ASCEND ACQUISITION CORP.
|
|
(Exact Name of Registrant as Specified in Its Charter)
|
Delaware
|
20-3881465
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer
|
o |
Accelerated filer
|
o | |
Non-accelerated filer
|
o |
Smaller reporting company
|
x |
PART I - FINANCIAL INFORMATION
|
||||||||
Item 1. Financial Statements
|
||||||||
ASCEND ACQUISTION CORP
|
||||||||
(a corporation in the development stage)
|
||||||||
CONDENSED CONSOLIDATED
|
||||||||
BALANCE SHEETS
|
||||||||
March 31,
|
December 31,
|
|||||||
2013
|
2012* | |||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 35,127 | $ | 258,857 | ||||
Prepaid asset
|
16,001 | 18,167 | ||||||
Total current assets
|
51,128 | 277,024 | ||||||
Capitalized software
|
- | 374,214 | ||||||
Equipment, net
|
15,587 | 15,973 | ||||||
Total assets
|
$ | 66,715 | $ | 667,211 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$ | 223,502 | $ | 119,980 | ||||
Bridge loan payable
|
120,000 | - | ||||||
Due to member
|
1,626 | 1,626 | ||||||
Total current liabilities
|
345,128 | 121,606 | ||||||
Deferred revenue
|
121,875 | 121,875 | ||||||
Total liabilities
|
467,003 | 243,481 | ||||||
Commitments and Contingencies
|
||||||||
Stockholders’ (Deficit) Equity:
|
||||||||
Preferred stock, $0.0001 par value, authorized 1,000,000 shares; none issued
|
||||||||
Common stock, $0.0001 par value, authorized 300,000,000 shares, issued and
|
||||||||
outstanding 50,926,700 and 50,926,700 shares, respectively
|
5,093 | 5,093 | ||||||
Additional paid-in capital
|
2,234,797 | 2,225,340 | ||||||
Deficit accumulated during the development stage
|
(2,640,178 | ) | (1,806,703 | ) | ||||
Total stockholders’ (deficit) equity
|
(400,288 | ) | 423,730 | |||||
Total liabilities and stockholders’ (deficit) equity
|
$ | 66,715 | $ | 667,211 |
ASCEND ACQUISITION CORP.
(a corporation in the development stage)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
||||||||||||
January 17, 2011
|
||||||||||||
Three Months
|
Three Months
|
(Inception)
|
||||||||||
Ended
|
Ended
|
to
|
||||||||||
March 31, 2013
|
March 31, 2012
|
March 31, 2013
|
||||||||||
Revenues
|
$ | - | $ | 28,125 | $ | 103,125 | ||||||
Software development costs
|
109,580 | 393,210 | ||||||||||
Selling, General and Administrative Expense
|
349,681 | 197,203 | 1,905,484 | |||||||||
Impairment on capitalized software
|
374,214 | 374,214 | ||||||||||
Loss from operations
|
(833,475 | ) | (169,078 | ) | (2,569,783 | ) | ||||||
Other Income (Expense)
|
||||||||||||
Interest Income
|
- | 622 | 2,946 | |||||||||
Other income
|
- | - | 6,924 | |||||||||
Impairment of investment
|
- | - | (105,732 | ) | ||||||||
Equity Loss from Investment
|
- | - | (12,009 | ) | ||||||||
Total other income (expense)
|
- | 622 | (107,871 | ) | ||||||||
Net Loss
|
$ | (833,475 | ) | $ | (168,456 | ) | $ | (2,677,654 | ) | |||
Net Loss Attributable to the Non-Controlling Interest
|
37,476 | |||||||||||
Net Loss Attributable to Ascend Acquisition Corp.
|
$ | (833,475 | ) | $ | (168,456 | ) | $ | (2,640,178 | ) | |||
Weighted average shares of common stock outstanding
|
||||||||||||
Basic and Diluted
|
50,926,700 | 42,672,278 | ||||||||||
Loss per common share
|
||||||||||||
Basic and Diluted
|
$ | (0.02 | ) | $ | (0.00 | ) |
ASCEND ACQUISITION CORP.
|
||||||||||||
(a corporation in the development stage)
|
||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||||||
(UNAUDITED)
|
||||||||||||
January 17, 2011
|
||||||||||||
Three Months
|
Three Months
|
(Inception)
|
||||||||||
Ended
|
Ended
|
To
|
||||||||||
March 31, 2013
|
March 31, 2012
|
March 31, 2013
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net loss
|
$ | (833,475 | ) | $ | (168,456 | ) | $ | (2,677,654 | ) | |||
Adjustments to reconcile net loss to net cash (used in) operating activities:
|
||||||||||||
Depreciation
|
1,008 | - | 4,581 | |||||||||
Impairment of capitalized software
|
374,214 | 374,214 | ||||||||||
Impairment of investments
|
- | - | 105,732 | |||||||||
Equity loss from investment
|
- | - | 12,009 | |||||||||
Bad debt expense
|
- | - | 52,705 | |||||||||
Other income from deconsolidation of Rotvig Labs, LLC
|
- | - | (6,924 | ) | ||||||||
Stock compensation expense
|
9,457 | - | 50,706 | |||||||||
Compensation for software development costs
|
- | - | 64,900 | |||||||||
Direct payment of operating expenses by member
|
- | - | 4,500 | |||||||||
Change in operating assets and liabilities:
|
||||||||||||
Accrued interest receivable
|
- | (622 | ) | (2,946 | ) | |||||||
Prepaid asset
|
2,166 | (42,958 | ) | (16,001 | ) | |||||||
Accounts payable and accrued expenses
|
103,522 | 4,142 | 223,502 | |||||||||
Payroll tax liabilities
|
- | (22,823 | ) | - | ||||||||
Deferred revenue
|
- | (28,125 | ) | 121,875 | ||||||||
Net cash (used in) operating activities
|
(343,108 | ) | (258,842 | ) | (1,688,801 | ) | ||||||
Cash flows from investing activities:
|
||||||||||||
Purchase of equipment
|
(622 | ) | (2,292 | ) | (20,168 | ) | ||||||
Payments related to capitalized software development costs
|
- | (21,275 | ) | (374,214 | ) | |||||||
Reduction of cash due to the deconsolidation of Rotvig Labs, LLC
|
- | - | (25,000 | ) | ||||||||
Investments in private companies
|
- | - | (50,000 | ) | ||||||||
Purchase of convertible notes receivable
|
- | - | (130,000 | ) | ||||||||
Proceeds from return of investment in private companies
|
- | 12,500 | 12,500 | |||||||||
Net cash used in investing activities
|
(622 | ) | (11,067 | ) | (586,882 | ) | ||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from convertible note payable
|
- | 200,000 | 250,000 | |||||||||
Proceeds from bridge loan payable
|
120,000 | - | 120,000 | |||||||||
Repayment of convertible note payable
|
- | (250,000 | ) | (250,000 | ) | |||||||
Member's contributions
|
- | - | 167,375 | |||||||||
Cash acquired in reverse merger
|
- | 21,809 | 21,809 | |||||||||
Proceeds from related party advance
|
- | 1,626 | 1,626 | |||||||||
Proceeds from private placement
|
- | 2,000,000 | 2,000,000 | |||||||||
Net cash provided by financing activities
|
120,000 | 1,973,435 | 2,310,810 | |||||||||
Net (decrease) increase in cash and cash equivalents
|
(223,730 | ) | 1,703,526 | 35,127 | ||||||||
Cash at beginning of period
|
258,857 | 80,588 | - | |||||||||
Cash at end of period
|
$ | 35,127 | $ | 1,784,114 | $ | 35,127 | ||||||
Supplemental disclosure of non-cash financing activities:
|
||||||||||||
