenues. The Company projects to generate revenues from Andrew Dorff’s “writer’s share” for an estimate of 20 years based on Andrew Dorff’s past accomplishments and the ability of the recorded music to generate revenues for long periods of time.

 

F-13


 
 

Following is a summary of the intangibles at the end of the years ending:

 

    December 31, 2015  December 31, 2014
    Gross  Accumulated  Gross  Accumulated
    Amount  Amortization  Amount  Amortization
Intangibles subject to amortization:            
Harju Music Catalog   15,000    6,442    15,000    5,297 
Dorff's Writer's Share   40,000    6,678    40,000    4,133 
  $55,000   $13,120   $55,000   $9,430 

 

For the years ended December 31, 2015 and 2014, respectively, amortization expense was $3,690 and $3,827, respectively.

 

Amortization of the remaining intangible assets is expected to be $16,397 from 2016 through 2020, and $25,483 in aggregate for years thereafter through 2032.

 

 

 

 

F-14


 
 

 

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

   December 31, 2015  December 31, 2014
   Gross  Accumulated  Gross  Accumulated
   Amount  Depreciation  Amount  Depreciation
Property and Equipment            
Musical Equipment  $4,692   $469   $—     $—   
Computer Equipment   1,396    116    —      —   
Office Furniture   3,700    308    —      —   
x  $9,788   $893   $—     $—   

 

 

Depreciation expense for the years ended December 31, 2015 and 2014, respectively, was $893 and zero.

 

NOTE 6 - LEASES

 

The Company leases office space under a lease arrangement that is classified as an operating lease. The office space lease provides that the Company pay insurance, utilities and maintenance plus minimum monthly rentals of $1,161 at September 30, 2015. As of September 30, 2015, the Company had a one year office space lease extending through May 31, 2016. Minimum annual rental commitments under non-cancelable leases having initial or remaining lease terms in excess of one year, including the new facilities lease, are as follows:

 

December 31,  Amount
2016  $5,805 
2017   —   
2018   —   
2019   —   
2020   —   
Thereafter   —   
Total minimum future rental payments  $5,805 

 

Total rental expenses for the years ended December 31, 2015 and 2014, respectively, were $14,007 and zero.

 

 

NOTE 7 – INCOME TAXES

 

The current year provision for income taxes includes income taxes currently payable and those deferred due to temporary differences between financial statement and tax basis of assets and liabilities. The provision for income taxes consists of the following:

 

   2015  2014
Current      
Federal  $—     $—   
State   —      —   
    —      —   
           
Deferred          
Federal   243    —   
State   42    —   
    285    —   
           
Total  $285   $—   

  

F-15


 
 

NOTE 7 – INCOME TAXES (CONTINUED)

 

The following reconciles the federal statutory income tax rate to the effective rate of the provision for income taxes.

 

   2015  2014
Federal Statutory Rate   34%   34%
Valuation Allowance Adjustment   -34%   -34%
Effective Rate   0%   0%
           
State Statutory Rate   8.84%   8.84%
Valuation Allowance Adjustment   -8.84%   -8.84%
Effective Rate   0.00%   0.00%

 

Deferred income tax liabilities (assets) are as follows:

 

   2015  2014
       
Deferred income tax liabilities:      
Property, Plant and Equipment   285    —   
    285    —   
           
Deferred income tax assets:          
Start-Up Expenses   (50,792)   (58,614)
Intangible Assets   (10,601)   (12,147)
Net Operating Loss Carryforward   (745,490)   (426,374)
Charitable Contributions Carryforward   (199)   —   
Accrued Interest Payable   —      (24,323)
Less Valuation Allowance   807,082    521,458 
    —      —   
           
Total Deferred Taxes  $285   $—   

As of December 31, 2015, the Company had incurred $300,000 of start-up expenses amortizable over 15 years. Also, the Company acquired certain intangible assets in the amount of $113,500 amortizable over 15 years.

 

Additionally, the Company has net operating loss carry forwards of approximately $1,854,900 and $1,968,200 for both federal and state purpose, respectively. These federal and state carry forwards are scheduled to expire beginning 2027. The Company is no longer subject to examination by the Internal Revenue Service for years prior to 2011 and by the Franchise Tax Board for years prior to 2010. There could be certain limitation, imposed by Internal Revenue Code Section 382, on the utilization of these loss carry forwards if there were more than a 50 percent change of control. The Company has recorded a deferred tax asset of $807,100 and a deferred tax liability of $300. As of December 31, 2015, the Company established a valuation allowance of $806,800 to fully offset the deferred tax asset and deferred tax liability based on a brief history of operations.

