x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the fiscal year ended: December 31, 2008
|
|
or
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
OF 1934
|
For
the transition period from: _____________ to
_____________
|
Delaware
|
333-141141
|
01-0692341
|
(State
or Other Jurisdiction
|
(Commission
|
(I.R.S.
Employer
|
of
Incorporation or Organization)
|
File
Number)
|
Identification
No.)
|
Title
of each class
|
Name
of each exchange on which registered
|
|
None
|
None
|
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
|||
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
PART
I
|
||
Item
1.
|
Business.
|
2
|
Item
1A.
|
Risk
Factors.
|
4
|
Item
1B.
|
Unresolved
Staff Comments.
|
4
|
Item
2.
|
Properties.
|
4
|
Item
3.
|
Legal
Proceedings.
|
5
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
5
|
PART
II
|
||
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
6
|
Item
6.
|
Selected
Financial Data.
|
7
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation.
|
8
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
20
|
Item
8.
|
Financial
Statements and Supplementary Data.
|
20
|
Item
9.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure.
|
20
|
Item
9A.
|
Controls
and Procedures.
|
20
|
Iteam 9A(T). | Controls and Procedures. | 20 |
Item
9B.
|
Other
Information.
|
21
|
PART
III
|
||
Item
10.
|
Directors,
Executive Officers and Corporate Governance.
|
22
|
Item
11.
|
Executive
Compensation.
|
24
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
28
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
29
|
Item
14.
|
Principal
Accounting Fees and Services.
|
29
|
PART
IV
|
||
Item
15.
|
Exhibits,
Financial Statement Schedules.
|
31
|
SIGNATURES
|
33
|
Item
1.
|
Business.
|
|
·
|
the
timing and market acceptance of our new solutions and enhancements to
existing solutions developed by us;
|
|
·
|
continuing
our relationships with top quality
publishers;
|
|
·
|
our
customer service and support
efforts;
|
|
·
|
our
sales and marketing efforts; and
|
|
·
|
our
ability to remain price
competitive.
|
Item
1B.
|
Unresolved
Staff Comments.
|
Item
2.
|
Properties.
|
Location
|
Approximate Size
|
Monthly Cost(1)
|
Expiration Date
|
||||
Executive
offices
New
York, NY
|
5,786
sq. ft.
|
$25,073 |
December
31, 2014
|
||||
Former
executive offices(2)
New
York, NY
|
2,500
sq. ft.
|
$8,798 |
June
30, 2012
|
||||
Technology
offices
Boca
Raton, FL
|
2,272
sq. ft.
|
$3,313 |
February
2014
|
||||
Sales
office(3)(4)
Chicago,
IL
|
3
workstations
|
$1,400 |
June
30, 2009
|
||||
Sales
office
San
Francisco, CA
|
3
workstations
|
$3,371 |
Month
to Month Lease
|
||||
Sales
office(3)(4)
Los
Angeles, CA
|
2
workstations
|
$1,532 |
August
31,
2009
|
(1)
|
Our
leases typically have annual escalations ranging from 2.5% to 3.0%. In
addition, all leases typically have such pass throughs such as property
taxes and electricity.
|
(2)
|
We
are seeking to sublease this space.
|
(3)
|
These
sales offices are located in executive
suites.
|
(4)
|
Effective
in 2009.
|
Item
3.
|
Legal
Proceedings.
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
Year
|
Quarter Ended
|
Bid Prices
|
||||||||
High
|
Low
|
|||||||||
2008
|
March 31,
2008
|
$ | 6.25 | $ | 3.56 | |||||
June 30,
2008
|
$ | 3.80 | $ | 2.60 | ||||||
September 30,
2008
|
$ | 3.49 | $ | 1.12 | ||||||
December 31,
2008
|
$ | 1.92 | $ | 0.45 | ||||||
2007
|
December 31,
2007 (1)
|
$ | 6.49 | $ | 5.10 |
Name Of Plan
|
Aggregate
Number of
Securities
Underlying
Options
Granted
|
Weighted
Average
Exercise
Price Per
Share
|
Aggregate
Number of
Securities
Available
for
Grant
|
||||
Equity
compensation plans approved by security holders
|
0
|
$ |
0
|
0
|
|||
Equity
compensation plans not approved by security
holders
|
5,075,954
|
$
|
1.50
|
424,046
|
|||
Total
|
5,075,954
|
$
|
1.50
|
424,046
|
Name
|
Date Sold
|
No. of
Securities
|
Reason for Issuance
|
||||
Shareholder
|
October
12, 2007
|
66,667 |
Legal
fees
|
||||
Shareholder
|
January
4, 2008
|
1,000,000 |
Acquisition
|
||||
Shareholder
|
May
28, 2008
|
60,000 |
In
consideration for IR
services
|
Item
6.
|
Selected
Financial Data.