Conversion of notes receivable / accrued interest into Investment in private company |
-
|
- | $ | 80,241 |
Weighted-
|
Weighted
|
|||||||||||
Stock
|
Average
|
Average
|
||||||||||
Options
|
Exercise Price
|
Contractual Life
|
||||||||||
Outstanding, January 1, 2013
|
770,000 | $ | 0.45 | |||||||||
Granted
|
- | |||||||||||
Exercised
|
- | |||||||||||
Cancelled/forfeited
|
(95,000 | ) | $ | 0.35 | ||||||||
Outstanding, March 31, 2013
|
675,000 | $ | 0.46 | 7.09 | ||||||||
Exercisable, March 31, 2013
|
50,000 | $ | 0.50 | 2.28 |
Discount rate
|
.34% - .99%
|
Expected volatility
|
59% - 65%
|
Forfeiture rate
|
-
|
Expected life
|
3 - 6.25 Years
|
Expected dividends
|
-
|
1)
|
We do not employ a full time Chief Financial Officer with the necessary skill set to prepare a complete set of financial statements and footnotes in accordance with generally accepted accounting principles. We have employed an external consultant to assist in preparing the financial statements and footnote disclosures, but the consultant is not involved in the day to day decision making to ensure that a complete presentation is made. We intend to remediate this material weakness by hiring a full time Chief Financial Officer in the future, but only if our liquidity sufficiently improves.
|
2)
|
We did not sufficiently segregate duties over incompatible functions at our corporate headquarters. Our inability to sufficiently segregate duties is due to a small number of personnel at the corporate headquarters, which management expects to remedy when we begin to generate revenue from our software.
|
3)
|
We do not currently have a system in place which links the tracking of software development time to the financial reporting system, which management expects to remedy.
|
Exhibit No.
|
Description
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
Certification of Chief Executive Officer and Interim Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
Condensed consolidated financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2013, formatted in XBRL: (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Cash Flows and (iv) Notes to Unaudited Financial Statements, as blocks of text and in detail.*
|
|
101.INS
|
XBRL Instance Document*
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document *
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document *
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document *
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document*
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document *
|
ASCEND ACQUISITION CORP.
|
||
By:
|
/s/ Craig dos Santos
|
|
Craig dos Santos
|
||
Chief Executive Officer
(Principal executive officer)
|
||
By:
|
/s/ Jonathan J. Ledecky
|
|
Jonathan J. Ledecky
|
||
Interim Chief Financial Officer
(Principal financial and accounting officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Ascend Acquisition Corp.; |
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.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 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 my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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; and
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my 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.
|
I have disclosed, based on my 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.
|
/s/ Craig dos Santos
|
||||
|
Craig dos Santos
|
|||
|
Chief Executive Officer
|
|||
(Principal executive officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Ascend Acquisition Corp.; |
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.
|
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 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 my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
|
c)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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; and
|
d)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my 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
|
e)
|
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.
|
I have disclosed, based on my 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):
|
f)
|
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
|
g)
|
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.
|
/s/ Jonathan J. Ledecky
|
||||
|
Jonathan J. Ledecky
|
|||
|
Interim Chief Financial Officer
|
|||
(Principal financial and accounting officer)
|
/s/ Craig dos Santos
|
Craig dos Santos
|
Chief Executive Officer
|
(Principal executive officer)
|
/s/ Jonathan J. Ledecky
|
Jonathan J. Ledecky
|
Interim Chief Financial Officer
|
(Principal financial and accounting officer)
|
Subsequent Events
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 – SUBSEQUENT EVENTS
In April 2013 and June 2013, the Company issued the Secured Notes in favor of Ironbound with an aggregate principal amount of $300,000. See Note 5 for further information with respect to the Secured Notes.
In May 2013, the Company entered into an amendment to the agreement with NGHT and terminated its agreement with Infinitap. See Note 7 for further information with respect to such agreements.
On June 12, 2013, the Company entered into a merger agreement and plan of reorganization (“Kitara/NYPG Merger Agreement”) with Kitara Media, LLC (“Kitara”) and New York Publishing Group Inc. (“NYPG”). The Kitara/NYPG Merger Agreement contemplates Kitara and NYPG becoming wholly owned subsidiaries of the Company upon consummation of the transaction. Kitara delivers and optimizes video advertisements each month from advertisers to web sites in a revenue sharing arrangement. Kitara's proprietary video advertising delivery platform called Propel seeks to optimize and achieve maximum revenue per ad view for each web site owner. NYPG is the owner of ADOTAS, a news publication focused on the internet advertising and media industry. ADOTAS features a daily email newsletter and website that reaches advertising industry professionals monthly. It focuses on providing news and information on media buying, planning, selling, technology and activities of the digital media business to the interactive advertising community. The transaction is subject to several closing conditions and the parties intend to seek to consummate it within 30 days. There is no assurance, however, that the transaction will be consummated.