 

 

NOTE 8 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date of this report.

 

 

F-16


 
 

 

 

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

 

Not Applicable

 

Item 9A Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order to allow timely consideration regarding required disclosures.

 

The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including our chief executive officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of December 31, 2015 were effective to ensure that information required to be disclosed by us in reports that we file or submit 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.  There have been no material changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the years ended December 31, 2015.

 

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations.  Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management's assessment of the effectiveness of the small business issuer's internal control over financial reporting is as of the year ended December 31, 2014. We believe that internal control over financial reporting is effective. We have not identified any, current material weaknesses considering the nature and extent of our current operations and any risks or errors in financial reporting under current operations.

 

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management's report in this annual report.

 

 

 

15


 
 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.

 

There was no change in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

Not applicable.

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Our Board of Directors currently consists of four members. Each director holds office until his successor is duly elected by the stockholders. Executive officers serve at the pleasure of the Board of Directors. Our current directors and executive officers are:

 

Name       Age   Position   Year Appointed
Robert Wallace       65   CEO, CFO, Secretary and Director   2015
Steve Dorff       65   Director and President of Latigo Shore Music, Inc.   2007
Wyatt Wachtel   44   Director   2015
Gordon Smith   61   Director   2015

 

Mr. Wallace was appointed to the Board and appointed CEO, CFO and Secretary of the Company in May, 2015, in accordance with a Securities Purchase Agreement wherein he purchased 15,250,000 shares of the Company’s common stock. Mr. Wallace is the Founder, the Advisor, and currently serves on the Board of Directors of, Life Storage, L.P., a real estate platform company focused on the self-storage sector. Prior to that, Mr. Wallace has been an entrepreneur who has assisted or founded a number of private companies that have scaled rapidly, completed IPO, merger or acquisition exits. Mr. Wallace also previously served on the board of directors of certain of these companies subsequent to their public offerings, including Media Arts Group Inc., Zycon Corp., and International Family Entertainment, KMCI and Mr. Coffee. In addition, Mr. Wallace was appointed to serve on a Steering Committee of Interco, to direct its exit from bankruptcy. Mr. Wallace has also served on various non-profit, private school, and university boards.  

 

Steve Dorff, the President of Latigo, is a long-time composer and producer. Mr. Dorff is a three-time Grammy nominee and has often been on the nation's top music charts. His résumé includes nine #1 film songs and 15 Top 10 hits, including the Kenny Rogers' classic "Through the Years", a BMI 3 million performance song, as well as "I Just Fall In Love Again ", the Anne Murray record that captured Billboard's #1 Song Of The Year honors. His many songs have been sung by some of the greatest artists of our time including Barbra Streisand, Celine Dion, Whitney Houston, George Strait, Vanessa Williams and others. Emmy Nominee for five television compositions, his credits include such stalwarts as "Murphy Brown" and "Murder She Wrote". He has also contributed to various television series’ like "Growing Pains", "Alien Nation", "Spenser: for Hire", "Major Dad", "Colombo", "Reba", and "Rodney". Currently, Mr. Dorff is the musical director of the popular television show “The Singing Bee” on CMT (the “Country Music Television” channel) His many other TV and cable movie credits include the Emmy nominated CBS mini-series "Elvis", the Hallmark Hall of Fame "Rose Hill", the animated Christmas classic "Annabelle's Wish", "Babe Ruth", "The Quick and The Dead", "Moonshine Highway" and "The Defiant Ones". Mr. Dorff’s many movie songs and scores have been featured in "Bronco Billy", "Blast from the Past", "Rocky IV", "Pure Country", "Tin Cup", "Michael", "Dudley Do-Right", "Dancer, Texas", "The Last Boy Scout", "Curly Sue" and "Honky Tonk Man".

 

Wyatt Wachtel is a Managing Director of York Capital Management ("York"). York, with approximately $14 billion in Assets Under Management (“AUM”), primarily invests in event driven strategies, by investing in companies undergoing merger and acquisitions, distressed and restructuring situations, special situation equities, including spin-offs, split-ups, bond, warrant and option transactions. Prior to joining York, from June of 2012 to Jan. 2015, Wyatt provided advisory services to York through a consulting agreement via Solana Capital Management, LLC, m which he was the sole member. Wyatt focuses on structured credit investments, sub-performing mortgages, bank loans and other distressed opportunities. Prior to joining Solana Capital, Wyatt was a Senior Portfolio Analyst at Highland Capital Management, specializing in distressed investments and special situations. He also served as a Senior Associate in Private Finance at Allied Capital, and an Associate at Banc of America Securities, and an Associate in the Asset Securitization division of first Union Securities. Mr. Wachtel received a B.A. in Political Science at the University of California, an M.B.A. from the Goizueta Business School at Emory University, and J.D. from the Emory School of Law. York has offices in New York City, Singapore, Wash. DC., London, Moscow, and Hong Kong.

