-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NYnaIOXMle2gGSFfjWPa1gDzCK66QRhsmZONUHhO0IUh84EUUWm7VK8ercZ1Pc9n V4xBdJASVZbq422Xdh7BXg== 0001269678-05-000204.txt : 20051020 0001269678-05-000204.hdr.sgml : 20051020 20051019175013 ACCESSION NUMBER: 0001269678-05-000204 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20051020 DATE AS OF CHANGE: 20051019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIGER TELEMATICS INC CENTRAL INDEX KEY: 0001065581 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 134051167 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15977 FILM NUMBER: 051145908 BUSINESS ADDRESS: STREET 1: 5550 WATER STREET STREET 2: SUITE 937 CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 904-279-9240 MAIL ADDRESS: STREET 1: 5550 WATER STREET STREET 2: SUITE 937 CITY: JACKSONVILLE STATE: FL ZIP: 32202 FORMER COMPANY: FORMER CONFORMED NAME: MEDIA COMMUNICATIONS GROUP INC DATE OF NAME CHANGE: 20000630 10-Q 1 tiger10q033105.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2005 Commission File Number 001-15977 TIGER TELEMATICS, INC. (Exact name of registrant as specified in its charter) Delaware 13-4051167 (State or other jurisdiction of (IRS Employer Incorporation or organization) Identification Number) 550 Water Street, Suite 937 32202 (Address of principal executive offices) (Zip Code) (904) 279-9240 (Registrant's telephone number, including area code) 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 No X --- --- Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding as of Class September 30, 2005 - ---------------------- ------------------- Common Stock, Par 62,600,000 Value $0.001 per share CONTENTS Page ---- Part I Item 1. Financial Statements Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statement of Stockholders' Deficiency 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition nd Results of Operations 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 Item 4. Controls and Procedures 21 Part II Tiger Telematics, Inc. Other Information Item 1. Legal Proceedings 21 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22 Item 3. Defaults Upon Senior Securities 23 Item 4. Submission of Matters to a Vote of Security Holders 23 Item 5. Other Information 23 Item 6. Exhibits 23 1 TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2005 and December 31, 2004 Unaudited March 31, December 31, 2005 2004 ---- ---- ASSETS Current Assets Cash $ 336,105 $ 4,653,559 Accounts receivable 580,464 616,571 Other receivables 4,234,154 3,129,235 Inventories 599,459 38,532 Advances to employees 52,965 204,081 Deposits to suppliers 2,694,415 924,456 Prepaid expenses and other current assets 1,022,781 698,106 ------------- ------------- Total current assets 9,520,343 10,264,540 Property and Equipment, net 2,682,781 350,626 Assets held for sale 1,441,062 755,227 Other assets: Goodwill 3,975,670 3,975,670 Other intangible assets 1,901,765 1,901,765 ------------- ------------- Deferred tax asset, net of valuation allowance of $110,000,000 and $45,000,000 in 2005 and 2004 respectively $ 19,521,621 $ 17,247,828 ============= ============= LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current Liabilities Accounts payable $ 13,711,766 $ 13,976,402 Amount due stockholders -- 248,266 Notes payable - Current portion 217,694 78,937 Accrued expenses 9,960,459 8,143,023 Foreign tax accrual 39,026,843 7,567,351 Deposits on common stock -- 1,871,730 Contingent liabilities arising from discontinued operations 1,168,243 1,168,243 ------------- ------------- Total current liabilities 64,085,005 33,053,952 Notes payable after one year 1,100,000 408,638 ------------- ------------- Total liabilities 65,185,005 33,462,590 ------------- ------------- 2 COMMITMENTS AND CONTINGENCIES Stockholders' Deficiency Common stock - 0.001 par value, authorized 500,000,000 shares. Issued and outstanding 53,235,271 and 36,306,607 in 2005 and 2004 respectively 53,236 36,307 Additional paid-in-capital 239,940,639 107,017,140 Accumulated other comprehensive loss (1,743,709) (3,112,766) Accumulated deficiency (283,913,550) (120,155,443) ------------- ------------- Stockholders' deficiency (45,663,384) (16,214,762) ------------- ------------- $ 19,521,621 $ 17,247,828 ============= ============= See Notes to Consolidated Financial Statements 3
TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended March 31, 2005 and 2004 Unaudited 2005 2004 ---- ---- Net sales $ 420,196 $ -- Cost of goods sold 455,092 -- ------------- ------------- Gross Loss (34,896) -- ------------- ------------- Operating expenses Selling expense 12,556,954 839,565 General and administrative 151,141,469 4,890,268 ------------- ------------- Total Operating Expenses 163,571,423 5,729,833 ------------- ------------- Operating Loss (163,606,319) (5,729,833) ------------- ------------- Other (expense) Other (2,286) Interest expense (149,502) (38,292) ------------- ------------- (151,788) (38,292) ------------- ------------- Net Loss $(163,758,107) $ (5,768,125) ============= ============= Net loss per common share - basic and diluted $ (3.81) $ (0.52) ============= ============= Weighted average shares outstanding - basic and diluted 42,956,145 11,196,382 ============= =============
See Notes to Consolidated Financial Statements 4
TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY For the three months ended March 31, 2005 Unaudited Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Capital Loss Deficit Deficiency ------------- ------------- ------------- ------------- ------------- ------------- Balance (deficiency) December 31, 2004 36,306,607 $ 36,307 $ 107,017,140 $ (3,112,766) $(120,155,443) $ (16,214,762) Issuance of common stock: Private placement 1,161,711 1,162 19,180,482 -- -- 19,181,644 Stock based employee compensation 4,859,284 4,859 36,961,504 -- -- 36,966,363 Services 10,307,669 10,308 72,606,113 -- -- 72,616,421 Contingent shares related to Indie acquisition 600,000 600 4,175,400 -- -- 4,176,000 Net loss -- -- -- (163,758,107) (163,758,107) (163,758,107) Other comprehensive income -foreign currency translation adjustment 1,369,057 1,369,057 ------------- Total comprehensive loss (162,389,050) ============= ------------- ------------- ------------- ------------- ------------- ------------- Balance (deficiency) March 31, 2005 53,235,271 $ 53,236 $ 239,940,639 $ (1,743,709) $(283,913,550) $ (45,663,384) ============= ============= ============= ============= ============= =============
See Notes to Consolidated Financial Statements 5