On June 11, 2013, the Company terminated the agreement with UTA. See Note 11 for further information with respect to such agreement. |
Condensed Consolidated Statements Of Operations (Unaudited) (USD $)
|
3 Months Ended | 26 Months Ended | |
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2013
|
|
Income Statement [Abstract] | |||
Revenues | $ 28,125 | $ 103,125 | |
Software development costs | 109,580 | 393,210 | |
Selling, General and Administrative Expense | 349,681 | 197,203 | 1,905,484 |
Impairment of capitalized software | 374,214 | 374,214 | |
Loss from operations | (833,475) | (169,078) | (2,569,783) |
Other Income (Expense) | |||
Interest Income | 622 | 2,946 | |
Other income | 6,924 | ||
Impairment of investment | (105,732) | ||
Equity loss from investment | (12,009) | ||
Total other income (expense) | 622 | (107,871) | |
Net loss | (833,475) | (168,456) | (2,677,654) |
Net Loss Attributable to the Non-Controlling Interest | 37,476 | ||
Net Loss Attributable to Ascend Acquisition Corp. | $ (833,475) | $ (168,456) | $ (2,640,178) |
Weighted average shares of common stock outstanding | |||
Basic and Diluted | 50,926,700 | 42,672,278 | |
Loss per common share | |||
Basic and Diluted | $ (0.02) | $ 0.00 |
Bridge Loans
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Bridge Loans [Abstract] | |
BRIDGE LOANS | NOTE 5 – BRIDGE LOANS
As of March 31, 2013, the Company received $120,000 in advances from an affiliate of the Company. An additional $180,000 was received subsequent to March 31, 2013. These advances of $300,000 are subject to the terms of the Secured Notes (defined and described below).
On April 24, 2013 and June 3, 2013, the Company issued secured promissory notes related to these advances (the “Secured Notes”) in favor of Ironbound Partners Fund LLC (“Ironbound”), an affiliate of Jonathan J. Ledecky, Ascend’s current interim Chief Financial Officer and Non-Executive Chairman of the Board, with an aggregate principal amount of $300,000. The principal balance, together with interest, on the Secured Notes is due June 23, 2013, but may be prepaid at any time without penalty or premium. Upon occurrence of an event of default, the unpaid principal balance, together with interest, automatically and immediately becomes due and payable. Interest accrues on the unpaid balance at an annual rate of 15%. In the event, the Secured Notes are not paid by or on June 23, 2013, or such earlier date upon acceleration of repayment, the interest rate increases to 18% per annum from the date on which payment was due. The Secured Notes further grant Ironbound a security interest in all of the Company’s assets. |
"+ text.join( "
\n" ) +"
" + text[p] + "
\n"; } } }else{ formatted = '' + raw + '
'; } html = ''+ "\n"+''+ "\n"+''+ "\n"+' formatted: '+ ( this.Default == 'raw' ? 'as Filed' : 'with Text Wrapped' ) +''+ "\n"+' | '+ "\n"+'
'+ "\n"+' | '+ "\n"+' '+ "\n"+'
'+ "\n"+' | '+ "\n"+' '+ "\n"+'
Bridge Loans (Details) (USD $)
|
1 Months Ended | 3 Months Ended | 26 Months Ended | |
---|---|---|---|---|
Jun. 30, 2013
|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2013
|
|
Bridge Loans (Textual) | ||||
Advance from affiliate recorded as secured note | $ 300,000 | $ 300,000 | ||
Proceeds from bridge loan payable | 120,000 | 120,000 | ||
Secured debt due date | Jun. 23, 2013 | |||
Annual interest rate of secured debt | 15.00% | |||
Increased interest rate upon payment default | 18.00% | |||
Subsequent Event [Member]
|
||||
Bridge Loans (Textual) | ||||
Additional amount received subject to terms of Secured Notes | 180,000 | |||
Advance from affiliate recorded as secured note | 300,000 |
Summary of Significant Accounting Policies (Policies)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Summary Of Significant Accounting Policies [Abstract] | |
Interim Review Reporting | Interim Review Reporting
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. 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 of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on April 9, 2013. |
Development Stage Company | Development Stage Company
The Company is a development stage company as defined by section 810-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. |
Principles of Consolidation | Principles of Consolidation
The condensed consolidated financial statements included the accounts of the Company and the less than majority owned variable interest entity for the period of time which it was controlled (see NOTE 3). Significant inter-company accounts and transactions have been eliminated in consolidation. During the 3 months ended December 31, 2012, the Company determined it no longer had a controlling interest in Rotvig Labs LLC (“Rotvig” or “Rotvig Labs”). As a result, the Company deconsolidated Rotvig and derecognized the assets, liabilities, and noncontrolling interest from the condensed consolidated financial statements (see NOTE 3). |
Management's Liquidity Plan and Going Concern | Management’s Liquidity Plan and Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. The Company had minimal revenue inception-to-date, and the Company has incurred a substantial loss from operations for the period from January 17, 2011 (inception) through March 31, 2013. Based on the Company’s liquidity position, continued losses could result in the Company not having sufficient liquidity or minimum cash levels to operate its business. The Company is currently relying on loans of an aggregate of $300,000 made by an affiliate of its interim Chief Financial Officer to meet its working capital needs. There can be no assurances that it will continue to loan the Company money for its working capital needs. Management's plan in regard to these matters includes reducing expenses, raising additional proceeds from debt and equity transactions and completing strategic acquisitions that will generate positive cash flows. Management believes it will need to raise additional capital to execute its business plans. There can be no assurances that management will be successful in executing its plans or that capital will be available on a commercially reasonable basis. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. |
Cash | Cash
For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. |
Investments in private companies | Investments in private companies
Investments in private companies in which the Company owns less than 20% of the entity and does not influence the operating or financial decisions of the investee are carried at cost. The Company reviews the investments for impairment and records a loss on impairment based on the difference between the fair value of the investment and the carrying amount when indicators of impairment exist. |
Equipment | Equipment
Equipment is carried at cost and is depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. |
Software development costs | Software development costs
In accordance with ASC 985-20 “Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise Marketed,” software development costs are expensed as incurred until technological feasibility (generally in the form of a working model) has been established. Research and development costs which consist primarily of salaries and fees paid to third parties for the development of software and applications are expensed as incurred. The Company capitalizes only those costs directly attributable to the development of the software. Capitalization of these costs begins upon the establishment of technological feasibility. Activities undertaken after the products are available for release to customers to correct errors or keep the product up to date are expensed as incurred. Capitalized software development costs will be amortized over the estimated economic life of the software once the product is available for general release to customers. Capitalized software development costs will be amortized over the greater of the ratio of current revenue to total projected revenue for a product or the straight-line method. The Company will periodically perform reviews of the recoverability of such capitalized software costs. At the time a determination is made that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any remaining capitalized amounts are written off. During the three months ended March 31, 2013 and March 31, 2012 and the period from January 17, 2011 (inception) through March 31, 2013, the Company expensed $ 109,580, $- and $393,210 in software development costs, respectively. During the three months ended March 31, 2013, the Company recognized an impairment loss in the amount of $374,214 related to the software development costs which had been previously been capitalized through December 31, 2012. The determination was based on the fact that the Company will not be able to recover the value of its capitalized costs based on excpected changes in its business model. The impairment charge which reduced the capitalized costs to $0 were based on non-recurring Level 3 fair value measurement and which are based on unobservable inputs (which reflect the Company’s internal markets assumptions) that are supported by little or no market activity and that are significant to the fair value of the asset. |