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
|
·
|
Our
2008 revenues grew to $22.5 million or 237% over 2007 revenues of
$6.7 million. We began operations in June 2007 and completed the Desktop
acquisition on August 31,
2007;
|
|
·
|
Our
fourth quarter 2008 revenues of $8.5 million increased 47% from third
quarter revenues of $5.8 million and 54% from fourth quarter 2007 revenues
of $5.5 million;
|
|
·
|
Our
fourth quarter 2008 gross profit of $3.2 million increased 79% from third
quarter gross profit of $1.8 million and 155% from fourth quarter 2007
gross profit of $1.3 million;
|
|
·
|
Gross
margins for 2008 were 31.7% compared to gross margins of 20.1% for
2007;
|
|
·
|
The
improvement in our gross margins is illustrated by fourth quarter 2008
gross margins of 37.8%, compared to third quarter 2008 gross margins of
31.1% and fourth quarter 2007 gross margins of
22.8%;
|
|
·
|
To
support our future growth, in 2008 and 2009 we opened sales offices in
Chicago, Illinois, San Francisco, California and Los Angeles,
California;
|
|
·
|
Our
sales staff has grown from 7 people on January 1, 2008 to 18 people as of
the date of this Report; and
|
|
·
|
In
February 2009, we increased our line of credit to $4.5 million from $3.5
million.
|
For the
Year Ended
December 31, 2008
|
For the period
from June 14, 2007
(Inception) to
December 31, 2007
|
|||||||
Revenues
|
$ | 22,452,333 | $ | 6,654,768 | ||||
Cost
of revenues
|
15,344,337 | 5,315,418 | ||||||
Gross
profit
|
7,107,996 | 1,339,350 | ||||||
Total
operating expenses
|
13,700,574 | 4,871,027 | ||||||
Operating
loss from continuing operations
|
(6,592,578 | ) | (3,531,677 | ) | ||||
Total
other income (expense)
|
(1,659,413 | ) | (239,290 | ) | ||||
Loss
from continuing operations before income taxes
|
(8,251,991 | ) | (3,770,967 | ) | ||||
Income tax benefit | 1,687,305 | 538,000 | ||||||
Equity
in investee’s loss,
net of income taxes
|
(653,231 | ) | - | |||||
Net
loss from discontinued operations, net of income taxes
|
(4,807,622 | ) | - | |||||
Net
loss
|
$ | (12,025,539 | ) | $ | (3,232,967 | ) | ||
Loss
per share from continuing operations – basis and diluted
|
$ | (0.19 | ) | $ | (0.12 | ) | ||
Loss
per share from discontinued operations – basis and diluted
|
$ | (0.13 | ) | $ | - | |||
Net
loss per share – basic and diluted
|
$ | (0.32 | ) | $ | (0.12 | ) | ||
Weighted
average shares outstanding – basic and diluted
|
37,137,877 | 28,025,035 |
|
·
|
Actual
or anticipated variations in our quarterly results of
operations;
|
|
·
|
Our
failure to meet financial analysts’ performance
expectations;
|
|
·
|
Our
failure to achieve and maintain
profitability;
|
|
·
|
Short
selling activities;
|
|
·
|
The
loss of major advertisers or
publishers;
|
|
·
|
Announcements
by us or our competitors of significant contracts, new products,
acquisitions, commercial relationships, joint ventures or capital
commitments;
|
|
·
|
The
departure of key personnel;
|
|
·
|
Regulatory
developments;
|
|
·
|
Changes
in market valuations of similar companies;
or
|
|
·
|
The
sale of a large amount of common stock by our shareholders including those
who invested prior to commencement of
trading.
|
|
(i)
|
we
are current in our filings,
|
|
(ii)
|
certain
manner of sale provisions,
|
|
(iii)
|
filing
of Form 144, and
|
|
(iv)
|
volume
limitations limiting the sale of shares within any three-month period to a
number of shares that does not exceed the greater of 1% of the total
number of outstanding shares or, the average weekly trading volume during
the four calendar weeks preceding the filing of a notice of
sale.