 

Gordon Smith is currently COO of Exact Staff, Inc., a staffing company he helped grow from start-up to a national company employing 20,000 people per year. He is also an executive officer of Vertis Capital Fund, a hedge fund that uses proprietary methodology to generate equity returns with reduced risk by exploiting tracking errors in leveraged and futures ETFs. Mr. Smith began his career at CBS owned and operated TV stations, and headed the finance operations, overseeing a $1 billion budget. He served on the Management Board of CBS/ FOX Studios, and CBS/MTM Studios. During his tenure, he also Executive Produced a feature film, acquired by Sony Pictures.

 

16


 
 

Subsequent to CBS, Mr. Smith became VP of IMG, where he developed and managed four business areas, including founding the home video business of IMG. Subsequent to IMG, Gordon acquired an entertainment and animation company, which after consummating a 130 television episode deal with Comedy Central and being nominated for two Ace Awards, he sold to a Utah based investment group. Subsequently, Gordon became president of Goldhil Home Media International, involved in the production, and distribution of a broad array of home media programs, including animation, entertainment, fitness, and special interest programming, such as the Teenage Mutant Ninja Turtles, Dragon Ball, Z, And Little House on the Prairie. Mr. Smith recently returned from residing in Hong Kong, and maintains business interests in the Asian distribution rights to four major entertainment libraries. Mr. Smith earned a B.S. with highest honors from University of California at Berkeley, and an M.B.A. from Harvard Business School. Mr. Smith also has served in certain non-profit groups, including Big Brothers, Harvard Business School Community Partners, The Special Olympics, and the Academy of Television Arts and Sciences.

 

Directors serve for a one-year term. There are currently no agreements or understandings whereby any officer or director would resign at the request of another person. None of our officers or directors is acting on behalf of or will act at the direction of any other person.

 

Board Committees

 

Audit committee

 

We currently have no compensation or nominating committee or other board committee performing equivalent functions. Currently, all members of our board of directors participate in reviewing and monitoring our financial statements and internal accounting procedures, recommending the selection of independent auditors by our board, evaluating the scope of the annual audit, reviewing audit results, consulting with management and our independent auditor prior to presentation of financial statements to stockholders and, as appropriate, initiating inquiries into aspects of our internal accounting controls and financial affairs. 

 

Compensation and Nominations Committees

 

We currently have no compensation or nominating committee or other board committee performing equivalent functions. Currently, all members of our board of directors participate in discussions concerning executive officer compensation and nominations to the board of directors.

 

Code of Conduct and Ethics

 

Our board of directors has adopted a code of business conduct and ethics applicable to our directors, officers and employees, in accordance with applicable federal securities laws and the FINRA Rules. 

 

Indemnification of Executive Officers and Directors

 

The General Corporation Law of the State of Delaware permits indemnification of directors, officers, and employees of corporations under certain conditions subject to certain limitations. Article VII of our Certificate of Incorporation states that we may provide indemnification of our agents, including our officers and directors to the maximum extent permitted by the Delaware Corporation Law. In the event that a claim for indemnification (other than the payment by us of expenses incurred or paid by our sole director and officer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is appropriate and will be governed by the final adjudication of such issue.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of its Common Stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission ("SEC") and each exchange on which the Company's securities are registered. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all ownership forms they file.

 

Based solely on its review of the copies of such forms received by it, or written representations from the officers, directors, or persons holding greater than 10% of Company stock, no ownership disclosure form (SEC Form 5) was required for those persons. All of the required Form 3's and up to date Form 4's for the directors have been filed with the SEC. There are no transfers of the Company's common stock by any persons subject to Section 16(a) requirements.

 

17


 
 

 

 

Item 11. Executive Compensation

 

The following table summarizes all compensation recorded by us in 2015, 2014 and 2013 for our principal executive officer, each other executive officer serving as such whose annual compensation exceeded $100,000, and up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our company at December 31, 2015. The value attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of the option awards are included in Note 2 of the Notes to our Financial Statements appearing later in this report. 

