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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2013
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _ to _
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Nevada
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76-0640970
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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701 North Post Oak Road, Suite 350, Houston,Texas
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77024
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(Address of principal executive offices)
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(Zip Code)
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voice: 713-686-1100
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fax: 713-682-7402
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Issuer's telephone number
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[X]
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TABLE OF CONTENTS
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ITEM 1. FINANCIAL STATEMENTS
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Unaudited Financial Statements
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F-1
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Balance Sheets as of March 31, 2013 and December 31, 2012
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F-1
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Statements of Operations for the three months ended March 31, 2013 and 2012
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F-2
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Statement of Stockholders’ Deficit for the three months ended March 31, 2013
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F-3
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Statements of Cash Flows for the three months ended March 31, 2013 and 2012
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F-4
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Notes to Financial Statements
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F-5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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I-1
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ITEM 4. CONTROLS AND PROCEDURES
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I-4
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II-1
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II-1
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ITEM 5. OTHER INFORMATION
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II-1
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ITEM 6. EXHIBITS
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II-1
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SIGNATURES
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II-2
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CERTIFICATIONS
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II-3
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BALANCE SHEETS
UNAUDITED
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||||||||
March 31,
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December 31,
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|||||||
2013
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2012
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|||||||
ASSETS
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|||||||
Current assets:
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||||||||
Cash and cash equivalents
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$ | 2,665 | $ | 3,762 | ||||
Accounts receivable, net
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2,161 | 3,233 | ||||||
Prepaid expenses and other
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10,435 | 10,435 | ||||||
Total current assets
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$ | 15,261 | $ | 17,430 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
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||||||||
Current liabilities:
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||||||||
Accounts payable
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$ | 11,097 | $ | 12,435 | ||||
Accounts payable to related party
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568,766 | 519,241 | ||||||
Accrued liabilities
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7,513 | 20,837 | ||||||
Note payable to related party
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1,271,600 | 1,245,000 | ||||||
Accrued liabilities to related parties
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514,299 | 438,051 | ||||||
Deferred revenue
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1,035 | 7,813 | ||||||
Total current liabilities
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2,374,310 | 2,243,377 | ||||||
Stockholders’ deficit:
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||||||||
Undesignated preferred stock, $.001 par value, 9,999,942 shares authorized, none issued and outstanding
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- | - | ||||||
Series C Convertible Non-Redeemable preferred stock, $.001 par value, 48 shares authorized, issued and outstanding at March 31, 2013 and December 31, 2012; $12,500 per share liquidation preference ($600,000 aggregate liquidation preference at March 31, 2013)
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- | - | ||||||
Series D Convertible Non-Redeemable preferred stock, $.001 par value, 10 shares authorized, issued and outstanding at March 31, 2013 and December 31, 2012; $8,725 per share liquidation preference ($87,250 aggregate liquidation preference at March 31, 2013)
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- | - | ||||||
Common stock, $.001 par value, 50,000,000 shares authorized, 46,033,565 shares issued and outstanding at March 31, 2013 and December 31, 2012
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46,034 | 46,034 | ||||||
Additional paid-in capital
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22,400,286 | 22,400,286 | ||||||
Accumulated deficit
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(24,805,369 | ) | (24,672,267 | ) | ||||
Total stockholders’ deficit
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(2,359,049 | ) | (2,225,947 | ) | ||||
Total liabilities and stockholders’ deficit
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$ | 15,261 | $ | 17,430 | ||||
BLUEGATE CORPORATION
STATEMENTS OF OPERATIONS
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||||||||
THREE MONTHS ENDED MARCH 31, 2013 AND 2012
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||||||||
UNAUDITED
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||||||||
2013
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2012
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|||||||
Service revenue
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$ | 32,153 | $ | 40,230 | ||||
Cost of services
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26,965 | 33,652 | ||||||
Gross profit
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5,188 | 6,578 | ||||||
Selling, general and administrative expenses
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62,041 | 62,363 | ||||||
Loss from operations
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(56,853 | ) | (55,785 | ) | ||||
Interest expense
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(76,249 | ) | (75,259 | ) | ||||
Net loss
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$ | (133,102 | ) | $ | (131,044 | ) | ||
Net loss per share - basic and diluted
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$ | (0.00 | ) | $ | (0.00 | ) | ||
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||||||||