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
Item
8.
|
Financial
Statements and Supplementary Data.
|
Item
9.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure.
|
Item
9A.
|
Controls
and Procedures.
|
Item
9A(T).
|
Controls
and Procedures.
|
Item
9B.
|
Other
Information.
|
Item
10.
|
Directors,
Executive Officers and Corporate
Governance.
|
Name
|
|
Age
|
|
Position
|
Michael
Mathews
|
47
|
Chief
Executive Officer and Director
|
||
David
Garrity
|
48
|
Chief
Financial Officer and Director
|
||
Michael
Katz
|
30
|
President
and Director
|
||
Andrew
Katz
|
28
|
Chief
Technology Officer
|
||
Michael
Brauser
|
53
|
Co-Chairman
of the Board
|
||
Barry
Honig
|
37
|
Co-Chairman
of the Board
|
||
Sanford
Rich
|
51
|
Director
|
Name
and
|
Option
|
||||||||||||||||||||
Principal
Position
|
Year
|
Salary
|
Bonus
|
Awards
|
Total
|
||||||||||||||||
(a)
|
(b)
|
($)(c)
|
($)(d)
|
($)(f)
|
($)(j)
|
||||||||||||||||
Michael
Mathews
|
2008
|
$ | 325,000 | $ | 70,000 | $ | 379,301 | (1 | ) | $ | 774,301 | ||||||||||
Chief
Executive Officer
|
2007
|
$ | 116,071 | $ | 50,000 | $ | 122,545 | (1 | ) | $ | 288,616 | ||||||||||
Michael
Katz
|
2008
|
$ | 250,000 | $ | 112,615 | $ | 50,162 | (1 | ) | $ | 412,777 | ||||||||||
President
|
2007
|
$ | 116,896 | $ | 0 | $ | 16,721 | (1 | ) | $ | 133,617 | ||||||||||
Andrew
Katz
(2)
|
2008
|
$ | 181,875 | $ | 0 | $ | 70,351 | (1 | ) | $ | 252,226 | ||||||||||
Chief
Technology Officer
|
2007
|
$ | 84,583 | $ | 35,000 | $ | 4,618 | (1 | ) | $ | 124,201 |
Name
|
Number of
Options
|
Exercise Price per
Share
|
Expiration Date
|
||||||
Michael
Mathews
|
1,450,000 | $ 1.00 |
8/28/2012
|
||||||
Michael
Mathews
|
250,000 | $ 1.00 |
10/12/2012
|
||||||
Michael
Mathews
|
200,000 | $ 0.76 |
2/6/2014
|
||||||
David
Garrity
|
100,000 | $ 1.31 |
6/9/2013
|
||||||
David
Garrity
|
405,000 | $ 1.31 |
6/30/2013
|
||||||
David
Garrity
|
20,000 | $ 0.76 |
2/6/2014
|
||||||
Michael
Katz
|
300,000 | $ 1.00 |
8/31/2012
|
||||||
Andrew
Katz
|
100,000 | $ 1.00 |
9/21/2012
|
||||||
Andrew
Katz
|
200,000 | $ 1.31 |
6/16/2013
|
||||||
Michael
Brauser
|
100,000 | $ 1.00 |
8/28/2012
|
||||||
Barry
Honig
|
100,000 | $ 1.00 |
8/28/2012
|
||||||
Sanford
Rich
|
100,000 | $ 1.00 |
8/28/2012
|
Name
(a)
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
|
Number of Securities
Underlying
Unexercised Options
(#)
Unexercisable
(c)
|
Option
Exercise Price
($)(e)
|
Option
Expiration
Date
(f)
|
|||||||||
Michael
Mathews (1)
|
604,167 | 845,833 | 1.00 |
08/28/12
|
|||||||||
Chief
Executive Officer (1)
|
83,333 | 166,667 | 1.00 |
10/12/12
|
|||||||||
Michael
Katz (2)
|
75,000 | 225,000 | 1.00 |
08/31/12
|
|||||||||
President
|
|||||||||||||
Andrew
Katz (2)
|
25,000 | 75,000 | 1.00 |
09/21/12
|
|||||||||
Chief
Technology Officer (1)
|
0 | 200,000 | 1.31 |
06/16/13
|
(1)
|
These
options vest quarterly over a three year
period.
|
(2)
|
These
options vest annually over a four year
period.