TIGER TELEMATICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2005 and 2004 Unaudited 2005 2004 ---- ---- Cash Flows for Operating Activities: Loss from operations $(163,758,107) $ (5,768,125) Other comprehensive income (loss) - foreign currency translation adjustment 1,369,057 (34,468) Adjustments to reconcile net loss from operations to net cash used in operating activities: Depreciation 434,857 32,688 Expenses paid with common stock 113,758,784 380,358 Changes in assets and liabilities: (Increase) in other receivable (1,104,919) (595,485) Decrease (increase) in advances to employees 151,116 (1,151,359) (Increase) in inventories (560,927) -- (Increase) in deposits with suppliers (1,769,959) -- (Increase) in prepaid expenses and other current assets (324,675) -- Increase (decrease) in accounts payable (264,636) 1,292,815 Increase in foreign tax accrual 31,459,491 221,967 Increase in accrued expenses 1,817,437 722,998 (Increase) decrease in accounts receivable 36,107 (75,527) ------------- ------------- Net cash used in operating activities (18,756,374) (4,974,138) ------------- ------------- Cash Flows From Investing Activities: Purchase of property and equipment (2,767,012) (57,164) Assets held for sale (685,835) -- ------------- ------------- Net cash used in investing activities (3,452,847) (57,164) ------------- ------------- Cash Flows From Financing Activities: Issuance of common stock and warrants 19,181,644 2,923,033 Net change in deposits on common stock (1,871,730) 2,108,139 Loans and advances from stockholders -- 55,000 Repayment to stockholders (248,266) (9,191) Payments on notes payable (78,937) (9,529) Proceeds from notes payable 909,056 -- ------------- ------------- Cash provided by financing activity 17,891,767 5,067,452 ------------- ------------- Net change in cash (4,317,454) 36,150 Cash: Beginning of period 4,653,559 8,959 ------------- ------------- End of period $ 336,105 $ 45,109 ============= ============= 6 Supplemental disclosure of cash flow Information: Cash paid for interest $ 149,502 $ 4,719 ============= ============= Supplemental Disclosure of Non-cash Investing and Operating Activities - Stock issued for: Operating expenses $ 72,616,421 $ 380,358 Employee compensation 36,966,363 -- Contingent consideration for Indie Studios acquisition 4,176,000 -- ------------- ------------- 113,758,784 380,358 ============= ============= Financing Activities: Conversion of stockholder debt to common stock $ -- $ 55,000 ============= =============
See Notes to Consolidated Financial Statements 7 TIGER TELEMATICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION The condensed consolidated financial statements as of March 31, 2005 and for the three months ended March 31, 2005 and March 31, 2004, included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information for the periods indicated have been included. For further information regarding the Company's accounting policies, refer to the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2004. Tiger Telematics, Inc. ("Tiger Telematics" or the "Company"), a Delaware corporation, is the parent company of several subsidiaries, including Gizmondo Europe Ltd., the developer of the multi-entertainment wireless handheld gaming device called the Gizmondo. The consolidated financial statements include the accounts of Tiger Telematics and its subsidiaries, Gizmondo Europe Ltd. (and its subsidiaries), Tiger Telematics USA, Inc., ISIS Models Ltd., Indie Studios, AB, and Warthog Plc (including four wholly owned subsidiaries of Warthog Plc). Intercompany accounts and transactions have been eliminated. Going Concern: The Company has sustained net losses aggregating $118 million for the three years ended December 31, 2004 and $164 million for the three months ended March 31, 2005. In addition, the Company at March 31, 2005 had a net working capital deficiency of $54.6 million. During those periods, $149 million of expenses were funded by issuing restricted common stock in exchange for services and did not require the use of cash. Management anticipates proceeds from sales of Gizmondo units and accessories to increase significantly after the U. S. launch of the product in the fourth quarter of 2005. Management also anticipates the issuance of equity securities to meet working capital requirements and to fund development costs incurred in connection with developing telematics related products that the Company believes will enhance its operations. Additionally, the Company borrowed approximately $21.2 million from shareholders on a short-term basis during the second quarter and management believes that future shareholder loans are available if needed. In July 2005, the Company instituted significant cost savings measures including: closing unneeded facilities, reducing staff by over 100 employees and instituting other cost savings measures. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary in the event the Company cannot continue as a going concern. 8 Description of the business: Tiger Telematics and its subsidiaries are principally engaged in the business of developing and marketing the Gizmondo wireless handheld multi-entertainment gaming device. The Company started Gizmondo Europe, Ltd. (formerly Tiger Telematics Europe Ltd.) in late 2002 to focus on developing new telematics products including next generation fleet telematics products and child tracker products. In 2003, the Company began developing a new multi-entertainment wireless handheld gaming device referred to as Gizmondo. While the Company previously developed a variety of commercial telematics products, since early 2005 the Company's primary business strategy has been to develop the Gizmondo. The Company launched the full-scale production of Gizmondo in the UK in March 2005, and plans a full-scale introduction to the US market in the fourth quarter of 2005. The Gizmondo is powered by a Microsoft Windows CE.net platform, has a 2.8-inch TFT color screen with a Samsung ARM9 400Mhz processor and incorporates the GoForce 3D 4500 NVIDIA graphics accelerator. Gizmondo provides cutting-edge gaming, multimedia messaging, an MP3 music player, Mpeg4 movie playing capability, a digital camera and a GPRS network link to allow wide-area network gaming. Additionally, Gizmondo contains a GPS chip for location based services, is equipped with Bluetooth for use in multi-player gaming and accepts MMC card accessories. The Gizmondo represents the Company's primary business segment. Valuation of Common Stock: The shares of the Company's common stock issued as payment for services, employee bonuses, acquisitions and debt payments are restricted securities and may not be currently sold. An independent business valuation expert determines the "fair value" of these restricted securities on a quarterly basis. Management believes that the appraised value is a better indication of the fair value of the restricted shares issued than the price of freely traded shares in the open market due to the large number of issued restricted shares. Segment Information: The Company focuses primarily all of its business in one segment, the development, production, and sale of the wireless handheld multi-entertainment gaming device, Gizmondo. NOTE B - ADVANCES TO AND AMOUNTS DUE EMPLOYEES AND STOCKHOLDERS AND OTHER RECEIVABLES Advances to employees and stockholders of subsidiaries of the Company of $52,965 and $204,081 at March 31, 2005 and December 31, 2004, respectively, are due on demand, without interest. Amounts due to employees and stockholders of $0 and $248,266 at March 31, 2005 and December 31, 2004, respectively, are due on demand, without interest. Other receivables of $4,234,154 and $3,129,235 at March 31, 2005 and December 31, 2004, respectively, consist primarily of VAT tax recoverable from government agencies. 