 

Position  Year Ended  Salary
($)
  Bonus
($)
  Stock
Awards
($)
  Option
Awards
($)
  Non-equity
Incentive
Plan
Compensation
  Non-qualified Deferred Compensation Earnings
($)
  All Other Compensation
($)
  Total
($)
Robert Wallace, CEO1   2015    -0-    -0-    -0-    -0-    -0-    -0-    -0-    -0- 
Yale Farar, President2   2015    -0-    -0-    -0-    -0-    -0-    -0-    -0-    -0- 
    2014    -0-    -0-    -0-    -0-    -0-    -0-    -0-    -0- 
    2013    -0-    -0-    -0-    -0-    -0-    -0-    -0-    -0- 

 

  (1) Mr. Wallace was appointed CEO, CFO and Secretary in May 2015.  
  (2) Mr. Farar resigned as President in May 2015.  

 

Mr. Wallace spends approximately 75% of his time on the business of the Company.

 

Employment Agreement

 

The Company has no Employment Agreement with any of its officers or directors.

 

 

Stock Options

Outstanding Equity Awards at Fiscal Year End

 

The following table sets forth certain information concerning outstanding option awards held by our officers and directors for the fiscal year ended December 31, 2015:

 

Name  No. of securities underlying exercised options (#)  No. of securities underlying unexercised options (#)  Equity incentive plan awards: No. of securities underlying unexercised unearned options (#)  Option exercise price ($)  Option expiration Date  No. of shares or units of stock that have not vested (#)  Market value of shares or units of stock that have not vested ($)  Equity incentive plan awards: No. of unearned shares, units or other rights that have not vested (#)  Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Steve Dorff, Director   —      25,000    —     $0.75    December 31, 2016    —     $—      —     $—   
                                              

 

Stock Option Plan

 

We do not have a stock option plan although we may adopt one or more such plans in the future.

  

Employee Pension, Profit Sharing or other Retirement Plans

 

We do not have a defined benefit, pension plan, profit sharing or other retirement plan, although we may adopt one or more of such plans in the future.

 

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Director's compensation

At present we do not pay our directors for attending meetings of our Board of Directors, although we may adopt a director compensation policy by the end of the current year. On December 17, 2014, we issued 40,000 shares of our common stock to Steve Dorff for services rendered. The Company determined that the price of $0.45 per share was a fair value for the shares issued based on its most recent securities sale transaction.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table lists, as of March 28, 2016, the number of shares of common stock of our Company that are beneficially owned by (i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of our Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power. In computing the number and percentage of shares beneficially owned by each person, we include any shares of common stock that could be acquired within 60 days of March 28, 2016, by the exercise of options or warrants. These shares, however, are not counted in computing the percentage ownership of any other person. 

 

  

 

Name and Address of Beneficial Owner *  Shares Beneficially Owned  Percentage of Outstanding Common Stock
       
Coco Partners, LLC (1) (2)      21,150,000    87.5%
Robert Wallace (2)      21,150,000    87.5%
Brooktide, LLC (3) (4)         1,556,892    8.4%
Steve Dorff (5) (6)   185,000    1.0%
Wyatt Wachtel          
Gordon Smith          
Officers and Directors (4 persons)   24,192,777    88.5%

  

* The address for each person or entity listed on the table other than Brooktide, LLC and Yale Farar is c/o Rokwader, Inc., 15466 Los Gatos Blvd., Suite 109-352, Los Gatos, CA 95032.
   
(1) Coco Partners, LLC is principally owned by and engages in investment and financial management for Mr. Wallace.
   
(2) The amount of shares Beneficially Owned includes 5,900,000 shares exercisable by Coco Partners at prices between $0.60 and $1.25 per share, pursuant to a Warrant which terminates on April 1, 2020. These shares are held in the name of Coco Partners, LLC of which Mr. Wallace, Rokwader’s President and Director, is the sole Manager of Coco Partners, LLC. As the sole Manager, Mr. Wallace has Voting and Investment power over these shares.
   
(3) The address for Brooktide, LLC is 123 West Nye Lane #510, Carson City, Nevada 89706. Brooktide, LLC is owned by, and engages in investment and financial management for Mr. Farar, a former officer and director of the Company.
   