|
Name
(a)
|
Option
Awards
($)
|
Total
($)
|
||||||
Michael
Brauser (1)
|
$ | 22,289 | $ | 22,289 | ||||
David
Garrity (1)(2)
|
$ | 26,915 | $ | 26,915 | ||||
Barry
Honig (1)
|
$ | 22,289 | $ | 22,289 | ||||
Sanford
Rich (1)
|
$ | 22,289 | $ | 22,289 |
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
Title of Class
|
Name and
Address of Beneficial Owner
|
Number of Shares
Beneficially
Owned(1)
|
Percent(1)
|
||||
Directors
and Executive Officers:
|
|||||||
Common Stock
|
Michael
Mathews
257
Park Avenue South Ste. 602
New
York, NY 10010 (2)
|
2,520,833
|
6.5
|
%
|
|||
Common
Stock
|
Michael
Katz
257
Park Avenue South Ste. 602
New
York, NY 10010 (3)
|
2,075,000
|
5.5
|
%
|
|||
Common
Stock
|
Andrew
Katz
257
Park Avenue South Ste. 602
New
York, NY 10010 (4)
|
131,250
|
*
|
|
|||
Common
Stock
|
Michael
Brauser
595
S. Federal Hwy. Ste. 600
Boca
Raton, FL 33432
(5)
|
7,273,000
|
19.2
|
%
|
|||
Common
Stock
|
David
Garrity
257
Park Avenue South Ste. 602
New
York, NY 10010 (6)
|
163,050
|
*
|
|
|||
Common
Stock
|
Barry
Honig
595
S. Federal Hwy. Ste. 600
Boca
Raton, FL 33432
(7)
|
7,031,500
|
18.6
|
%
|
|||
Common
Stock
|
Sanford
Rich
950
Third Avenue 22nd Floor
New
York, NY 10022 (8)
|
25,000
|
*
|
|
|||
Common
Stock
|
All
directors and executive officers
as
a group (7 persons)
|
19,219,633
|
48.8
|
%
|
*
|
Less
than 1%
|
(1)
|
Applicable percentages
are based on 37,845,167 shares outstanding adjusted as required by rules
of the SEC. Beneficial ownership is determined under the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options, warrants and
convertible notes currently exercisable or convertible, or exercisable or
convertible within 60 days after the date of this Report are deemed
outstanding for computing the percentage of the person holding such
securities but are not deemed outstanding for computing
the percentage of any other person. Unless otherwise indicated in the
footnotes to this table, the Company believes that each of the
shareholders named in the table has sole voting and investment power with
respect to the shares of common stock indicated as beneficially owned by
them.
|
(2)
|
Includes
1,170,833 shares issuable upon exercise of options that are exercisable
within 60 days of the date of this
Report.
|
(3)
|
Includes
75,000 shares issuable upon exercise of options that are exercisable
within 60 days of the date of this
Report.
|
(4)
|
Includes
75,000 shares issuable upon exercise of options that are exercisable
within 60 days of the date of this Report and 56,250 shares of restricted
common stock which vest semi-annually over a four year period beginning
June 30, 2009.
|
(5)
|
Includes
25,000 shares issuable upon exercise of options that are exercisable
within 60 days of the date of this Report. Also includes: (i)
4,485,500 shares held in a Partnership of which Mr. Brauser is the General
Partner, (ii) 1,800,000 shares held jointly with his wife and (iii)
950,000 shares held by a trust whereby his wife is the trustee and
beneficiary.
|
(6)
|
Includes
121,250 shares issuable upon exercise of options that are exercisable
within 60 days of the date of this Report. Also includes shares
held in Mr. Garrity's IRA
account.
|
(7)
|
Includes
25,000 shares issuable upon exercise of options that are exercisable
within 60 days of the date of this Report. Also includes shares
held in a 401(K) plan whereby Mr. Honig is the
trustee.
|
(8)
|
Includes 25,000
shares issuable upon exercise of options that are exercisable within 60
days of the date of this
Report.
|
Item
14.
|
Principal
Accounting Fees and Services.
|
2008
|
2007
|
|||||||
Audit
Fees (1)
|
$ | 125,000 | $ | 82,000 | ||||
Audit
Related Fees (2)
|
$ | 17,000 | $ | 130,000 | ||||
Tax
Fees
|
$ | 0 | $ | 0 | ||||
All
Other Fees
|
$ | 0 | $ | 0 |
(1)
|
Audit
fees – these fees relate to the audits of our annual consolidated
financial statements and the review of our interim quarterly consolidated
financial statements.