9
NOTE C - EQUITY TRANSACTIONS During the first quarter of 2005, the Company issued 16,928,664 shares of restricted common stock in numerous private transactions with an aggregate value of $132,940,428, all as more particularly described below: Issued 10,307,669 shares of restricted common stock in payment of services provided by unrelated vendors, principally consulting services related to development of the Gizmondo, aggregating $72,616,421. The shares issued were valued at $6.96 to $7.92 per share. Sold 1,161,711 shares of restricted common stock in various private placement transactions with individual and institutional investors aggregating $19,181,644 in cash. The shares issued were valued at $3.00 to $20.00 per share. Issued 600,000 shares of restricted common stock valued at $4,176,000 in connection with the successful completion of a product development project. Issued 4,859,284 shares of restricted common stock in payment to employees aggregating $36,966,363. The shares were valued at $6.96 to $7.92 per share. Of those shares, executives of the Company received 4,045,036 shares valued at $27,918,551, and Warthog employees received 422,000 shares valued at $3,204,862. At March 31, 2005, 53,235,271 shares of common stock were issued and outstanding. From April 1 to September 28, 2005, the Company issued approximately 8.4 million additional shares in numerous private transactions (a) for cash, (b) to settle accounts payable or other liabilities, and (c) to purchase goods or services provided by vendors, strategic partners, professionals, consultants and employees. In each case the Company recorded capital surplus based upon the fair value of the Company's common stock at the time of issuance or agreement to issue. The aggregate amount recorded during 2005 was approximately $200 million, including the above-described shares. Following is a recap of additional shares issued after March 31, 2005: - -------------------------------- -------------- ------------------- -------------------- Number Price Per Share Common Stock and of Shares Additional Paid in Capital - -------------------------------- -------------- ------------------- -------------------- Balance, March 31, 2005 53,235,271 $239,993,875 - -------------------------------- -------------- ------------------- -------------------- April 1, 2005 to June 30, 2005: - -------------------------------- -------------- ------------------- -------------------- Sale of Securities 1,351,088 $3.50 to $20.00 18,826,735 - -------------------------------- -------------- ------------------- -------------------- Employee Compensation 57,392 $4.31 247,359 - -------------------------------- -------------- ------------------- -------------------- Services 1,701,216 $4.31 to $5.18 7,405,060 - -------------------------------- -------------- ------------------- -------------------- Totals - Three months ended June 30, 2005 3,109,696 26,479,154 - -------------------------------- -------------- ------------------- -------------------- 10 - -------------------------------- -------------- ------------------- -------------------- July 1 to September 30, 2005: - -------------------------------- -------------- ------------------- -------------------- Sale of Securities 4,106,368 $3.50 to $20.00 42,319,007 - -------------------------------- -------------- ------------------- -------------------- Services 1,708,195 $5.20 to $6.06 9,363,708 - -------------------------------- -------------- ------------------- -------------------- Totals at September 30, 2005 62,159,530 $318,155,744 - -------------------------------- -------------- ------------------- --------------------
NOTE D- REVERSE STOCK SPLIT AND INCREASE IN AUTHORIZED SHARES In July 2004, the Company's shareholders approved a 1 for 25 reverse stock split. The number of authorized shares and par value were unchanged. All common stock amounts described in this Form 10-Q have been adjusted to reflect this change for all periods presented. In May 2003, the Company's shareholders approved an increase in the number of authorized shares from 100 million shares to 250 million shares. In January 2004, the authorized shares were increased to 500 million shares. NOTE E - STOCK BASED COMPENSATION The Company uses the intrinsic-value method of accounting for stock based compensation. Under this method, compensation cost is the excess, if any, of the fair value over the amount an employee must pay to acquire the stock at the date of the grant. The Company generally grants options with an exercise price equal to the market value of the common stock at the date of grant. The Black-Scholes option price model was used to estimate the fair value as of the date of grant using the following assumptions: Dividend yield 0% Risk-free interest rates 4.35% Volatility 163.00% Expected option term (years) 9.61 Weighted-average fair value of options granted during the year $1.50 If the Company had determined compensation expense for the Plan based on the fair value at the grant dates consistent with the method of SFAS No. 123 and SFAS No. 148, the Company's pro-forma net loss and basic loss per share would have been as follows: 11
Three Months Ended Three Months Ended March 31, 2005 March 31, 2004 -------------- -------------- Net loss as reported $ (163,758,000) $ (5,768,000) Stock based compensation expense, net of tax ($0) included in the determination of net loss as reported $ (36,966,000) $ -- Stock based compensation expense under the fair value based method, net of tax ($0) $ (36,980,000) $ (14,000) Pro forma net loss $ (163,772,000) $ (5,782,000) Basic and diluted net loss per share, as reported $ (3.81) $ (.52) Pro forma basic and diluted net loss per share $ (3.81) $ (.52)
