R
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
91-2008633
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(IRS Employer Identification Number)
|
Large accelerated filer
|
o |
Accelerated filer
|
o |
Non-accelerated filer
|
o |
Smaller reporting company
|
x |
(Do not check if a smaller reporting company) |
Page
|
||
Part I.
|
Financial Information
|
|
Item 1.
|
Financial Statements (unaudited):
|
3
|
Consolidated Balance Sheets at June 30, 2013 and December 31, 2012
|
3
|
|
Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012
|
4
|
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012
|
5
|
|
Notes to Consolidated Financial Statements
|
6
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
12
|
Item 4.
|
Controls and Procedures
|
19
|
Part II.
|
Other Information
|
|
Item 6.
|
Exhibits
|
20
|
Signatures
|
21
|
June 30,
2013
|
December 31,
2012
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 630,706 | $ | 658,100 | ||||
Accounts receivable, net
|
580,302 | 652,603 | ||||||
Prepaid expenses
|
60,580 | 72,843 | ||||||
Other current assets
|
303,084 | 273,577 | ||||||
Total current assets
|
1,574,672 | 1,657,123 | ||||||
Deposits
|
20,715 | 21,810 | ||||||
Property and equipment, net
|
1,309,110 | 1,276,776 | ||||||
Goodwill
|
110,000 | 110,000 | ||||||
Intangible assets
|
91,373 | 91,922 | ||||||
Total assets
|
$ | 3,105,870 | $ | 3,157,631 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$ | 1,343,322 | $ | 1,156,289 | ||||
Deferred revenue
|
574,312 | 525,026 | ||||||
Total current liabilities
|
1,917,634 | 1,681,315 | ||||||
Long-term portion of amounts due to related parties
|
6,928,605 | 6,615,136 | ||||||
Stockholders’ deficit:
|
||||||||
Preferred stock, nondesignated, 10,000,000 shares
|
- | - | ||||||
authorized, none issued
|
||||||||
Common stock, $0.001 par value, 150,000,000 shares
|
||||||||
authorized, 89,371,320 shares issued and outstanding
|
89,372 | 89,372 | ||||||
Additional paid-in capital
|
8,926,962 | 8,922,108 | ||||||
Accumulated deficit
|
(14,756,703 | ) | (14,150,300 | ) | ||||
Total stockholders’ deficit
|
(5,740,369 | ) | (5,138,820 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 3,105,870 | $ | 3,157,631 |
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Revenue
|
$ | 2,380,714 | $ | 2,476,556 | $ | 4,764,699 | $ | 5,041,000 | ||||||||
Cost of revenue
|
1,334,458 | 1,226,439 | 2,605,684 | 2,402,144 | ||||||||||||
Gross profit
|
1,046,256 | 1,250,117 | 2,159,015 | 2,638,856 | ||||||||||||
Operating expenses
|
||||||||||||||||
Sales and marketing
|
418,124 | 423,266 | 826,290 | 902,488 | ||||||||||||
General and administrative
|
516,818 | 514,085 | 1,052,269 | 1,035,930 | ||||||||||||
Software development
|
283,079 | 292,004 | 599,313 | 596,376 | ||||||||||||
1,218,021 | 1,229,355 | 2,477,872 | 2,534,794 | |||||||||||||
Operating profit (loss)
|
(171,765 | ) | 20,762 | (318,857 | ) | 104,062 | ||||||||||
Other income and (expense)
|
||||||||||||||||
Foreign exchange gain
|
27,974 | 36,851 | 49,735 | 2,675 | ||||||||||||
Interest expense (related party)
|
(169,826 | ) | (157,569 | ) | (335,312 | ) | (310,184 | ) | ||||||||
(141,852 | ) | (120,718 | ) | (285,577 | ) | (307,509 | ) | |||||||||
Loss before income taxes
|
(313,617 | ) | (99,956 | ) | (604,434 | ) | (203,447 | ) | ||||||||
Provision for income taxes
|
(977 | ) | (491 | ) | (1,969 | ) | (1,987 | ) | ||||||||