|
(2)
|
Audit
related fees – The audit related fees for the period from June 14, 2007
(Inception) to December 31, 2007 and for the year ended December 31, 2008
were for professional services rendered for assistance with reviews of
documents filed with the SEC primarily related to the 2007
recapitalization and for audits of acquired companies in 2007 and
2008.
|
Item
15.
|
Exhibits,
Financial Statement Schedules.
|
No.
|
Description
|
Incorporated
By Reference
|
||
2.1
|
Agreement
of Merger and Plan of Reorganization, by and among Customer Acquisition
Network Holdings, Inc., Customer Acquisition Network, Inc. and CAN
Acquisition Sub, Inc.
|
Form 8-K
filed on September 4, 2007
|
||
2.2
|
Agreement
and Plan of Merger, by and among Customer Acquisition Network Holdings,
Inc., Customer Acquisition Network, Inc., Desktop Acquisition Sub, Inc.,
Desktop Interactive, Inc. and Michael Katz, Brandon Guttman and Stephen
Guttman
|
Form 8-K
filed on September 4, 2007
|
||
2.3
|
Certificate
of Merger, merging Customer Acquisition Sub, Inc. with and into Customer
Acquisition Network Inc.
|
Form 8-K
filed on September 4, 2007
|
||
2.4
|
Certificate
of Merger, merging Desktop Interactive, Inc. with and into Desktop
Acquisition Sub, Inc.
|
Form 8-K
filed on September 4, 2007
|
||
2.5
|
Agreement
of Merger and Plan of Reorganization, by and among Options Media Group
Holdings, Inc., Options Acquisition Corp., Options Acquisition Sub, Inc.
and Customer Acquisition Network Holdings, Inc.
|
Form
8-K filed on June 27, 2008
|
||
2.6
|
Certificate
of Merger, merging Options Acquisition Corp. with and into Options
Acquisition Sub, Inc.
|
Form 8-K
filed on September 4, 2007
|
||
3.1
|
Amended
and Restated Certificate of Incorporation
|
Form
8-K filed on August 30, 2007
|
||
3.2
|
Certificate
of Amendment to Certificate of Incorporation
|
Form
8-K filed on July 1, 2008
|
||
3.3
|
Amended
and Restated Bylaws
|
Form
8-K filed on August 30, 2007
|
||
4.1
|
2007
Equity Incentive Plan
|
Form 8-K
filed on September 4, 2007
|
||
4.2
|
Form
of 2007 Incentive Stock Option Agreement
|
Form 8-K
filed on September 4, 2007
|
||
4.3
|
2007
Incentive Stock and Award Plan
|
Form
8-K filed on November 16, 2007
|
||
4.4
|
First
Amendment to the 2007 Incentive Stock and Award Plan
|
Filed
with this Report
|
||
4.5
|
Promissory
Notes issued to Barry Honig and GRQ Consultants, Inc.
|
Form
8-K filed on October 1, 2008
|
||
10.1
|
Michael
Mathews Employment Agreement
|
Form 8-K
filed on September 4, 2007
|
||
10.2
|
Michael
Katz Employment Agreement
|
Form 8-K
filed on September 4, 2007
|
||
10.3
|
David
Garrity Employment Agreement
|
Form
8-K filed on July 7, 2008
|
||
10.4
|
Andrew
Katz Employment Agreement
|
Filed
with this Report
|
||
10.5
|
Whalehaven
Capital Fund Limited Subscription Agreement
|
Form
8-K filed on April 3, 2008
|
||
10.6
|
Chestnut
Ridge Capital LLC Subscription Agreement
|
Form
8-K filed on April 3, 2008
|
||
10.7
|
Form
of Subscription Agreement
|
Form
8-K filed on May 7, 2008
|
||
10.8
|
Amendment
to Securities Purchase Agreement with Alpha Capital
Anstalt
|
Form
8-K filed on May 7, 2008
|
||
10.9
|
Whalehaven
Capital Fund Limited Subscription Agreement
|
Form
8-K filed on May 19, 2008
|
||
10.10
|
P.A.W.