NOTE F - RELATED PARTY TRANSACTIONS Included in accrued expenses are amounts owed an executive officer and director of $882,119 and $646,667 at March 31, 2005 and December 31, 2004, respectively, for back salary and reimbursable expenses incurred on behalf of the Company. In September 2004, Northern Lights Software Limited ("Northern Lights"), a company registered in the United Kingdom, and Gizmondo Europe entered into a License Agreement, pursuant to which Northern Lights licensed the games Chicane and Colors and provided software development services to Gizmondo Europe. During 2004, Gizmondo Europe paid Northern Lights a total of $3,513,000 under the License Agreement, which amount was invoiced during the regular course of business. Carl Freer, Chairman of the Company's Board of Directors, and Stefan Eriksson are directors of both Northern Lights and Gizmondo Europe and each is the beneficial owner of 23.5% of the issued and outstanding share capital of Northern Lights. At December 31, 2004, the outstanding balance payable to Northern Lights was $906,000, which amount was subsequently paid in 2005. Carl Freer repaid this amount to an escrow account held by the Company on September 29, 2005, pending the determination of a special committee of independent directors of the fairness of the transaction to the Company, relying upon independent counsel and a fairness opinion of independent financial experts. In 2004 and the first quarter of 2005, Gizmondo Europe paid Anneli Freer, the spouse of Mr. Carl Freer, $116,000 and $57,831, respectively, for consultancy services provided to Gizmondo Europe. Mrs. Freer provided marketing and public relations services, an introduction to the performer Sting and time spent in connection with the creation of the "Agaju" gaming concept currently in development. Carl Freer reimbursed the Company for these entire amounts on September 28, 2005. This amount was recorded as additional paid in capital upon receipt. In 2004, the Company paid $163,855 to Bankside Law for legal fees incurred on behalf of Mr. Freer, personally. The Company included this amount as additional 12 compensation to Mr. Freer. Carl Freer reimbursed the Company for these entire amounts on September 28, 2005. This amount was recorded as additional paid in capital upon receipt. During 2004, Mr. Carl Freer and Mr. Stefan Eriksson entered into a multi-party transaction, whereby they caused Asiatic Bank and Finance, a company registered in Panama with its head office in Hong Kong, to pay $7,622,000 that was previously owed by Asiatic to Messrs. Freer and Eriksson directly to 3P PreForm Marketing and Research AB and other non-affiliated third parties in repayment of research and development expenditures owed to these parties by Gizmondo Europe. Gizmondo Europe then credited this amount in payment of amounts previously owed by Carl Freer and Stefan Eriksson to Gizmondo Europe. Asiatic Bank and Finance owns 400,000 shares of common stock of the Company that it acquired in November 2003 at a price of $.50 per share. Gizmondo Europe maintains directors accounts whereby amounts owing to and from directors of Gizmondo Europe are netted in order to facilitate advances made and expenses incurred by directors. During 2004, Gizmondo Europe was owed as much as $5,723,860, and $3,122,210, by Messrs. Freer and Eriksson, respectively. Prior to his becoming a director of the Company in August 2004, all amounts owed by Mr. Freer and a portion of amounts owed by Mr. Eriksson were satisfied by Asiatic in the transaction described in the preceding paragraph. As of December 31, 2004, Mr. Eriksson owed $204,081 to Gizmondo, which loans were subsequently repaid. During 2005, Mr. Eriksson owed as much as $114,066 to Gizmondo Europe, all of which has been repaid. Several of the transactions described above were consummated without prior approval by the Company's Board of Directors. Since the Company had three directors, all of whom are involved in management of the Company and its subsidiaries, none of these transactions were approved by independent directors. On September 29, 2005, the Company appointed three independent directors. With respect to the transactions in 2004 described above in which Mr. Carl Freer, Mrs. Carl Freer and/or Mr. Stefan Eriksson had an interest, respectively, the Company appointed the three independent directors as a special committee of the Board, authorized to retain independent counsel and other experts and with their assistance investigate, review and determine the fairness of these transactions and, if appropriate, initiate remedial actions. The independent directors have retained Marshall Stevens to assist in valuing these transactions. NOTE G - INVENTORY Inventories are stated at the lower of cost (specific identification basis) or market, and consist of the following at March 31, 2005 and December 31, 2004: 2005 2004 ---------- ---------- Electronic components $ 38,532 $ 38,532 Finished goods $ 560,927 -- ---------- ---------- Total $ 599,459 $ 38,532 ========== ========== 13 NOTE H - FOREIGN TAX ACCRUAL The Company has accrued a UK Tax that may be levied on the restricted common stock issued to employees as compensation. NOTE I - LONG-TERM DEBT The Company has increased long-term debt from $488,000 at December 31, 2004, to $1,318,000 at March 31, 2005. The loans are secured by automobiles, some of which are classified as assets held for sale. The loans are payable in monthly installments over five years through January 2009. NOTE J - CONTINGENCIES In August 2005, the Company filed an action against Integra SP Holdings Limited and Integra SP Nominee Limited (collectively "Integra") seeking a declaratory judgment that the Company had properly terminated a stock purchase agreement between the Company and Integra. In November 2004, the Company entered into an agreement with Integra to acquire all of the outstanding share capital of Integra SP Holdings Limited for Company common stock with a market value of approximately $35 million based on $14.06 per share. The agreement, which was amended in January 2005, required the satisfaction of numerous conditions in order to close. Several of those conditions were not satisfied and on July 7, 2005, the Company notified Integra that it had elected to terminate the agreement. In connection with entering into the agreement the Company had also loaned Integra $1,541,280 under a debenture providing for loans by the Company of up to $1,926,600 secured by Integra's intellectual property rights. Termination of the stock purchase agreement entitles the Company to demand payment on the debenture with 60 