Revenue Recognition | Revenue Recognition
The Company evaluates revenue recognition based on the criteria set forth in FASB ASC 985-605, “Software: Revenue Recognition.” The Company recognizes revenue when persuasive evidence of an arrangement exists, the product, image or game has been delivered, the fee is fixed or determinable, and collectability is reasonably assured. The Company’s specific revenue recognition policies are as follows:
The Company recognizes revenue from the sale of its social games and mobile applications (“Apps”) from two revenue sources: direct payment revenue or alternative payment service revenue. Direct payment revenue results from payments from the end users of Apps for virtual goods or currency (i.e. items within the game and virtual money to buy items and upgrades in a game) in an application from a variety of direct payment sources, less deductions for fraud, charge-backs, refunds, credit card processing fees or uncollected amounts (assuming all other recognition criteria are met). Alternative payment service revenue results from utilization of the platform provided by a publisher that is party to a collaborative arrangement with the Company (see “Collaborative Arrangements” – see NOTE 7). The publisher's platform incentivizes end users to complete certain tasks in response to advertisements presented within the application (i.e. to purchase other applications on the publisher’s platform). Revenue from the alternative payment service (subject to a “Recoupment Amount” by the vendor — see NOTE 7) would be recognized as the service is rendered, with a portion of the revenue allocated to the vendor. If the service period is not defined, the Company would recognize the revenue over the estimated service period. In conjunction with the collaborative arrangement, the Company receives proceeds that are recognized on a straight line basis over the period that the Company is required to keep its applications on the publisher’s platform. |
Non-controlling Interest | Non-controlling Interest
During 2011, the Company consolidated Rotvig Labs, LLC (see NOTE 3), which qualified as a variable interest entity (“VIE”) because the Company determined that it was the primary beneficiary and had a controlling financial interest. Therefore, Rotvig’s financial statements were consolidated in the Company’s consolidated financial statements and the other member’s equity in Rotvig was recorded as non-controlling interest as a component of consolidated stockholders’ equity (deficit). During 2012, the Company determined it no longer had a controlling financial interest and deconsolidated Rotvig Labs (see NOTE 3). |
Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates utilized related to the impairment of investment in private companies and capitalized software. Actual results could differ from those estimates. |
Net Loss Per Share | Net Loss Per Share
Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss attributable to Ascend Acquisition Corp. by the weighted average number of shares of Common Stock outstanding during the period. As discussed above, the change in capital structure of the Company that occurred subsequent to December 31, 2011 requires retrospective presentation as if the change took place at the beginning of the period presented. The 8,731,675 shares of Ascend common stock outstanding at the date of the closing along with the 4,000,000 issued pursuant to the financing are reflected as outstanding in the earnings per share calculation commencing with the date of closing. Common Stock equivalents have not been included in this computation since the effect would be anti-dilutive. As further discussed above, the Merger Agreement provides for contingently issuable common shares. These shares would be required to be issued in the event of and in proportion to any shortfall in proceeds that may be received towards the maximum amount of the Financing. If no additional proceeds are received in the Financing, the maximum contingently issuable shares would be issued, or a total of 33,951,133. In accordance with ASC 260-10-45-12A, contingently issuable shares should be included in basic earnings (loss) per share only when there is no circumstance in which those shares would not be issued. The actual number of contingently issuable shares is not determinable at this time. During the three months ended March 31, 2013, 825,000 options and warrants were excluded from the calculation of diluted net loss per share because the net loss would cause these options to be antidilutive. |
Concentrations of Credit Risk | Concentrations of Credit Risk
At times throughout the year, the Company may maintain certain bank accounts in excess of FDIC insured limits. These cash balances are held at one financial institution. |
Fair Value | Fair Value
The Company has financial instruments, including investments in companies at cost, convertible notes receivable, and bridge loans, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at March 31, 2013 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying consolidated balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. |
Income Taxes | Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement, and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
The Company accounts for uncertain tax positions in accordance with ASC 740—“Income Taxes”. No uncertain tax provisions have been identified. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying condensed consolidated statements of operations.
In accordance with ASC 740, the Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration of all available evidence and using a “more likely than not” standard. Significant weight is given to evidence that can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and current operating performance. In conducting the analysis, the Company utilizes an approach, which considers the current year loss, including an assessment of the degree to which any losses are driven by items that are unusual in nature and incurred to improve future profitability. In addition, the Company reviews changes in near-term market conditions and any other factors arising during the period, which may impact its future operating results. |
Stock Compensation Policy | Stock Compensation Policy
The Company accounts for stock based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 establishes accounting for stock-based awards exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has not experienced significant exercise activity on stock options. Due to the lack of historical information, the Company determined the expected term of its stock option awards issued using the simplified method. The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires. The Company expenses stock-based compensation by using the straight-line method |
Recent Accounting Pronouncements | Recent Accounting Pronouncements
Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. |
Subsequent Events | Subsequent Events