Long Term Partners, L.P. Subscription Agreement
|
Form
8-K filed on July 22,
2008
|
10.11
|
Securities
Purchase Agreement with Longview Marquis Master Fund, L.P.
|
Form
8-K filed on November 20, 2007
|
||
10.12
|
Amendment
to Securities Purchase Agreement with Longview Marquis Master Fund,
L.P.
|
Form
8-K filed on June 2, 2008
|
||
10.13
|
Second
Amendment to Securities Purchase Agreement Longview Marquis Master Fund,
L.P.
|
Form
8-K filed on June 18, 2008
|
||
10.14
|
Letter
Agreement with Longview Marquis Master Fund, L.P dated June 20,
2008
|
Form
8-K filed on June 27, 2008
|
||
10.15
|
Letter
Agreement with Longview Marquis Master Fund, L.P dated August 29,
2008
|
Form
8-K filed on September 5, 2008
|
||
10.16
|
Placement
Agent Agreement with Dinosaur Securities LLC
|
Form
8-K filed on June 13, 2008
|
||
10.17
|
Stephen
B. Wechsler Subscription Agreement
|
Form
8-K filed on June 18, 2008
|
||
10.18
|
Stock
Pledge Agreement with Barry Honig and GRQ Consultants,
Inc.
|
Form
8-K filed on October 1, 2008
|
||
10.19
|
Letter
Agreement with Barry Honig and GRQ Consultants, Inc.
|
Filed
with this Report
|
||
10.20
|
Security
Agreement with Silicon Valley Bank Loan
|
Form
8-K filed on October 15, 2008
|
||
10.21
|
Letter
Agreement with Silicon Valley Bank
|
Form
8-K filed on December 3, 2008
|
||
10.22
|
Settlement
and Release Agreement with Hagai Schecter
|
Filed
with this Report
|
||
10.23
|
Accounts
Receivable Financing Agreement with Crestmark Commercial Capital Lending
LLC
|
Filed
with this Report
|
||
10.24
|
Amendment
to the Accounts Receivable Financing Agreement with Crestmark Commercial
Capital Lending LLC
|
Filed
with this Report
|
||
10.25
|
Letter
Agreement with Crestmark Commercial Capital Lending LLC increasing Line of
Credit
|
Filed
with this Report
|
||
10.26
|
Second
Amendment to the Accounts Receivable Financing Agreement with Crestmark
Commercial Capital Lending LLC
|
Filed
with this Report
|
||
14.1
|
Code
of Ethics
|
Form
10-K filed on April 15, 2008
|
||
21.1
|
List
of Subsidiaries
|
Form
10-K filed on April 15, 2008
|
||
31.1
|
Certification
of Principal Executive Officer (Section 302)
|
Furnished
with this Report
|
||
31.2
|
Certification
of Principal Financial Officer (Section 302)
|
Furnished
with this Report
|
||
32.1
|
Certification
of Principal Executive Officer (Section 906)
|
Filed
with this Report
|
||
32.2
|
Certification
of Principal Financial Officer (Section 906)
|
Filed
with this Report
|
||
99.1
|
Audit Committee Charter | Filed with this Report |
|
interCLICK,
Inc.
|
|
|
||
By:
|
/s/
Michael Mathews
|
|
Michael
Mathews
|
||
Chief
Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/
David Garrity
|
Chief
Financial Officer (Principal Financial Officer and Chief Accounting
Officer)
|
March
31, 2009
|
||
David
Garrity
|
||||
/s/ Michael Brauser |
Co-Chairman
|
March
31, 2009
|
||
Michael
Brauser
|
||||
/s/
Barry Honig
|
Co-Chairman
|
March
31, 2009
|
||
Barry
Honig
|
||||
/s/
Michael Katz
|
Director
|
March
31, 2009
|
||
Michael
Katz
|
||||
/s/ Michael Mathews |
Director
|
March
31, 2009
|
||
Michael
Mathews
|
||||
/s/ Sanford Rich |
Director
|
March
31, 2009
|
||
Sanford
Rich
|
Page
|
||||
Interclick,
Inc. (Formerly Customer Acquisition Network Holdings, Inc.)