(4) The amount of shares Beneficially Owned includes 183,333 shares exercisable by Yale Farar\ at $0.75 per share, pursuant to an Option which terminates on December 31, 2016. These shares are held in the name of Brooktide, LLC of which Yale Farar is the sole Manager of Brooktide, LLC. As sole Manager, Mr. Farar has voting and investment power over these shares.
   
(5) The amount of shares Beneficially Owned includes 25,000 shares exercisable by Mr. Dorff at $0.75 per share, pursuant to an Option which terminates on December 31, 2016.
   
(6) Individual has sole voting and investment power over such shares.

 

19


 
 
Item 13. Certain Relationships and Related Transactions and Director Independence.  

 

The Company’s president contributed capital in the amount of $26,000 during the month of January 2015. The president of the Company was not issued additional shares of stock in exchange for this capital nor was a note payable to him exercised. The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On February 18, 2015, the Company agreed to issue 317,392 shares of its common stock (the “Shares”) to Brooktide, LLC, an entity principally owned by Yale Farar, the former President, director and principal shareholder of the Company (the “Investor”) in consideration of the cancellation of debt owed to the Investor totaling $196,060. The Shares were issued to the Investor at approximately $0.6177 per share on the date that the average between the “bid” and “ask” price for the Company’s stock on the OTC:QB market was $0.42 per share.

 

On March 17, 2015 Brooktide, LLC, of which the former President of the Company is the managing member and principal owner, loaned the Company $55,500 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $0.47 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.

 

On April 16, 2015 Brooktide, LLC loaned the Company $7,000 in accordance with a Subordinated Convertible Promissory Note (“Note”) executed by the Company. Pursuant to the terms of the Note, this loan bears an interest rate equal to 6% per annum and is convertible at the option of the holder at any time into common stock of the Company at $0.47 per share. The Note is a demand note and may be paid at any time without premium or penalty. The outstanding balance on the Note is immediately due and payable without notice or demand, upon or at any time after the occurrence or existence of any one or more of the listed “Events of Default.” The proceeds of the Note were used to pay fees and expenses, to the extent such expenses are not deferred, and to continue to create viable entertainment assets in the music recording industry.  

 

As of May 4, 2015, Brooktide, LLC and the Company agreed that the loan of $55,500 entered into on March 17, 2015 and the loan of $7,000 entered into on April 16, 2015 be forgiven by Brooktide, LLC. Additionally, accrued interest payable in the amount of $278 was also forgiven by Brooktide, LLC. In accordance with FASB ASC 470-50-40 Debt Modifications and Extinguishments, the Company recorded this forgiveness of debt from a Related Party as a capital transaction and no gain was recognized on the Company’s consolidated statement of operations.

 

 All of the individuals and entities receiving the Company’s common stock are “accredited” investors. The shares of common stock are all restricted shares and the stock certificates have been affixed with a legend restricting sales and transfers. The Company issued the common stock pursuant to certain exemptions from registration provided by Rule 506 of Regulation D and Section 4(2) and Section 4(6) of the Securities Act of 1933, as amended.

 

We currently use the music recording studio of management at no cost to us. Management has agreed to continue this arrangement until the Company generates greater revenues.

 

Item 14. Principal Accountant Fees and Services.    

   

During 2015 and 2014, Anton and Chia, LLP, the Company’s independent auditors, have billed for their services as set forth below. In addition, fees and services related to the audit of the financial statements of the Company for the period ended December 31, 2015, as contained in this Report, are estimated and included for the fiscal year ended December 31, 2015.

 

   Year ended December 31,
   2015  2014
       
Audit Fees  $5,500   $5,200 
           
Audit-Related Fees  $-0-   $-0- 
           
Tax Fees  $-0-   $-0- 
           
All Other Fees  $  4,500   $3,120 
           
Total  $  10,000   $8,320 

 

 

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Pre-Approval Policy

 Our Board as a whole pre-approves all services provided by Anton and Chia, LLP. For any non-audit or non-audit related services, the Board must conclude that such services are compatible with Anton and Chia, LLP independence as our auditors.

 

 

PART IV

 

Item 15. Exhibits; Financial Statement Schedules.

 

Exhibit ITEM
   
2.1 C Securities Exchange Agreement dated February 12, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
2.2 (5) Revised Securities Exchange Agreement dated April 20, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
3.1 (2) Certificate of Incorporation
   
3.2 By-Laws
   
4.1(6) Form of Warrant
   
10.1 * Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $35,000 dated April 1, 2013
   
10.2* Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $50,000 dated May 24, 2013
   
10.3 * Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $50,000 dated October 28, 2013
   
10.4 * Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $25,000 dated January 31, 2014
   
10.5 * Exclusive Songwriter Agreement between the Company and Jess Boeschen dated March 1, 2014
   
10.6 * Assignment Agreement and Addendum to Assignment Agreement between Dillonpark, LLC and Latigo Shore Music, Inc. dated January 24, 2013 and May 7, 2013, respectively.
   