The Company has evaluated events that occurred subsequent to March 31, 2013 through the date these financial statements were issued. Management has concluded that no additional subsequent events required disclosure in these financial statements other than those identified in Note 12. |
Stockholders' Equity (Details)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Dec. 31, 2012
|
|
Stockholders Equity (Textual) | ||
Shares outstanding subsequent to merger | 50,926,700 | 50,926,700 |
Shares issued to owners of Andover Games, LLC prior to the merger | 38,195,025 | |
Shares of Ascend outstanding on date of merger | 8,731,675 | |
Shares issued pursuant to financing | 4,000,000 | |
Purchase right lapsed and equity interest vested for total number of shares | 31,967,722 |
Commitments and Contingencies (Details) (USD $)
|
3 Months Ended | 26 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2013
|
Dec. 31, 2012
|
Dec. 31, 2011
Collaborative Arrangement [Member]
Stockholder
|
Feb. 29, 2012
Employment Agreement [Member]
Chief Executive Officer [Member]
|
Feb. 29, 2012
Consulting Agreement [Member]
Ironbound [Member]
|
Feb. 29, 2012
Consulting Agreement [Member]
Traction and Scale, LLC [Member]
|
May 31, 2011
Development and Licensing Agreement [Member]
Infinitap [Member]
|
Dec. 31, 2011
Development and Licensing Agreement [Member]
Infinitap [Member]
|
Mar. 26, 2012
Amended Agreements [Member]
Infinitap [Member]
|
Dec. 31, 2012
Amended Agreements [Member]
Infinitap [Member]
|
May 20, 2013
Amended Agreements [Member]
Infinitap [Member]
Subsequent Event [Member]
|
Dec. 31, 2012
Licensing Agreements [Member]
NGHT [Member]
|
Mar. 31, 2013
Licensing Agreements [Member]
NGHT [Member]
|
May 17, 2013
Licensing Agreements [Member]
NGHT [Member]
Subsequent Event [Member]
|
|
Commitments and Contingencies (Textual) | ||||||||||||||||
Customer Deposits | $ 225,000 | |||||||||||||||
Number of stockholders' cofounder in service provider | 2 | |||||||||||||||
Percentage of direct payments allocated as per collaborative arrangement | 100.00% | |||||||||||||||
Percentage of revenues allocated as per collaborative arrangement | 70.00% | |||||||||||||||
Recoupment Amount | 50,000 | |||||||||||||||
Period required to maintain publisher's platform | 24 months, plus any extension period. | |||||||||||||||
Marketing Credits | 50,000 | |||||||||||||||
Revenues | 28,125 | 103,125 | 65,000 | 262,000 | ||||||||||||
Annual salary to be paid in exchange for his services | 225,000 | |||||||||||||||
Agreement period | 2 years | 2 years | 2 years | |||||||||||||
Annual consulting fee | 150,000 | 150,000 | ||||||||||||||
Initial payment upon execution of agreement | 32,500 | |||||||||||||||
Final payment upon completion of product | 32,500 | |||||||||||||||
Software development costs | 109,580 | 393,210 | 55,250 | |||||||||||||
Percentage of revenue paid to company by publisher, only effective after the Company first receives $65,000 in net revenue | 20.00% | |||||||||||||||
Amount to be paid to service provider related to software development | 202,000 | 50,000 | 26,250 | |||||||||||||
Percentage of revenue generated through software require to pay a consultant | 18.00% | |||||||||||||||
Accounts payable and accrued expenses | 223,502 | 223,502 | 119,980 | 50,000 | 25,000 | |||||||||||
Percentage of royalties pay to NGHT during the term of the agreement | 1012.00% | |||||||||||||||
Consideration upon agreement expiration | After the license agreement expires, the Company was required to pay 8% of net sales to NGHT. | |||||||||||||||
Percentage of royalties pay to NGHT after expiration of agreement | 2035.00% | |||||||||||||||
Consideration to be paid upon termination of agreement | 5,000 | |||||||||||||||
Royalty payment under agreement | The Company was required to pay royalties of 10-12% to NGHT based on sales in excess of $1,000,000 during the term of the agreement. | The royalty owed to NGHT was set at 10% of net sales received by the Company in excess of $262,500 on or after June 1, 2013. | ||||||||||||||
Deferred revenue | 121,875 | 121,875 | 121,875 | |||||||||||||
Operating lease monthly payment | 4,000 | |||||||||||||||
Operating Leases, Rent Expense | $ 12,000 |
Stock Option Plan (Details Textual) (USD $)
|
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2013
Stock Options [Member]
|
Dec. 31, 2012
Stock Options [Member]
|
May 14, 2012
2012 Long-Term Incentive Equity Plan [Member]
|
|
Stock Option Plan (Textual) | ||||
Weighted average grant date fair value of options granted | $ 0.20 | |||
Aggregate intrinsic value of outstanding options | $ 3,500 | |||
Stock based compensation expense | 3,745 | |||
Options issued to employees | 570,000 | |||
Total number of shares of common stock reserved for issuance under Plan | 6,000,000 | |||
Stock options granted to employee in May, June and October, 2012 | 570,000 | |||
Unrecognized compensation arrangements granted related to unvested options | $ 90,030 | |||
Unrecognized compensation arrangements granted related to unvested options, expected to recognized | Through 2016 |
Income Taxes (Details) (USD $)
|
Dec. 31, 2012
|
---|---|
Income Taxes (Textual) | |
Federal net operating loss carryforwards | $ 740,000 |
Summary of Significant Accounting Policies
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Summary Of Significant Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Ascend Acquisition Corp. (“Ascend”) was formed on December 5, 2005 as a blank check company to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business. Andover Games, LLC (the “Company” or “Andover Games”), a development stage company, is a limited liability company formed on January 17, 2011 under the laws of the State of Delaware as Andover Fund, LLC. The name was changed in December, 2011 to Andover Games, LLC. The entity has an indefinite life. The Company's principal business is focused on developing mobile games for iPhone and Android platforms.
On February 29, 2012, Ascend and the Company closed the transactions under a Merger Agreement and Plan of Reorganization, as amended (the “Merger Agreement”), with the Company becoming a wholly-owned subsidiary of Ascend (the “Closing”). At the Closing, the holders of membership interests of the Company received 38,195,025 shares of Ascend common stock, representing 75% of the fully diluted capitalization of Ascend immediately after the closing of the merger and the Financing (defined below), subject to further adjustment as provided for in the Merger Agreement.
Pursuant to the Merger Agreement, Ascend was obligated to use its commercial best efforts to raise at least $4 million of equity capital through the sale of Ascend's capital stock (the “Financing”), of which at least $2 million was to be raised prior to or simultaneously with the Closing and such additional proceeds are to be raised, if at all, following the Closing so as to raise up to $4 million in aggregate proceeds. Pursuant to the Merger Agreement, Ascend is required to use its commercial best efforts to raise an additional $2 million of proceeds. Pursuant to the Merger Agreement, if Ascend sells additional shares of its capital stock in the Financing, Ascend will issue additional shares of its common stock to the former members of the Company to maintain their collective ownership of Ascend common stock at 75% on a fully diluted basis. Alternatively, if Ascend sells less than the maximum $4 million in aggregate proceeds in the Financing, then such number of additional shares of Ascend capital stock shall be issued to the former members of the Company at the final closing of the Financing so as to increase their collective pro-rata percentage ownership in Ascend by one percent (1%) for every $200,000 in proceeds that Ascend falls short of the $4 million maximum proceeds in the Financing. The parties have agreed that upon consummation of the Kitara/NYPG Merger Agreement (defined in NOTE 12), Ascend will no longer be obligated to issue any additional shares to the former members of the Company.
Simultaneously with the Closing, Ascend sold 4,000,000 shares of its common stock at $0.50 per share, for gross proceeds of $2 million pursuant to the Financing.