Net loss
|
$ | (314,594 | ) | $ | (100,447 | ) | $ | (606,403 | ) | $ | (205,434 | ) | ||||
Loss per share
|
||||||||||||||||
Basic and diluted loss per share
|
(0.00 | ) | (0.00 | ) | (0.01 | ) | (0.00 | ) | ||||||||
Weighted average shares outstanding
|
||||||||||||||||
Basic and diluted
|
89,371,320 | 89,371,320 | 89,371,320 | 89,371,320 |
Six months ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Operating activities:
|
||||||||
Net loss
|
$ | (606,403 | ) | $ | (205,434 | ) | ||
Adjustments to reconcile net loss to net cash provided
|
||||||||
by operating activities:
|
||||||||
Depreciation and amortization
|
397,563 | 370,705 | ||||||
Bad debt expense
|
137,919 | 58,500 | ||||||
Stock-based compensation expense
|
4,854 | 4,798 | ||||||
Noncash barter revenue
|
- | (180,000 | ) | |||||
Noncash barter advertising expense
|
- | 96,000 | ||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
(65,618 | ) | (36,880 | ) | ||||
Prepaid expenses
|
12,263 | (6,605 | ) | |||||
Other current assets
|
(29,507 | ) | (52,522 | ) | ||||
Deposits
|
1,095 | (205 | ) | |||||
Accounts payable and amounts due to related parties
|
500,502 | 340,772 | ||||||
Deferred revenue
|
49,286 | 35,214 | ||||||
Net cash provided by operating activities
|
401,954 | 424,343 | ||||||
Investing activities:
|
||||||||
Purchase of fixed assets
|
(40,463 | ) | (16,299 | ) | ||||
Purchase of intangible assets
|
(2,380 | ) | - | |||||
Capitalized application software
|
(386,505 | ) | (372,092 | ) | ||||
Net cash used in investing activities
|
(429,348 | ) | (388,391 | ) | ||||
Net increase (decrease) in cash
|
(27,394 | ) | 35,952 | |||||
Cash and equivalents, beginning of period
|
658,100 | 427,010 | ||||||
Cash and equivalents, end of period
|
$ | 630,706 | $ | 462,962 |
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Barter revenue earned
|
- | $ | 90,000 | - | $ | 180,000 | ||||||||||
Advertising credits expensed
|
- | 6,000 | - | 96,000 |
June 30, 2013
|
December 31, 2012
|
|||||||||||||||
Notional
Amount
|
Net Asset
(Liability)
|
Notional
Amount
|
Net Asset
(Liability)
|
|||||||||||||
Forward contracts
|
$ | 450,000 | $ | (11,206 | ) | $ | - | $ | - |
June 30, 2013
|
December 31, 2012
|
|||||||
Purchase of business unit
|
$ | 227,677 | $ | 228,721 | ||||
Computer hosting services
|
23,647 | 127,127 | ||||||
Office rent
|
954,537 | 970,729 | ||||||
Other
|
17,276 | 17,276 | ||||||
Loan
|
756,458 | 732,670 | ||||||
Lead generation services
|
999,691 | 951,133 | ||||||
Due to Management
|
3,949,319 | 3,587,480 | ||||||
$ | 6,928,605 | $ | 6,615,136 |
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Sales and marketing
|
$ | 2,001 | $ | 2,001 | $ | 4,002 | $ | 4,002 | ||||||||
General and administrative
|
426 | 318 | 852 | 796 | ||||||||||||
Total stock-based compensation
|
$ | 2,427 | $ | 2,319 | $ | 4,854 | $ | 4,798 |
Three months ended June 30,
|
Six months ended June 30,
|
||||||
2013
|
2012
|
2013
|
2012
|
||||
Expected dividend yield
|
N/A
|
-
|
N/A
|
-
|
|||
Expected stock price volatility
|
N/A
|
276%
|
N/A
|
276%
|
|||
Risk-free interest rate
|
N/A
|
4%
|
N/A
|
4%
|
|||
Expected life of options
|
N/A
|
6.5 years
|
N/A
|
6.3 years
|
|||
Weighted average fair value of options and warrants granted
|
N/A
|
$0.065
|
N/A
|
$0.062
|
Weighted-
|
||||||||
Options and
|
Average
|
|||||||
Warrants
|
Exercise Price
|
|||||||
Outstanding at December 31, 2012