days notice, which the Company did on July 7, 2005. The loan is included as other receivables. The Company considers this loan to be recoverable given the value of the collateral securing this loan. On August 19, 2005, Ogilvy Group Sweden Limited ("Ogilvy") commenced an action against Gizmondo Europe Limited in the Stockholm District Court to collect approximately $4.1 million plus interest allegedly owed to Ogilvy for marketing and advertising services provided to Gizmondo Europe during 2003 and 2004. Gizmondo Europe's relationship with Ogilvy was terminated on June 30, 2005. Pursuant to a Securities Lending Agreement, the Company issued 400,000 shares of its common stock to Ogilvy as collateral for Gizmondo Europe's obligations to Ogilvy. At March 31, 2005, the value of these shares is included in accounts payable. On October 3, 2005, Ogilvy filed an action against the Company and Gizmondo Europe in the U. S. District Court, Southern District of New York, to recover the amounts described above based on alleged defaults under the Securities Lending Agreement. On August 29, 2005, an affiliate of Ogilvy, Ogilvy Public Relations Worldwide, Inc. ("Ogilvy PR"), commenced an arbitration proceeding in New York City against Gizmondo Europe and the Company to collect approximately $305,000 plus interest allegedly owed to Ogilvy PR for public relations services under an agreement dated June 30, 2004. On September 20, 2005, the Company and Ogilvy PR settled this dispute for $125,000 to be paid by the Company. On September 2, 2005, MTV Networks Europe demanded payment of $1,527,500 previously invoiced to Gizmondo Europe under an agreement dated March 31, 2005 with Gizmondo Europe guaranteed by the Company. The agreement provides for 14 sponsorship fees of $2,600,000 plus VAT and airtime advertising fees of $2,600,000. MTV Networks Europe has terminated the agreement effective September 9, 2005, reserving its right to bring legal proceedings for payment of the outstanding invoices and damages for lost profits resulting from termination of this agreement. Management anticipates an amicable settlement based on current discussions with MTV. Early in the third quarter of 2005, HandHeld Games, Inc. filed suit against the Company for damages and costs in excess of $200,000 as a result of a dispute between the Company and HandHeld Games over a game development contract for the game "Chicane". The suit is in the discovery stages, but the Company believes it has meritorious defenses and does not expect the outcome of the matter to have a material effect on the financial condition of the Company. In October 2004, Gizmondo Europe Ltd, (Gizmondo), a subsidiary of the Company signed a contract with SCi Entertainment Group Plc (SCi), a leading games publisher, under which Gizmondo has licensed the right to develop and publish twelve SCi products for the Gizmondo platform. The agreement covers both currently released titles as well as those in the pipeline, and establishes the structure for continuing collaboration between the two companies. The agreement has Gizmondo paying a minimum guarantee of approximately $1,250,000 allocated by and among 12 products. The guarantee, which has been paid, is non-refundable but fully recoverable against earned royalties of each product. An earned royalty of 5% of net receipts is to be paid on each product. NOTE K - WARRANTS During 2004, the Company issued warrants to purchase 250,000 shares of common stock at an exercise price of $5 per share. The warrants are exercisable immediately and expire on September 30, 2009. The Company also granted warrants to purchase 245,525 shares of common stock at an exercise price of $11.25 per share. These warrants are exercisable immediately and expire on June 30, 2006. At March 31, 2005 and December 31, 2004, 495,525 warrants were outstanding. None have been exercised. NOTE L - ACQUISITIONS The Company acquired several subsidiaries during 2004, ISIS Models, Ltd., Indie Studios AB and four subsidiaries of Warthog, PLC. The following proforma information reflects the net sales, net loss, and per share amounts for the first quarter of 2004 as if the Company had made the 2004 Acquisitions on January 1, 2004. March 31, 2004 ------------ Pro forma net sales $ 3,582,000 Pro forma net loss $ 10,633,000 Pro forma basic and diluted net loss ($0.83) per common share Weighted average shares outstanding - - basic and diluted 12,784,247 15 NOTE M - SUBSEQUENT EVENTS In August 2005, Gizmondo Europe and U. S. game developer Electronic Arts entered into a Software Development Contract for the development of two games, FIFA and FXXFSX. In connection with this contract, Gizmondo Europe paid Electronic Arts $5.9 million. In May 2005, two entities that are shareholders of the Company provided an aggregate total of approximately $21.2 million in short term loans to Gizmondo Europe. The loans are payable on October 31, 2005. The loans are guaranteed by Carl Freer and Stefan Eriksson, personally. The Company also pledged 1,027,069 shares of its common stock as collateral for the loans. During the second quarter of 2005, as payment for interest and loan fees, the Company (i) issued 1,200,000 of its restricted common stock valued at approximately $5,000,000 and (ii) granted warrants to purchase 3,027,069 shares of the its restricted common stock for $8.00 per share. The warrants are valued at approximately $2,512,876. The warrants are exercisable at any time and expire as follows: December 31, 2005 - 1,027,069 shares; December 31, 2006 - 2,000,000 shares. Carl Freer loaned the Company $1,840,000 on September 18, 2005, and paid an additional $1,489,000 on behalf of the Company to satisfy a payable due to a component supplier. These amounts are interest free demand notes. The Company satisfied these amounts shortly thereafter. On September 8, 2005, the Company executed a Stock Purchase Agreement with certain stockholders of Globicom, Inc., a Texas corporation, and closed the transaction on that date, for the acquisition of approximately eighty-four percent (84%) of the issued and outstanding common stock of Globicom, Inc. The Company acquired Globicom in a move to provide wireless network support and expand the wireless infrastructure for Gizmondo. The Company paid $200,000 in cash and issued 116,859 shares of its restricted common stock on September 8, 2005. An additional contingent cash payment of $120,000 is due upon the completion of certain milestones. Payments amounting to $3,971,000 have been made to Games Factory Publishing Ltd in connection with a games development agreement entered into in August 2005 for the development of 19 games to be used on the Gizmondo handheld device. A 50% shareholder of Games Factory Publishing Ltd owns 100,000 shares of the Company's common stock. In October 2005, the Company exercised a withdrawal provision in the agreement due to a delay in game delivery and received a reimbursement of all amounts previously paid to Games Factory. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 23E of the Securities Act of 1934, as amended. These statements relate to future events or future financial performance. Any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "intend", "believe," "estimate," "predict," "potential" or "continue," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Investors are cautioned that these forward-looking statements reflect numerous assumptions and involve risks and uncertainties that may affect the Company's business and prospects and cause actual results to differ materially from these forward-looking statements. Among the factors that could cause actual results to differ are the Company's operating history; competition; low barriers to entry; reliance on strategic relationships; rapid technological changes; inability to complete transactions on favorable terms; consumer demand for video game hardware and software; the timing of the introduction of new generation competitive hardware systems; pricing changes by key vendors for hardware and software and the timing of any such changes, and the adequacy of supplies of new software products. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person or entity, assumes responsibility for the accuracy and completeness of the forward-looking statements. The Company is under no obligation to update any of the forward-looking statements after the filing of this Form 10-Q to conform such statements to actual results or to changes in the Company's expectations. The following discussion should be read in conjunction with the Company's financial statements, related notes and the other financial information appearing elsewhere in this Form 10-Q. General Overview In early 2003, the Company began developing a new multi-entertainment wireless handheld gaming device that is now referred to as Gizmondo. Since then the Company's primary business strategy has been to develop and market Gizmondo. The Company initially launched a limited production version of the Gizmondo in the UK on March 19, 2005, and expects to launch the full-scale production of Gizmondo and selling in the U.S. market in the fourth quarter of 2005. The Gizmondo is powered by a Microsoft Windows CE.net platform, has a 2.8-inch TFT color screen and a Samsung ARM9 400Mhz processor and incorporates the GoForce 3D 4500 NVIDIA graphics accelerator. Gizmondo provides cutting-edge gaming, multimedia messaging, an MP3 music player, Mpeg4 movie playing capability, a digital camera and a GPRS network link to allow wide-area network gaming. Additionally, Gizmondo contains a GPS chip for location based services, is equipped with Bluetooth for use in multi-player gaming and accepts MMC card accessories. 17 Three months-ended March 31, 2005 compared to the three months ended March 31, 2004: Net Sales: The Company's net sales were $420,000 for the three months ended March 31, 2005 and $0 for the three months ended March 31, 2004. The Company began selling its Gizmondo products in the United Kingdom in 2005. In both quarters the Company has focused and will continue to focus its full attention to the development of the Gizmondo device. Gross Profits: The Company's gross loss was ($35,000) and ($0) for the periods ended March 31, 2005 and 2004. Sales of the Gizmondo device began in 2005 and only minor sales amounts have been recorded. Gross profit (loss) at this sales level is not a meaningful measure. Selling Expenses: Selling and marketing expenses for the three months ended March 31, 2005 were $12,557,000 compared with $840,000 for the same time period in 2004. Most of the increase can be attributed to moving towards the launch of the Gizmondo device in Europe and the United States in the fourth quarter of 2005. Direct advertising expenses aggregated $892,000 in 2005 as compared to $ 50,000 in the first quarter of 2004. Sales promotion activities aggregated $11,120,000 in 2005 compared to $709,000 in for the same period in 2004. Additional expenses were incurred in recruiting various distributors and representatives in various market regions prior to the Gizmondo launch. General and Administrative Expenses: General and administrative expenses for the three months ended March 31, 2005 were $151,014,000 compared to $4,890,000 for 2004, or up approximately over $146 million. This increase came primarily from expenses related to development of the Gizmondo device. The Company incurred over $5,810,000 million in research and development costs directly attributable to the Gizmondo in 2005 as compared to approximately $2,600,000 in 2004. All of these costs are expensed as incurred and are not capitalized for financial reporting purposes. In addition, salaries and related costs rose to over $72,592,000 million in 2005 from $750,000 in 2004 as the Company continued in the product development phase and awarded significant stock bonuses related to the launch of the Gizmondo product. The Company also incurred over $72,257,000 million of legal, accounting and consulting costs in the first quarter of 2005, up from $883,000 in 2004, as consultants were engaged to assist the Company in activities related to the development and launch of the Gizmondo. In the first quarter of 2005, approximately $113,759,000 of the above costs were paid by issuance of the Company's restricted common stock. Interest expense: Interest expense rose to $150,000 from $38,000 during the quarters ended March 31, 2005 and 2004, respectively as notes payable related to vehicle purchases increased from approximately $488,000 at March 31, 2004 to approximately $1,318,000 at March 31, 2005. Net Loss: The Company reported an operating loss of $163,758,000 for the quarter ended March 31, 2005 compared to $5,768,000 for the same time period in 2004. $113,759,000 of this loss was the non-cash cost of issuing shares for services and goods. The aforementioned costs associated with the development of Gizmondo account for this material increase in operating loss. 18 Liquidity and Capital Resources The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The Company has funded its operations principally through private placements of its common stock to accredited foreign investors, aggregating over $131,000,000 in cash since 2002 through March 31, 2005, and the issuance of common stock in exchange for goods and services. During 2004 the Company's