On May 14, 2012, the parties further amended the Merger Agreement, effective as of April 30, 2012. Pursuant to the amendment, the parties agreed to terminate the offering period for the Financing and recommence financing efforts at a later time. The parties determined to amend the Merger Agreement in this way to allow the Company to freely explore and consummate potential strategic initiatives and alternatives that have been presented to it since consummation of the merger. After it has fully analyzed and explored such strategic initiatives and alternatives, the Company anticipates recommencing its efforts to raise the remaining additional $2 million of proceeds pursuant to the original terms of the Merger Agreement and will then have approximately 30 days to complete the Financing. The completion of the financing is a condition to the closing of the Kitara/NYPG Merger Agreement.
Ironbound Partners Fund, LLC (“Ironbound”), an affiliate of Jonathan J. Ledecky, the Company’s Non-Executive Chairman of the Board and Interim Chief Financial Officer, has agreed that if, by the expiration of the 30-day period described above, the Company is unable to identify investors to purchase all of the remaining $2 million of shares of common stock, it will purchase such remaining shares.
The merger has been treated as an acquisition of Ascend by Andover Games and as a recapitalization of Andover Games as Andover Games members will hold a majority of the Ascend shares and will exercise significant influence over the operating and financial policies of the consolidated entity. As Ascend was a non-operating public shell prior to the transaction, pursuant to Securities and Exchange Commission rules, the merger or acquisition of a private operating company into a non-operating public shell with nominal assets is considered a capital transaction in substance rather than a business combination. As a result, the condensed consolidated balance sheet, statement of operations, and statement of cash flows of Andover Games, LLC have been retroactively updated to reflect the recapitalization. The Company determined that no income tax benefit associated with any net operating loss carry-forwards would be recognized if it had been taxed as a corporation from inception, as it is more likely than not that such loss carryforwards would not be realized.
Interim Review Reporting
The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. 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 of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed on April 9, 2013.
Development Stage Company
The Company is a development stage company as defined by section 810-10-20 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced.
Principles of Consolidation
The condensed consolidated financial statements included the accounts of the Company and the less than majority owned variable interest entity for the period of time which it was controlled (see NOTE 3). Significant inter-company accounts and transactions have been eliminated in consolidation. During the 3 months ended December 31, 2012, the Company determined it no longer had a controlling interest in Rotvig Labs LLC (“Rotvig” or “Rotvig Labs”). As a result, the Company deconsolidated Rotvig and derecognized the assets, liabilities, and noncontrolling interest from the condensed consolidated financial statements (see NOTE 3).
Management’s Liquidity Plan and Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. The Company had minimal revenue inception-to-date, and the Company has incurred a substantial loss from operations for the period from January 17, 2011 (inception) through March 31, 2013. Based on the Company’s liquidity position, continued losses could result in the Company not having sufficient liquidity or minimum cash levels to operate its business. The Company is currently relying on loans of an aggregate of $300,000 made by an affiliate of its interim Chief Financial Officer to meet its working capital needs. There can be no assurances that it will continue to loan the Company money for its working capital needs. Management's plan in regard to these matters includes reducing expenses, raising additional proceeds from debt and equity transactions and completing strategic acquisitions that will generate positive cash flows. Management believes it will need to raise additional capital to execute its business plans. There can be no assurances that management will be successful in executing its plans or that capital will be available on a commercially reasonable basis. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Cash
For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents.
Investments in private companies
Investments in private companies in which the Company owns less than 20% of the entity and does not influence the operating or financial decisions of the investee are carried at cost. The Company reviews the investments for impairment and records a loss on impairment based on the difference between the fair value of the investment and the carrying amount when indicators of impairment exist.
Equipment
Equipment is carried at cost and is depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Software development costs
In accordance with ASC 985-20 “Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise Marketed,” software development costs are expensed as incurred until technological feasibility (generally in the form of a working model) has been established. Research and development costs which consist primarily of salaries and fees paid to third parties for the development of software and applications are expensed as incurred. The Company capitalizes only those costs directly attributable to the development of the software. Capitalization of these costs begins upon the establishment of technological feasibility. Activities undertaken after the products are available for release to customers to correct errors or keep the product up to date are expensed as incurred. Capitalized software development costs will be amortized over the estimated economic life of the software once the product is available for general release to customers. Capitalized software development costs will be amortized over the greater of the ratio of current revenue to total projected revenue for a product or the straight-line method. The Company will periodically perform reviews of the recoverability of such capitalized software costs. At the time a determination is made that capitalized amounts are not recoverable based on the estimated cash flows to be generated from the applicable software, any remaining capitalized amounts are written off. During the three months ended March 31, 2013 and March 31, 2012 and the period from January 17, 2011 (inception) through March 31, 2013, the Company expensed $ 109,580, $- and $393,210 in software development costs, respectively. During the three months ended March 31, 2013, the Company recognized an impairment loss in the amount of $374,214 related to the software development costs which had been previously been capitalized through December 31, 2012. The determination was based on the fact that the Company will not be able to recover the value of its capitalized costs based on excpected changes in its business model. The impairment charge which reduced the capitalized costs to $0 were based on non-recurring Level 3 fair value measurement and which are based on unobservable inputs (which reflect the Company’s internal markets assumptions) that are supported by little or no market activity and that are significant to the fair value of the asset.
Revenue Recognition
The Company evaluates revenue recognition based on the criteria set forth in FASB ASC 985-605, “Software: Revenue Recognition.” The Company recognizes revenue when persuasive evidence of an arrangement exists, the product, image or game has been delivered, the fee is fixed or determinable, and
collectability is reasonably assured. The Company’s specific revenue recognition policies are as follows:
The Company recognizes revenue from the sale of its social games and mobile applications (“Apps”) from two revenue sources: direct payment revenue or alternative payment service revenue. Direct payment revenue results from payments from the end users of Apps for virtual goods or currency (i.e. items within the game and virtual money to buy items and upgrades in a game) in an application from a variety of direct payment sources, less deductions for fraud, charge-backs, refunds, credit card processing fees or uncollected amounts (assuming all other recognition criteria are met). Alternative payment service revenue results from utilization of the platform provided by a publisher that is party to a collaborative arrangement with the Company (see “Collaborative Arrangements” – see NOTE 7). The publisher's platform incentivizes end users to complete certain tasks in response to advertisements presented within the application (i.e. to purchase other applications on the publisher’s platform). Revenue from the alternative payment service (subject to a “Recoupment Amount” by the vendor — see NOTE 7) would be recognized as the service is rendered, with a portion of the revenue allocated to the vendor. If the service period is not defined, the Company would recognize the revenue over the estimated service period. In conjunction with the collaborative arrangement, the Company receives proceeds that are recognized on a straight line basis over the period that the Company is required to keep its applications on the publisher’s platform.