10.7 * Convertible Promissory Note between the Company and Brooktide in the amount of$35,000 dated May 22, 2014
   
10.8 * Convertible Promissory Note between the Company and Brooktide in the amount of$30,000 dated July 29, 2014
   
10.9 * Convertible Promissory Note between the Company and Brooktide in the amount of$35,000 dated October 30, 2014
   
10.10(5) Securities Purchase Agreement dated April 28, 2015 between the Registrant and Coco Partners, LLC
   
10.11(6) Escrow Agreement Dated May 7, 2015
   
10.12(7) Convertible Note in the amount of $55,500 dated March 17, 2015 in favor of Brooktide, LLC
   
31.1 Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
   
31.2 Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
   
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

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* Previously Filed
(1) These exhibits have been previously filed with Registrant’s Post-Effective Amendment No. 2 filed April 5, 2007
(2) These exhibits have been previously filed with the Registrant’s SB-2 Registration Statement (333-125314).
(3) Filed as exhibits to Registrant’s Form 8-K filed December 4, 2006
(4) Filed as an exhibit to Registrant’s Form 8-K filed February 14, 2007.
(5) Filed as an exhibit to Registrant’s Form 8-K filed May 5, 2015
(6) Filed as an exhibit to Registrant’s Form 8-K filed May 13, 2015
(7) Filed as an exhibit to Registrant’s Form 8-K filed March 20, 2015

 

 

  

SIGNATURES

 

In accordance with the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 30th day of March, 2016.

 

  ROKWADER, INC.

 

 

 

 

 

 

  By:   /s/ Robert Wallace
 

Robert Wallace, CEO

(Principal Executive Officer)

 

In accordance with the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated and on the dates stated.

 

     
     
/s/ Robert Wallace   Dated: March 30, 2016
Robert Wallace    
CEO (Principal Executive Officer), CFO (Principal Financial Officer) and Director    
     
     
/s/ Wyatt Wachtel   Dated: March 30, 2016
Wyatt Wachtel    
Director    
     
     
/s/ Steve Dorff   Dated: March 30, 2016
Steve Dorff    
Director and President of Latigo Shore Music, Inc.    
     
     
 /s/ Gordon Smith   Dated: March 30, 2016
Gordon Smith    
Director    

 

 

 

 

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EXHIBIT INDEX

 

Exhibit ITEM
   
2.1 (4) Securities Exchange Agreement dated February 12, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
2.2 (5) Revised Securities Exchange Agreement dated April 20, 2007 between Rokwader, Inc., Latigo Shore Music, Inc., and Stockholders of Latigo
   
3.1 (2) Certificate of Incorporation
   
3.2 (2) By-Laws
   
10.1 * Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $35,000 dated April 1, 2013
   
10.2* Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $50,000 dated May 24, 2013
   
10.3 * Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $50,000 dated October 28, 2013
   
10.4 * Convertible Promissory Note between the Company and Brooktide, LLC in the amount of $25,000 dated January 31, 2014
   
10.5 * Exclusive Songwriter Agreement between the Company and Jess Boeschen dated March 1, 2014
   
10.6 * Assignment Agreement and Addendum to Assignment Agreement between Dillonpark, LLC and Latigo Shore Music, Inc. dated January 24, 2013 and May 7, 2013, respectively.
   
10.7 * Convertible Promissory Note between the Company and Brooktide in the amount of$35,000 dated May 22, 2014
   
10.8 * Convertible Promissory Note between the Company and Brooktide in the amount of$30,000 dated July 29, 2014
   
10.9 * Convertible Promissory Note between the Company and Brooktide in the amount of$35,000 dated October 30, 2014
   
31.1 Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
   
31.2 Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
   
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

* Previously Filed
(1) These exhibits have been previously filed with Registrant’s Post-Effective Amendment No. 2 filed April 5, 2007
(2) These exhibits have been previously filed with the Registrant’s SB-2 Registration Statement (333-125314).
(3) Filed as exhibits to Registrant’s Form 8-K filed December 4, 2006
(4) Filed as an exhibit to Registrant’s Form 8-K filed February 14, 2007.

 

 

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