Basic and diluted weighted average shares outstanding
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46,033,565 | 46,033,565 |
BLUEGATE CORPORATION
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|||||||||||||||||||||||||||||||||||||
STATEMENT OF STOCKHOLDERS' DEFICIT
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|||||||||||||||||||||||||||||||||||||
THREE MONTHS ENDED MARCH 31, 2013
UNAUDITED
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|||||||||||||||||||||||||||||||||||||
PREFERRED STOCK
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ADDITIONAL
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||||||||||||||||||||||||||||||||||||
COMMON STOCK
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SERIES C
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SERIES D
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PAID-IN
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ACCUMULATED
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|||||||||||||||||||||||||||||||||
SHARES
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CAPITAL
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SHARES
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CAPITAL
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SHARES
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CAPITAL
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CAPITAL
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DEFICIT
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TOTAL
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|||||||||||||||||||||||||||||
Balance at December 31, 2012
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46,033,565 | $ | 46,034 | 48 | $ | - | 10 | $ | - | $ | 22,400,286 | $ | (24,672,267 | ) | $ | (2,225,947 | ) | ||||||||||||||||||||
Net loss
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(133,102 | ) | (133,102 | ) | |||||||||||||||||||||||||||||||||
Balance at March 31, 2013
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46,033,565 | $ | 46,034 | 48 | $ | - | 10 | $ | - | $ | 22,400,286 | $ | (24,805,369 | ) | $ | (2,359,049 | ) | ||||||||||||||||||||
BLUEGATE CORPORATION
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||||||||
STATEMENTS OF CASH FLOWS
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||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
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||||||||
UNAUDITED
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||||||||
2013
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2012
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|||||||
Cash flows from operating activities:
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||||||||
Net loss
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$ | (133,102 | ) | $ | (131,044 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
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||||||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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1,072 | 433 | ||||||
Prepaid expenses and other current assets
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- | (5,000 | ) | |||||
Accounts payable and accrued liabilities
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(14,662 | ) | (3,408 | ) | ||||
Accounts payable to related party
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49,525 | 49,188 | ||||||
Accrued liabilities to related parties
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76,248 | 75,259 | ||||||
Deferred revenue
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(6,778 | ) | 1,397 | |||||
Net cash used in operating activities
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(27,697 | ) | (13,175 | ) | ||||
Cash flows from financing activities:
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||||||||
Proceeds from related party short term debt
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26,600 | 15,000 | ||||||
Net cash provided by financing activities
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26,600 | 15,000 | ||||||
Net (decrease) increase in cash and cash equivalents
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(1,097 | ) | 1,825 | |||||
Cash and cash equivalents at beginning of period
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3,762 | 5,937 | ||||||
Cash and cash equivalents at end of period
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$ | 2,665 | $ | 7,762 | ||||
Supplemental information:
Cash paid for interest
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$ | - | $ | - | ||||
Cash paid for income taxes
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- | - |
3. ACCOUNTS PAYABLE TO RELATED PARTY
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The accounts payable to related party balance is owed to Sperco, LLC ("SLLC") (an entity controlled by Stephen J. Sperco, Bluegate's CEO/President/Director) and is summarized below:
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3/31/2013
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12/31/2012
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||||||
During November 2009, Bluegate entered into an Asset Sale and Purchase Agreement to sell certain assets to SLLC, and as a result, these balances represent funds collected by Bluegate on behalf of SLLC.
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$ | 98,766 | $ | 98,741 | ||||
As a result of the November 2009 transaction, commencing January 1, 2010, Bluegate had no employees and agreed to pay SLLC a monthly amount of $15,000 for management, accounting and administrative services, as well as, infrastructure and network engineering support. In August 2012 the monthly amount was $18,500 and beginning September 2012 the monthly amount was revised to $15,500 to reflect support for a new project engagement.
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502,000 | 455,500 | ||||||
From July 1, 2010 through July 31, 2011, SLLC agreed to pay Bluegate a monthly amount of $4,000 for office space and associated services for the Sperco entities
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(52,000 | ) | (52,000 | ) | ||||
Commencing August 1, 2011, SLLC and Bluegate moved from Suite 600 to Suite 350 and Bluegate agreed to pay SLLC $1,000 rent on a month-to-month basis
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20,000 | 17,000 | ||||||
$ | 568,766 | $ | 519,241 |
Note payable at March 31, 2013 and December 31, 2012 is summarized below:
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3/31/2013
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12/31/2012
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||||||
Secured note payable to related party: During 2007, the Company entered into a line of credit agreement with SAI Corporation ("SAIC"), a corporation controlled by our CEO, Stephen J. Sperco, to borrow up to $500,000. The line of credit has been amended several times due to Bluegate’s need to borrow funds for working capital purposes and has been increased to $1,275,000. As a condition to and as additional consideration for SAIC’s agreement to lend additional funds to the Company, the Company granted SAIC a security interest in its assets as more specifically detailed in the Promissory Note and Security Agreement. Principal and interest is due on demand. Interest is at the rate of 15% per annum and payments are due and payable monthly at the end of each month until the outstanding principal balance is paid in full. The Company agreed to pay a late charge in the amount of $10,000 on any interest payment more than fifteen days delinquent. During the three months ended March 31, 2013 and the year ended December 31, 2012, Bluegate borrowed $26,600 and $45,000, respectively for working capital purposes.