Non-controlling Interest
During 2011, the Company consolidated Rotvig Labs, LLC (see NOTE 3), which qualified as a variable interest entity (“VIE”) because the Company determined that it was the primary beneficiary and had a controlling financial interest. Therefore, Rotvig’s financial statements were consolidated in the Company’s consolidated financial statements and the other member’s equity in Rotvig was recorded as non-controlling interest as a component of consolidated stockholders’ equity (deficit). During 2012, the Company determined it no longer had a controlling financial interest and deconsolidated Rotvig Labs (see NOTE 3).
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates utilized related to the impairment of investment in private companies and capitalized software. Actual results could differ from those estimates.
Net Loss Per Share
Net loss per share, in accordance with the provisions of ASC 260, “Earnings Per Share” is computed by dividing net loss attributable to Ascend Acquisition Corp. by the weighted average number of shares of Common Stock outstanding during the period. As discussed above, the change in capital structure of the Company that occurred subsequent to December 31, 2011 requires retrospective presentation as if the change took place at the beginning of the period presented. The 8,731,675 shares of Ascend common stock outstanding at the date of the closing along with the 4,000,000 issued pursuant to the financing are reflected as outstanding in the earnings per share calculation commencing with the date of closing. Common Stock equivalents have not been included in this computation since the effect would be anti-dilutive. As further discussed above, the Merger Agreement provides for contingently issuable common shares. These shares would be required to be issued in the event of and in proportion to any shortfall in proceeds that may be received towards the maximum amount of the Financing. If no additional proceeds are received in the Financing, the maximum contingently issuable shares would be issued, or a total of 33,951,133. In accordance with ASC 260-10-45-12A, contingently issuable shares should be included in basic earnings (loss) per share only when there is no circumstance in which those shares would not be issued. The actual number of contingently issuable shares is not determinable at this time. During the three months ended March 31, 2013, 825,000 options and warrants were excluded from the calculation of diluted net loss per share because the net loss would cause these options to be antidilutive.
Concentrations of Credit Risk
At times throughout the year, the Company may maintain certain bank accounts in excess of FDIC insured limits. These cash balances are held at one financial institution.
Fair Value
The Company has financial instruments, including investments in companies at cost, convertible notes receivable, and bridge loans, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at March 31, 2013 does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying consolidated balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement, and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction.
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.
The Company accounts for uncertain tax positions in accordance with ASC 740—“Income Taxes”. No uncertain tax provisions have been identified. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying condensed consolidated statements of operations.
In accordance with ASC 740, the Company evaluates whether a valuation allowance should be established against the net deferred tax assets based upon the consideration of all available evidence and using a “more likely than not” standard. Significant weight is given to evidence that can be objectively verified. The determination to record a valuation allowance is based on the recent history of cumulative losses and current operating performance. In conducting the analysis, the Company utilizes an approach, which considers the current year loss, including an assessment of the degree to which any losses are driven by items that are unusual in nature and incurred to improve future profitability. In addition, the Company reviews changes in near-term market conditions and any other factors arising during the period, which may impact its future operating results.
Stock Compensation Policy
The Company accounts for stock based compensation in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). ASC 718 establishes accounting for stock-based awards exchanged for employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options are estimated using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has not experienced significant exercise activity on stock options. Due to the lack of historical information, the Company determined the expected term of its stock option awards issued using the simplified method. The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires. The Company expenses stock-based compensation by using the straight-line method
Recent Accounting Pronouncements
Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.
Subsequent Events
The Company has evaluated events that occurred subsequent to March 31, 2013 through the date these financial statements were issued. Management has concluded that no additional subsequent events required disclosure in these financial statements other than those identified in Note 12. |
Variable Interest Entity
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Variable Interest Entity [Abstract] | |
VARIABLE INTEREST ENTITY | NOTE 3 — VARIABLE INTEREST ENTITY
Rotvig Labs, LLC
In January 2011, the Company acquired a 50% membership interest in Rotvig Labs, LLC (“Rotvig Labs”) for $25,000. Rotvig Labs is also involved in developing applications for the mobile game industry. The Company evaluated its investment in Rotvig Labs and determined that it was the primary beneficiary and held a controlling interest in Rotvig Labs, and that the assets, liabilities and operations of Rotvig Labs should be consolidated into its financial statements. The key assumption in making this determination was that the Company held the sole cash basis investment at risk in the entity and share common management. The other founding member contributed services to the entity, which were recorded based on the agreed-upon capital contribution of $25,000, which approximates the fair value of the services rendered and the non-controlling interest at acquisition. The assets of Rotvig Labs can only be used to satisfy the liabilities of Rotvig Labs.
In April 2011, Rotvig Labs entered into a Service and Profit Sharing Agreement with Concepts Art House, Inc (“CAH”), a graphics design company. Under this agreement, CAH would provide $40,000 in committed art services in exchange for an eight percent (8%) membership interest in Rotvig Labs. CAH's membership interest is subject to vesting, whereby the equity interest is earned 25% for each $10,000 of committed art services provided for under the agreement. As of March 31, 2013, CAH had provided all such services and therefore had earned an 8% membership interest. Thus, the Company owns 46% of the membership interest of Rotvig Labs at March 31, 2013. In addition, CAH is entitled to profit sharing of 16% of Rotvig Labs’ gross revenue up to a cumulative amount of $80,000. After the cumulative $80,000 is reached CAH is entitled to 8% of gross revenues.
As of December 31, 2012, the Company determined that it no longer had a controlling interest in Rotvig Labs, LLC as the Company no longer had the power to direct the activities of Rotvig that most significantly impacted its economic performance. Prior to deconsolidation, the entity controlled these activities through common management. As a result of this evaluation, the Company deconsolidated Rotvig and deconsolidated the assets, liabilities, and non-controlling interest from its financial statements and no longer consolidated its results of operations. The Company will have a continuing 46% interest in the deconsolidated subsidiary, a related party entity. Upon deconsolidation of Rotvig, the Company determined that the investment in Rotvig had no value. This evaluation was made based upon the fact that the entity had no operations during the year ended December 31, 2012 and the Company had only experienced losses to date beyond the initial investment. As a result, the Company anticipated that it would not be able to recover any of its initial investment in Rotvig. |
Income Taxes
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Income Taxes [Abstract] | |
INCOME TAXES | NOTE 6 – INCOME TAXES
In its interim financial statements, the Company follows the guidance in ASC 270, “Interim Reporting” and ASC 740 “Income Taxes”, whereby the Company utilizes the expected annual effective tax rate in determining its income tax provisions for the interim periods. That rate differs from U.S. statutory rates primarily as a result of net operating loss carryforwards and permanent differences between book and tax reporting.