|
13,837,803 | $ | 0.05 | |||||
Stock options forfeited/expired
|
(110,000 | ) | $ | 0.04 | ||||
Outstanding at June 30, 2013
|
13,727,803 | $ | 0.05 |
Weighted-
|
||||||||
Options and
|
Average Grant
|
|||||||
Warrants
|
Date Fair Value
|
|||||||
Non-vested stock options and warrants at
|
||||||||
December 31, 2012
|
738,887 | $ | 0.04 | |||||
Vested during the period
|
(181,668 | ) | $ | 0.04 | ||||
Non-vested stock options and warrants at
|
||||||||
June 30, 2013
|
557,219 | $ | 0.04 |
Options and Warrants
|
||||||||||||||||||||||
Options and Warrants Outstanding
|
Exercisable
|
|||||||||||||||||||||
Weighted
|
||||||||||||||||||||||
Number
|
Average
|
Weighted
|
Number
|
Weighted
|
||||||||||||||||||
Outstanding at
|
Remaining
|
Average
|
Exercisable at
|
Average
|
||||||||||||||||||
June 30,
|
Contractual
|
Exercise
|
June 30,
|
Exercise
|
||||||||||||||||||
2013
|
Life
|
Price
|
2013
|
Price
|
||||||||||||||||||
$ | 0.05-0.10 | 13,227,803 | 2.59 | $ | 0.04 | 12,670,584 | $ | 0.04 | ||||||||||||||
$ | 0.11-0.40 | 500,000 | 1.38 | $ | 0.40 | 500,000 | $ | 0.40 |
2013
|
2012
|
Change ($)
|
Change (%)
|
|||||||||||||
Three months ended June 30, | ||||||||||||||||
Licensing revenue
|
$ | 2,380,714 | $ | 2,476,556 | $ | (95,842 | ) | (4 | )% |
Licensing revenue
|
$ | 4,764,699 | $ | 5,041,000 | $ | (276,301 | ) | (5 | )% |
2013
|
2012
|
Change ($)
|
Change (%)
|
|||||||||||||
Three months ended June 30,
|
||||||||||||||||
Cost of revenue
|
$ | 1,334,458 | $ | 1,226,439 | $ | 108,019 | 9 | % | ||||||||
Gross profit
|
$ | 1,046,256 | $ | 1,250,117 | $ | (203,861 | ) | (16 | )% | |||||||
Gross margin %
|
44 | % | 50 | % |
Six months ended June 30,
|
||||||||||||||||
Cost of revenue
|
$ | 2,605,684 | $ | 2,402,144 | $ | 203,540 | 8 | % | ||||||||
Gross profit
|
$ | 2,159,015 | $ | 2,638,856 | $ | (479,841 | ) | (18 | )% | |||||||
Gross margin %
|
45 | % | 52 | % |
2013
|
2012
|
Change ($)
|
Change (%)
|
|||||||||||||
Three months ended June 30,
|
||||||||||||||||
Sales and marketing
|
$ | 418,124 | $ | 423,266 | $ | (5,142 | ) | (1 | )% | |||||||
General and administrative
|
516,818 | 514,085 | 2,733 | 1 | % | |||||||||||
Software development
|
283,079 | 292,004 | (8,925 | ) | (3 | )% | ||||||||||
Total operating expenses
|
$ | 1,218,021 | $ | 1,229,355 | $ | (11,334 | ) | (1 | )% |
Six months ended June 30,
|
||||||||||||||||
Sales and marketing
|
$ | 826,290 | $ | 902,488 | $ | (76,198 | ) | (8 | )% | |||||||
General and administrative
|
1,052,269 | 1,035,930 | 16,339 | 2 | % | |||||||||||
Software development
|
599,313 | 596,376 | 2,937 | 0 | % | |||||||||||
Total operating expenses
|
$ | 2,477,872 | $ | 2,534,794 | $ | (56,922 | ) | (2 | )% |
2013
|
2012
|
|||||||
Three months ended June 30,
|
||||||||
Foreign exchange gain (loss)
|
$ | 27,974 | $ | 36,851 | ||||
Interest expense
|
(169,826 | ) | (157,569 | ) | ||||
Total other income and (expenses)
|
$ | (141,852 | ) | $ | (120,718 | ) |
Foreign exchange gain (loss)
|
$ | 49,735 | $ | 2,675 | ||||
Interest expense
|
(335,312 | ) | (310,184 | ) | ||||
Total other income and (expenses)
|
$ | (285,577 | ) | $ | (307,509 | ) |
Exhibit
Number
|
Description of Exhibit
|
|
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 |
Interactive Data Files (Quarterly Report on Form 10-Q, for the quarterly period ended June 30, 2013, furnished in XBRL (eXtensible Business Reporting Language)).