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$ | 1,271,600 | $ | 1,245,000 |
5. ACCRUED LIABILITIES TO RELATED PARTIES
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The accrued liabilities to related parties is summarized below:
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3/31/2013
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12/31/2012
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||||||
Accrued interest on the note payable to SAIC
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$ | 470,380 | $ | 394,132 | ||||
Fees accrued through March 31, 2009 to former Board of Director, Dale Geary
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20,419 | 20,419 | ||||||
Fees accrued through March 31, 2009 to Board of Director, Stephen J. Sperco
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17,500 | 17,500 | ||||||
Vehicle allowance accrued through December 31, 2008 to Stephen J. Sperco
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6,000 | 6,000 | ||||||
$ | 514,299 | $ | 438,051 |
Three Months Ended March 31, | ||||||||
2013
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2012
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Net loss
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$ | (133,102 | ) | $ | (131,044 | ) | ||
Negative cash flow from operations
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(27,697 | ) | (13,175 | ) | ||||
Negative working capital
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(2,359,049 | ) | (1,828,594 | ) | ||||
Stockholders’ deficit
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(2,359,049 | ) | (1,828,594 | ) |
Three Months Ended March 31,
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Increase (Decrease)
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|||||||||||||||||||
2013
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2012
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2011
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2013 from 2012
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2012 from 2011
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Service revenue
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$ | 32,153 | $ | 40,230 | $ | 63,051 | $ | (8,077 | ) | $ | (22,821 | ) | ||||||||
Cost of services
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26,965 | 33,652 | 39,652 | (6,687 | ) | (6,000 | ) | |||||||||||||
Gross profit
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5,188 | 6,578 | 23,399 | (1,390 | ) | (16,821 | ) | |||||||||||||
Selling, general and administrative expenses
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62,041 | 62,363 | 65,130 | (322 | ) | (2,767 | ) | |||||||||||||
Loss from operations
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(56,853 | ) | (55,785 | ) | (41,731 | ) | 1,068 | 14,054 | ||||||||||||
Interest expense
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(76,249 | ) | (75,259 | ) | (64,778 | ) | 990 | 10,481 | ||||||||||||
Loss on derivative financial instruments
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- | - | (13,000 | ) | - | (13,000 | ) | |||||||||||||
Net loss
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$ | (133,102 | ) | $ | (131,044 | ) | $ | (119,509 | ) | $ | 2,058 | $ | 11,535 |
Three Months Ended March 31,
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Increase (Decrease)
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|||||||||||||||||||
2013
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2012
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2011
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2013 from 2012
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2012 from 2011
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||||||||||||||||
Net cash (used in) by operating activities
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$ | (27,697 | ) | $ | (13,175 | ) | $ | (25,228 | ) | $ | 14,522 | $ | (12,053 | ) | ||||||
Net cash provided by financing activities
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26,600 | 15,000 | 30,000 | 11,600 | (15,000 | ) | ||||||||||||||
Net (decrease) increase in cash
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$ | (1,097 | ) | $ | 1,825 | $ | 4,772 | $ | (2,922 | ) | $ | (2,947 | ) | |||||||
Cash balance at end of period
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$ | 2,665 | $ | 7,762 | $ | 14,985 |
Exhibit
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Number
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Name
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31.1
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CERTIFICATION REQUIRED BY RULE 13a - 14(a) OR RULE 15d - 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF THE CHIEF EXECUTIVE OFFICER
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31.2
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CERTIFICATION REQUIRED BY RULE 13a - 14(a) OR RULE 15d - 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF THE CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER
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32.1
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CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350), OF THE CHIEF EXECUTIVE OFFICER
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32.2
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CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350), OF THE CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER
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SIGNATURES
|
|||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|||
Bluegate Corporation
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|||
Date:
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April 10, 2013
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/s/
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Stephen J. Sperco
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Stephen J. Sperco,
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|||
Chief Executive Officer
|
|||
Bluegate Corporation
|
|||
Date:
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April 10, 2013
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/s/
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Charles E. Leibold
|
Charles E. Leibold,
|
|||
Chief Financial Officer and Principal Accounting Officer
|
|||
1.
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I have reviewed this report on Form 10-Q for the quarter ended March 31, 2013 of Bluegate Corporation;
|
2.
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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;
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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(s) 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 Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) 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 registrant’s board of directors (or persons performing the equivalent functions):
|
Date: April 10, 2013
|
|
/s/ Stephen J. Sperco
|
|
Stephen J. Sperco
|
|
Chief Executive Officer
|
1.
|
I have reviewed this report on Form 10-Q for the quarter ended March 31, 2013 of Bluegate Corporation;
|
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(s) 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 Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) 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 registrant’s board of directors (or persons performing the equivalent functions):
|
Date: April 10, 2013
|
|
/s/ Charles E. Leibold
|
|
Charles E. Leibold
|
|
Chief Financial Officer and
Principal Accounting Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: April 10, 2013
|
|
/s/ Stephen J. Sperco
|
|
Stephen J. Sperco
|
|
Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: April 10, 2013
|
|
/s/ Charles E. Leibold
|
|
Charles E. Leibold
|
|
Chief Financial Officer and
Principal Accounting Officer
|
Accounts Payable To Related Party
|
3 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||
Accounts Payable To Related Party | 3. ACCOUNTS PAYABLE TO RELATED PARTY
|
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