The Company has incurred losses from operations for the period from November 1, 2011 through December 31, 2012. Historically, the Company was operating as a limited liability company with the operating losses being allocated to the individual owners through November 1, 2011 when it made an election to be taxed as a corporation. Based on a history of cumulative losses and the results of operations for the year ended December 31, 2012, the Company determined that it is more likely than not it will not realize benefits from the deferred tax assets. The Company will not record income tax benefits in the consolidated financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets. As a result of the analysis, the Company determined that a full valuation allowance against the net deferred tax assets is required. Prior to the merger on February 29, 2012, deferred tax assets consist primarily of net operating losses of Ascend.
As of December 31, 2012, the Company had federal net operating loss carryforwards of approximately $740,000. Internal Revenue Code Section 382 limits the utilization of net operating loss carryforwards upon a change of control of a company (as defined in Section 382). It was determined that one or more changes of control took place through February 29, 2012. As a result, utilization of the Company’s net operating loss carryforwards will be subject to limitations. These limitations could have the effect of eliminating a portion of the future income tax benefits of the net operating loss carryforwards.
The Company remains subject to examination by tax authorities for tax years 2009 through 2012. The Company files income tax returns in the U.S. federal jurisdiction and various states. |
Investments In Private Companies
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Investments In Private Companies [Abstract] | |
INVESTMENTS IN PRIVATE COMPANIES | NOTE 4 — INVESTMENTS IN PRIVATE COMPANIES
Game Closure, Inc.
On September 14, 2011, the Company invested $80,000 in an unsecured and subordinated convertible promissory note issued by Game Closure, Inc. (“GCI”). The note bore interest at 2%, and had a maturity date of September 14, 2013. In December 2011, GCI issued and sold shares of its Preferred Stock to investors in an equity financing of at least $1,000,000 including conversion of this note. Based on the terms of the note, the outstanding principal and accrued interest then outstanding at the closing of the financing automatically converted into shares of Series A Preferred Stock equal to the number obtained by dividing the aggregate amount of principal and accrued interest outstanding by the amount equal to the lesser of i) 100% of the purchase price for the Preferred Stock in the financing or ii) the price per share of such Preferred Stock assuming a $16,000,000 fully diluted pre-money valuation of the company. Upon conversion of principal of $80,000 and accrued interest of $241, the Company received 174,989 shares of Series A Preferred Stock of GCI. The holders of this Series A Preferred Stock have a non-cumulative dividend right at a rate of $0.0871128 per annum and conversion privileges at $1.08891 per share (unless automatically converted upon a qualified financing). The investment is accounted for using the cost method. As of December 31, 2012, the Company determined that the investment in Game Closure had no value as it determined it would not likely be able to recover any of its initial investment. As a result, the carrying amount of the investment of $80,241 was reduced to its fair value of $-. This non-recurring Level 3 fair value measurement was based on unobservable inputs (which reflect the Company’s internal market assumptions) that are supported by little or no market activity and that are significant to the fair value of the investment.
Tumbleweed Technologies, LLC/Byte Factory, LLC
During 2011, the Company invested $50,000 for a 33% membership interest in Tumbleweed Technologies, LLC (“Tumbleweed”). Subsequently, in September 2011, the Company contributed its interest in Tumbleweed for a 6.5% membership interest in Byte Factory, LLC (“Byte Factory”). The Company accounted for its investment in Tumbleweed under the equity method of accounting through the date of its transfer to Byte Factory. During the period from July 2011 through the date of transfer, the Company recognized losses under the equity method totaling $12,009, reducing the carrying value of the investment to $37,991. The Company accounts for its investment in Byte Factory under the cost method of accounting. Subsequent to December 31, 2011, the Company learned that Byte Factory was in the process of dissolution. Because of this fact, the Company assessed the value of its investment to determine whether there was any subsequent decline in value. The Company estimated the fair value of its investment in Byte Factory using a discounted cash flow model and determined there was a decline in value below the carrying value at December 31, 2011 that was other than temporary and recognized an impairment loss of $3,727 during the fourth quarter of 2011, reducing the carrying value to $34,264. In March 2012, Byte Factory repaid $12,500 of the original investment of $50,000, bringing its carrying value to $21,764. As of December 31, 2012, the Company determined that the investment in Tumbleweed Technologies had no value as it determined it would not likely be able to recover any of its initial investment. As a result, the carrying amount of the investment of $21,764 was reduced to its fair value of $-. This non-recurring Level 3 fair value measurement was based on unobservable inputs (which reflect the Company’s internal market assumptions) that are supported by little or no market activity and that are significant to the fair value of the investment.
|
Consulting Agreement (Details) (Meteor Group and Mr. Abt [Member], USD $)
|
0 Months Ended |
---|---|
May 07, 2012
|
|
Consulting Agreement (Textual) | |
Option granted to purchase common stock under consulting agreement | 150,000 |
Payment description under consulting agreement | Company also agreed to pay them a commission equal to 10% of any fees paid to the Company by a Brand to develop or modify an existing mobile game and 10% of net revenue (as defined in the agreements) the Company generates from any mobile game it releases for a Brand. |
Percentage of development expense for recouped | 25.00% |
Total fair value of stock option | $ 7,533 |
Amortization period of related expense under consulting agreement | 3 years |
Exercise price 0.50 per share [Member]
|
|
Consulting Agreement (Textual) | |
Stock option exercisable | 50,000 |
Stock option exercise price | $ 0.50 |
Exercise price 0.75 per share [Member]
|
|
Consulting Agreement (Textual) | |
Stock option exercisable | 50,000 |
Stock option exercise price | $ 0.75 |
Exercise price 1.00 per share [Member]
|
|
Consulting Agreement (Textual) | |
Stock option exercisable | 50,000 |
Stock option exercise price | $ 1.00 |
Warrants (Details) (United Talent Agency [Member], USD $)
|
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Warrants (Textual) | |
Term of letter agreement | 6 months |
Payments to be made as per letter agreement | $ 15,000 |
Percentage of commission of net profit as per letter agreement | 10.00% |
Total value of warrants | 45,694 |
Warrant [Member]
|
|
Warrants (Textual) | |
Warrants exercisable | 150,000 |
Warrant exercisable, vesting period | 2 years |
Warrants exercise price | $ 0.75 |
Warrants exercisabale contractual life | 3 years |
Expected dividends rate | 0.00% |
Forfeiture rate | 0.00% |
Discount rate | 41.00% |
Volatility rate | 61.00% |
Expected life | 3 years |
Remaining contractual life of warrants | 2 years 9 months 18 days |
Stock based compensation expense | $ 5,712 |