|
QUOTEMEDIA, INC. | |||
Dated: August 8, 2013
|
By:
|
/s/ R. Keith Guelpa | |
R. Keith Guelpa, | |||
President and Chief Executive Officer
(Principal Executive Officer)
|
|
By:
|
/s/ Keith J. Randall | |
Keith J. Randall, | |||
Chief Financial Officer
(Principal Accounting Officer)
|
|||
Exhibit 31.1
CERTIFICATION
I, R. Keith Guelpa, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Quotemedia, Inc.;
2. | Based on my knowledge, this 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 report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2013
By: /s/ R. Keith Guelpa
R. Keith Guelpa
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Keith J. Randall, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Quotemedia, Inc.;
2. | Based on my knowledge, this 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 report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 8, 2013
By: /s/ Keith J. Randall
Keith J. Randall
Chief Financial Officer
Exhibit 32.1
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 on Form 10-Q of Quotemedia, Inc. (the "Company") for the quarterly period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, R. Keith Guelpa, Chief Executive Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: /s/ R. Keith Guelpa
____________________
R. Keith Guelpa
Chief Executive Officer
August 8, 2013
Exhibit 32.2
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 on Form 10-Q of Quotemedia, Inc. (the "Company") for the quarterly period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Keith J. Randall, Chief Financial Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: /s/ Keith J. Randall
____________________
Keith J. Randall
Chief Financial Officer
August 8, 2013
SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Notes to Financial Statements | ||||
Barter revenue earned | $ 180,000 | $ 90,000 | ||
Advertising credits expensed | $ 180,000 | $ 6,000 |
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Consolidated Statements Of Operations | ||||
Revenue | $ 2,380,714 | $ 2,476,556 | $ 4,764,699 | $ 5,041,000 |
Cost of revenue | 1,334,458 | 1,226,439 | 2,605,684 | 2,402,144 |
Gross profit | 1,046,256 | 1,250,117 | 2,159,015 | 2,638,856 |
Operating expenses | ||||
Sales and marketing | 418,124 | 423,266 | 826,290 | 902,488 |
General and administrative | 516,818 | 514,085 | 1,052,269 | 1,035,930 |
Software development | 283,079 | 292,004 | 599,313 | 596,376 |
Total operating expenses | 1,218,021 | 1,229,355 | 2,477,872 | 2,534,794 |
Operating profit (loss) | (171,765) | 20,762 | (318,857) | 104,062 |
Other income and (expense) | ||||
Foreign exchange gain | 27,974 | 36,851 | 49,735 | 2,675 |
Interest expense (related party) | (169,826) | (157,569) | (335,312) | (310,184) |
Total other income and (expense) | (141,852) | (120,718) | (285,577) | (307,509) |
Loss before income taxes | (313,617) | (99,956) | (604,434) | (203,447) |
Provision for income taxes | (977) | (491) | (1,969) | (1,987) |
Net loss | $ (314,594) | $ (100,447) | $ (606,403) | $ (205,434) |
Loss per share | ||||
Basic and diluted loss per share | $ 0.00 | $ 0.00 | $ (0.01) | $ 0.00 |
Weighted average shares outstanding | ||||
Basic and diluted | 89,371,320 | 89,371,320 | 89,371,320 | 89,371,320 |
STOCK-BASED COMPENSATION
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 5. STOCK-BASED COMPENSATION |
FASB ASC 718, Stock Compensation requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized.