Consolidated Financial Statements
|
||||
Report
of Salberg & Company, P.A., Independent Registered Public Accounting
Firm
|
F-2 | |||
Consolidated
Balance Sheets at December 31, 2008 and 2007
|
F-3 | |||
Consolidated
Statements of Operations for the year ended December 31, 2008 and for the
period from June 14, 2007 (Inception) to December 31,
2007
|
F-4 | |||
Consolidated
Statements of Changes in Stockholders' Equity for the year ended December
31, 2008 and for the period from June 14, 2007 (Inception) to
December 31, 2007
|
F-5 | |||
Consolidated
Statements of Cash Flows for the year ended December 31, 2008 and for the
period from June 14, 2007 (Inception) to December 31,
2007
|
F-6 | |||
Notes
to Consolidated Financial Statements
|
F-8 |
December
31, 2008
|
December
31, 2007
|
|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 183,871 | $ | 3,675,483 | ||||
Accounts
receivable, net of allowance of $425,000 and $150,000,
respectively
|
7,120,311 | 3,390,302 | ||||||
Due
from factor
|
637,705 | - | ||||||
Prepaid
expenses and other current assets
|
94,164 | 55,750 | ||||||
Total
current assets
|
8,036,051 | 7,121,535 | ||||||
Property
and equipment, net
|
596,913 | 512,031 | ||||||
Intangible
assets, net
|
610,113 | 1,028,621 | ||||||
Goodwill
|
7,909,571 | 7,909,571 | ||||||
Investment
in available-for-sale marketable securities
|
1,650,000 | - | ||||||
Deferred
debt issue costs, net of accumulated amortization of $6,667 and $13,932,
respectively
|
33,333 | 77,505 | ||||||
Deferred
acquisition costs
|
- | 129,333 | ||||||
Other
assets
|
191,664 | 66,937 | ||||||
Total
assets
|
$ | 19,027,645 | $ | 16,845,533 | ||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities:
|
||||||||
Liability
on transferred accounts receivable
|
$ | 3,188,425 | $ | - | ||||
Senior
secured notes payable - related party
|
400,000 | - | ||||||
Payable
and promissory note settlement liability
|
248,780 | - | ||||||
Senior
secured notes payable, net of debt discount of $0 and $1,127,084,
respectively
|
- | 3,872,916 | ||||||
Accounts
payable
|
5,288,807 | 2,499,604 | ||||||
Accrued
expenses
|
310,685 | 1,046,719 | ||||||
Accrued
interest
|
16,948 | 36,173 | ||||||
Obligations
under capital leases, current portion
|
10,615 | 9,290 | ||||||
Deferred
revenue
|
9,972 | - | ||||||
Total
current liabilities
|
9,474,232 | 7,464,702 | ||||||
Obligations
under capital leases, net of current portion
|
9,495 | 19,317 | ||||||
Deferred
rent
|
72,696 | - | ||||||
Total
liabilities
|
9,556,423 | 7,484,019 | ||||||
Commitments
and contingencies (Note 12)
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock, $0.001 par value; 10,000,000 shares authorized, zero shares issued
and outstanding
|
- | - | ||||||
Common
stock, $0.001 par value; 140,000,000 shares authorized, 37,845,167
and 34,979,667 issued and outstanding,
respectively
|
37,846 | 34,980 | ||||||
Additional
paid-in capital
|
24,889,586 | 12,737,982 | ||||||
Deferred
consulting
|
- | (178,481 | ) | |||||
Accumulated
other comprehensive loss
|
(197,704 | ) | - | |||||
Accumulated
deficit
|
(15,258,506 | ) | (3,232,967 | ) | ||||
Total
stockholders’ equity
|
9,471,222 | 9,361,514 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 19,027,645 | $ | 16,845,533 |
For
the period
|
||||||||
For
the
|
from
June 14, 2007
|
|||||||
Year
Ended
|
(Inception)
to
|
|||||||
December
31, 2008
|
December
31, 2007
|
|||||||
Revenues
|
$ | 22,452,333 | $ | 6,654,768 | ||||
Cost
of revenue
|
15,344,337 | 5,315,418 | ||||||
Gross
profit
|
7,107,996 | 1,339,350 | ||||||
Operating
expenses:
|
||||||||
General
and administrative (includes stock-based compensation
of $1,941,191 and $954,167, respectively)
|
6,269,070 | 2,442,705 | ||||||
Sales
and marketing
|
4,884,973 | 1,073,884 | ||||||
Technology
support
|
1,061,182 | 748,968 | ||||||
Merger,
acquisition, and divestiture costs