working capital deficit increased from $8,800,000 to over $22,800,000 at December 31, 2004, and by the end of the first quarter of 2005 the working capital deficit had increased to over $54,500,000. Accounts payable and accrued expenses have increased by over $33,000,000 while current assets decreased just over $744,000. Without such funding, the Company would not have been able to sustain operations. A subsidiary of the Company, Warthog, had a $184,400 line of credit with a balance of $121,500 (included in accrued expenses) outstanding at December 31, 2004. The note was unsecured, due on demand and was repaid in 2005. Interest is computed at 3% over the bank's base rate. In May 2005, two entities that are shareholders of the Company provided an aggregate total of approximately $21.2 million in short term loans to Gizmondo Europe. The maturity date of these loans has been extended and they are now repayable for $13.49 million on November 31, 2005 and the additional $7.71 million is anticipated to be extended to October 31, 2005. The loans are guaranteed by the Company and by Carl Freer and Stefan Eriksson, personally. The Company also pledged 1,027,069 shares of its common stock as collateral for the loans. Carl Freer loaned the Company $1,840,000 on September 18, 2005, and paid an additional $1,489,000 on behalf of the Company to satisfy a payable due to a component supplier. These amounts are interest free demand notes. These amounts have been satisfied by the company shortly thereafter. From April 1, 2005 through September 30, 2005 the Company obtained additional equity capital aggregating over $78,000,000 in cash and services. The Company will seek to raise additional equity capital and will seek trade or bank financing as needed to fund the development and the launch of the Gizmondo product in different regions as needed. Management anticipates that it can continue to raise equity capital through private placements of its common stock. However, there can be no assurance that any future capital or other financing will be available, or if available on terms reasonably acceptable to the Company. Critical Accounting Policies The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management's best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are stock-based compensation, income taxes, goodwill impairment and revenue recognition. 19 Stock-Based Compensation - ------------------------ We have chosen to account for stock options granted to employees and directors under the recognition and measurement principles of Accounting Principles Board Opinion No. 25 instead of the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-based Compensation," as amended by SFAS No. 148, "Accounting for Stock-based Compensation Transition and Disclosure." In addition, the Company has routinely exchanged shares of its common stock for employee compensation and services and in satisfaction of debt owed by the Company to shareholders. Common stock exchanged for services from employees and unrelated parties, shareholder debt and suppliers is valued at the appraised value of the Company's restricted common stock. Any differences between the appraised value and the stated value of services or debt is charged to operations. The shares issued are restricted securities and may not be currently sold. The value of these restricted securities is determined by an independent business valuation expert on a quarterly basis. Management believes that the appraised value is a better indication of the fair value of the restricted shares issued than the price of freely traded shares in the open market due to the large number of issued restricted shares. Income Taxes - ------------ The calculation of the Company's income tax provision and related valuation allowance is complex and requires the use of estimates and judgments in its determination. As part of the Company's evaluation and implementation of business strategies, consideration is given to the regulations and tax laws that apply to the specific facts and circumstances for any transaction under evaluation. This analysis includes the amount and timing of the realization of income tax liabilities or benefits. Management closely monitors tax developments in order to evaluate the effect they may have on the Company's overall tax position. Impairment of Goodwill and Other Intangible Assets - -------------------------------------------------- Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The Company tests goodwill and other intangible assets on an annual basis, or more frequently if events or circumstances indicate that there may have been impairment. The goodwill impairment test estimates the fair value of each reporting unit, through the use of a discounted cash flows model, and compares this fair value to the reporting unit's carrying value. The goodwill impairment test requires management to make judgments in determining the assumptions used in the calculations. Management believes goodwill is not impaired and is properly recorded in the financial statements. Revenue Recognition - ------------------- The Company enters into agreements to sell products (hardware or software), services, and other arrangements that include combinations of products and 20 services. Revenue from product sales, net of trade discounts and allowances, is recognized provided that persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Revenue is reduced for estimated product returns and distributor price protection, when appropriate. For sales that include customer-specified acceptance criteria, revenue is recognized after the acceptance criteria have been met. Revenue from services is deferred and recognized over the contractual period or as services are rendered and accepted by the customer. When arrangements include multiple elements, we use objective evidence of fair value to allocate revenue to the elements and recognize revenue when the criteria for revenue recognition have been met for each element. The amount of product revenue recognized is affected by our judgments as to whether an arrangement includes multiple elements and if so, whether vendor-specific objective evidence of fair value exists for those elements. Changes to the elements in an arrangement and the ability to establish vendor-specific objective evidence for those elements could affect the timing of the revenue recognition. Most of these conditions are subjective and actual results could vary from the estimated outcome, requiring future adjustments to revenue. Research and Development - ------------------------ The Company expenses research and development costs as incurred. Item 3. Quantitative and