Total estimated stock-based compensation expense, related to all of the Companys stock-based awards, recognized for the three and six months ended June 30, 2013 and 2012 was comprised as follows:
At June 30, 2013 there was $31,998 of unrecognized compensation cost related to non-vested share-based payments which is expected to be recognized over a weighted-average period of 3.46 years.
We calculate the fair value of stock options and warrants granted under the provisions of FASB ASC 718 using the Black-Scholes valuation model with the following assumptions:
The following table represents stock option and warrant activity for the six months ended June 30, 2013:
The following table summarizes our non-vested stock option and warrant activity for the six months ended June 30, 2013:
As at June 30, 2013 all stock options and warrants have been granted with exercise prices equal to or greater than the market value of the underlying common shares on the date of grant.
At June 30, 2013 the aggregate intrinsic value of options and warrants outstanding was $179,639. The aggregate intrinsic value of options and warrants exercisable was $174,857. The intrinsic value of stock options and warrants are calculated as the amount by which the market price of our common stock exceeds the exercise price of the option or warrant. |
STOCK-BASED COMPENSATION (Details 2) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Options and Warrants | |
Outstanding at December 31, 2012 | 13,837,803 |
Stock options and warrants forfeited/expired | (110,000) |
Outstanding at June 30, 2013 | 13,727,803 |
Weighted- Average Exercise price | |
Outstanding at December 31, 2012 | $ 0.05 |
Stock options and warrants forfeited/expired | $ 0.04 |
Outstanding at June 30, 2013 | $ 0.05 |
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Notes to Financial Statements | ||||
Advertising credits valued | $ 180,000 | $ 6,000 | ||
Cash settlement to forfeit unused advertising credits | 264,000 | |||
Excess against advertising credits expensed | $ (84,000) |
STOCK-BASED COMPENSATION (Details Narrative) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Stock-Based Compensation Details Narrative | |
Unrecognized compensation cost related to non-vested share-based payments | $ 31,998 |
Share-based compensation, nonvested awards, compensation cost not yet recognized, period for recognition | 3 years 5 months 16 days |
Aggregate intrinsic value of options and warrants outstanding | 179,639 |
Aggregate intrinsic value of options and warrants exercisable | $ 174,857 |
STOCK-BASED COMPENSATION (Details 4) (USD $)
|
Jun. 30, 2013
|
---|---|
0.05-0.10 [Member]
|
|
Options and Warrants | |
Number Outstanding | 13,227,803 |
Weighted Average Remaining Contractual Life | 2 years 7 months 2 days |
Weighted-Average Exercise Price | 0.04 |
Number Exercisable | 12,670,584 |
Exercisable Weighted-Average Exercise Price | $ 0.04 |
0.11-0.40 [Member]
|
|
Options and Warrants | |
Number Outstanding | 500,000 |
Weighted Average Remaining Contractual Life | 1 year 4 months 17 days |
Weighted-Average Exercise Price | 0.40 |
Number Exercisable | 500,000 |
Exercisable Weighted-Average Exercise Price | $ 0.40 |
STOCK-BASED COMPENSATION (Details 3) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Options and Warrants | |
Non-vested stock options and warrants at December 31, 2012 | 738,887 |
Vested during the period | (181,668) |
Non-vested stock options and warrants at June 30, 2013 | 557,219 |
Weighted- Average Grant Date Fair Value | |
Non-vested stock options and warrants at December 31, 2012 | $ 0.04 |
Vested during the period | $ 0.04 |
Non-vested stock options and warrants at June 30, 2013 | $ 0.04 |
BASIS OF PRESENTATION
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Notes to Financial Statements | |
Note 1. BASIS OF PRESENTATION | The accompanying unaudited consolidated financial statements have been prepared in accordance with the generally accepted accounting principles for interim financial statements and instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for a full year. In connection with the preparation of the condensed financial statements, the Company evaluated subsequent events after the balance sheet date of June 30, 2013 through the filing of this report.
These financial statements should be read in conjunction with our financial statements and the notes thereto for the fiscal year ended December 31, 2012 contained in our Form 10-K filed with the Securities and Exchange Commission dated March 28, 2013. |
FINANCIAL INSTRUMENTS
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 3. FINANCIAL INSTRUMENTS | a) Fair value of financial instruments
FASB ASC 820, Fair Value Measurements and Disclosures establishes three levels of inputs that may be used to measure fair value: quoted prices in active markets for identical assets or liabilities (referred to as Level 1), observable inputs other than Level 1 that are observable for the asset or liability either directly or indirectly (referred to as Level 2), and unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities (referred to as Level 3).
From time to time we utilize forward contracts that are measured at fair market value on a recurring basis based on Level 2 inputs. At June 30, 2013, the fair market value for forward contracts was a liability of $11,206 and was included in accrued liabilities. We had no forward contracts outstanding at December 31, 2012.
b) Derivative instruments
A significant portion of our expenses are paid in Canadian dollars, therefore changes to the exchange rate between the U.S. and Canadian dollar affect our operating results. To manage this exchange rate risk, from time to time we utilize forward contracts to purchase Canadian dollars. Our Company policy limits contracts to maturities of one year or less from the date of issuance. We do not enter into foreign exchange forward contracts for trading purposes.
We account for derivatives and hedging activities in accordance with FASB ASC 815, Derivatives and Hedging, which requires that all derivative instruments be recorded on the balance sheet at their respective fair values. The accounting for changes in the fair value of a derivative instrument is dependent upon whether the derivative has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship.
We have chosen not to elect hedge accounting for these forward contracts; therefore, changes in fair value for these instruments are immediately recognized in earnings and included in our foreign exchange gain (loss). The fluctuations in the value of these forward contracts do, however, generally offset the impact of changes in the value of the underlying risk that they are intended to economically hedge.
The following table provides gross notional value of foreign currency derivative financial instruments and the related net asset or liability. The table presents the notional amount (at contract exchange rates) and the fair value of the derivatives in U.S. dollars:
We are required to maintain a margin deposit with a foreign exchange corporation based on the value of the forward contracts outstanding. Margin deposits totaling $22,700 related to forward contracts outstanding are included in other current assets at June 30, 2013. There were no margin deposits at December 31, 2012. |
LOSS PER SHARE
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Notes to Financial Statements | |
Note 6. LOSS PER SHARE | The basic and diluted net loss per share was $(0.00) and $(0.00) per share for the three months ended June 30, 2013 and 2012, respectively. The basic and diluted net loss per share was $(0.01) and $(0.00) per share for the six months ended June 30, 2013 and 2012, respectively. There were 13,727,803 and 13,937,803 stock options and warrants excluded from the calculation of dilutive loss per share for the three and six months ended June 30, 2013 and 2012, respectively, because they were anti-dilutive. |
RELATED PARTIES
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 4. RELATED PARTIES | The following table summarizes amounts due to related parties at June 30, 2013 and December 31, 2012:
As a matter of policy, all related party transactions are subject to review and approval by the Companys Board of Directors. All repayments of amounts due to related parties must be approved by our Board of Directors. Repayments are subject to our company having sufficient cash on hand and are intended not to impair continuing business operations. All amounts due to related parties have been classified as non-current liabilities as we do not expect to make any repayments within a year of the June 30, 2013 balance sheet date. Our related party creditors have agreed to these repayment terms. |
LOSS PER SHARE (Details Narrative) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Loss Per Share Details Narrative | ||||
Loss per share - basic and diluted | $ 0.00 | $ 0.00 | $ (0.01) | $ 0.00 |
Stock options and warrants excluded from the calculation of dilutive loss per share because they were anti-dilutive | 13,727,803 | 13,937,803 |