Qualitative Disclosures About Market Risk. No market risk sensitive instruments Item 4. Controls and Procedures. In August 2005, the Company began a remediation program to correct the deficiencies noted in Management's Report on Internal Control over Financial Reporting in the Company's Annual Report on Form 10-K for the year ended December 31, 2004. The Company retained BDO Seidman to assist in preparing a remediation plan. The plan was developed in October 2005 and is currently in the design and implementation phase. The Company is planning to remediate all of the areas of deficiency prior to the year end, December 31, 2005. For additional information regarding Management's Report on Internal Control over Financial Reporting, see the Company's Annual Report on Form 10-K for the year ended December 31, 2004. PART II TIGER TELEMATICS, INC. OTHER INFORMATION Item 1. Legal Proceedings In August 2005 the Company filed an action against Integra SP Holdings Limited and Integra SP Nominee Limited (collectively "Integra") seeking a declaratory judgment that the Company had properly terminated a stock purchase agreement between the Company and Integra. In November 2004 the Company entered into an agreement with Integra to acquire all of the outstanding share capital of Integra SP Holdings Limited for Company common stock with a market value of approximately $35 million based on $14.06 per share. The agreement, which was amended in January 2005, required the satisfaction of numerous conditions in 21 order to close. Several of those conditions were not satisfied and on July 7, 2005, the Company notified Integra that it had elected to terminate the agreement. In connection with entering into the agreement the Company had also loaned Integra $1,541,280 in 2005 under a debenture providing for loans by the Company of up to $1,926,600 secured by Integra's intellectual property rights. Termination of the stock purchase agreement entitles the Company to demand payment on the debenture with 60 days notice, which the Company did on July 7, 2005. The action was filed in Florida State Court and has been removed by Integra to the U.S. District Court, Middle District of Florida, Jacksonville Division. On October 13, 2005, Integra filed a motion for preliminary injunction seeking the return of certain property held by the Company as collateral for the debenture. On August 19, 2005, Ogilvy Group Sweden Limited ("Ogilvy") commenced an action against Gizmondo Europe Limited in the Stockholm District Court to collect approximately $4.1 million plus interest allegedly owed to Ogilvy for marketing and advertising services provided to Gizmondo Europe during 2003 and 2004. Gizmondo Europe's relationship with Ogilvy was terminated on June 30, 2005. Pursuant to a Securities Lending Agreement, the Company issued 400,000 shares of its common stock to Ogilvy as collateral for Gizmondo Europe's obligations to Ogilvy. On October 3, 2005, Ogilvy filed an action against the Company and Gizmondo Europe in the U. S. District Court, Southern District of New York, to recover the amounts described above based on alleged defaults under the Securities Lending Agreement. On August 29, 2005, an affiliate of Ogilvy, Ogilvy Public Relations Worldwide, Inc. ("Ogilvy PR"), commenced an arbitration proceeding in New York City against Gizmondo Europe and the Company to collect approximately $305,000 plus interest allegedly owed to Ogilvy PR for public relations services under an agreement dated June 30, 2004. The agreement was terminated in December 2004. On September 20, 2005, the Company and Ogilvy PR settled this dispute for $125,000 to be paid by the Company. Early in the third quarter of 2005, HandHeld Games, Inc. filed suit against the Company for damages and costs in excess of $200,000 as a result of a dispute between the Company and HandHeld Games over a game development contract for the game "Chicane". The suit is in the discovery stages, but the Company believes it has meritorious defenses and does not expect the outcome of the matter to have a material effect on the financial condition of the Company. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2005, the Company sold 1,161,711 shares of restricted common stock for an aggregate sum of $19,181,644, including, $1,871,730 of its restricted common stock that was originally recorded as deposits on common stock and subsequently moved to equity in the first quarter 2005 when the Company issued the common share certificates. The shares were sold for $3.00 to $20.00 per share. The Company negotiated the purchase price for the sale of restricted common stock, based upon the market price of the securities at the time of the negotiation and with an appropriate discount for the restrictions on resale. The restricted common stock was issued to sophisticated, accredited foreign investors or foreign corporations in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. Each investor had access to financial information available in public markets and was given the opportunity to review the Company's books, records and other information that they requested. The proceeds were used to fund the Company's operations. 22 Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits Exhibit 31 Rule 13a-14(a). Exhibit 32 Section 1350 Certification. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. TIGER TELEMATICS, INC. October 19, 2005 /S/ Michael W. Carrender - ------------------------- Michael W. Carrender Chief Executive Officer, Director and Chief Financial Officer 24 EX-31 2 tiger10q033105ex31.txt SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE AND FINANCIAL OFFICER Exhibit 31 Rule 13a-14(a) Certification ---------------------------- CERTIFICATIONS - -------------- I, Michael W. Carrender, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tiger Telematics, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: October 19, 2005 /S/ Michael W. Carrender ------------------------- Michael W. Carrender Chief Executive Officer and Chief Financial Officer EX-32 3 tiger10q033105ex32.txt SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE AND FINANCIAL OFFICER Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Tiger Telematics, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Executive Officer and Chief Financial officer of the Company hereby certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002 that based on their knowledge and belief: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report. /S/ Michael W. Carrender - ------------------------- Michael W. Carrender, Chief Executive Officer and Chief Financial Officer October 19, 2005 -----END PRIVACY-ENHANCED MESSAGE-----