|
652,104 | 187,353 | ||||||
Amortization
of intangible assets
|
418,508 | 302,062 | ||||||
Bad
debt expense
|
414,737 | 116,055 | ||||||
Total
operating expenses
|
13,700,574 | 4,871,027 | ||||||
Operating
loss from continuing operations
|
(6,592,578 | ) | (3,531,677 | ) | ||||
Other
income (expense):
|
||||||||
Interest
income
|
17,095 | 36,727 | ||||||
Loss
on settlement of debt
|
(20,121 | ) | - | |||||
Loss
on sale of available-for-sale securities, net
|
(116,454 | ) | - | |||||
Loss
on disposal of fixed assets
|
(13,635 | ) | - | |||||
Interest
expense
|
(1,526,298 | ) | (276,017 | ) | ||||
Total
other income (expense)
|
(1,659,413 | ) | (239,290 | ) | ||||
Loss
from continuing operations before income taxes
|
(8,251,991 | ) | (3,770,967 | ) | ||||
Income
tax benefit
|
1,687,305 | 538,000 | ||||||
Loss
from continuing operations before equity investment
|
(6,564,686 | ) | (3,232,967 | ) | ||||
Equity
in investee's loss, net of income taxes
|
(653,231 | ) | - | |||||
Loss
from continuing operations
|
(7,217,917 | ) | (3,232,967 | ) | ||||
Discontinued
operations:
|
||||||||
Loss
from discontinued operations, net of income tax benefit of $1,016,292
(includes stock-based compensation of $1,121,818)
|
(1,235,940 | ) | - | |||||
Loss
on sale of discontinued operations, net of income tax provision of
$2,439,597
|
(3,571,682 | ) | - | |||||
Loss
from discontinued operations, net
|
(4,807,622 | ) | - | |||||
Net
loss
|
(12,025,539 | ) | (3,232,967 | ) | ||||
Other
comprehensive loss:
|
||||||||
Unrealized
loss on available-for-sale securities
|
(197,704 | ) | - | |||||
Total
other comprehensive loss
|
(197,704 | ) | - | |||||
Comprehensive
loss
|
$ | (12,223,243 | ) | $ | (3,232,967 | ) | ||
Loss
per share from continuing operations - basic and diluted
|
$ | (0.19 | ) | $ | (0.12 | ) | ||
Loss
per share from discontinued operations - basic and diluted
|
$ | (0.13 | ) | $ | - | |||
Net
loss per share - basic and diluted
|
$ | (0.32 | ) | $ | (0.12 | ) | ||
Weighted
average shares outstanding - basic and diluted
|
37,137,877 | 28,025,035 |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||||||
Common
Stock
|
Paid-In
|
Deferred
|
Comprehensive
|
Accumulated
|
Stockholders'
|
|||||||||||||||||||||||
Stock
|
Amount
|
Capital
|
Consulting
|
Loss
|
Deficit
|
Equity
|
||||||||||||||||||||||
Balance,
June 14, 2007 (Inception)
|
- | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
Issuance
of common stock to founders and officers
|
16,600,000 | 16,600 | - | - | - | - | 16,600 | |||||||||||||||||||||
Recapitalization
and split-off
|
6,575,000 | 6,575 | (6,575 | ) | - | - | - | - | ||||||||||||||||||||
Common
stock and warrants issued for cash, net of offering costs of
$139,453
|
7,138,000 | 7,138 | 6,991,409 | - | - | - | 6,998,547 | |||||||||||||||||||||
Issuance
of common stock in connection with Desktop Interactive, Inc.
merger
|
3,500,000 | 3,500 | 3,496,500 | - | - | - | 3,500,000 | |||||||||||||||||||||
Conversion
of convertible notes to common stock
|
500,000 | 500 | 249,500 | - | - | - | 250,000 | |||||||||||||||||||||
Warrants
granted for professional services
|
- | - | 861,722 | (861,722 | ) | - | - | - | ||||||||||||||||||||
Issuance
of common stock in connection with settlement of certain
liabilities
|
66,667 | 67 | 66,600 | - | - | - | 66,667 | |||||||||||||||||||||
Exercise
of warrants
|
600,000 | 600 | 5,400 | - | - | - | 6,000 | |||||||||||||||||||||
Stock
options expense
|
- | - | 270,926 | - | - | - | 270,926 | |||||||||||||||||||||
Issuance
of common stock in connection with issuance of notes
payable
|
- | - | 802,500 | - | - | - | 802,500 | |||||||||||||||||||||
Amortization
of deferred consulting - warrants
|
- | - | - | 683,241 | - | - | 683,241 | |||||||||||||||||||||
Net
loss, June 14, 2007 (Inception) to December 31, 2007
|
- | - | - | - | - | (3,232,967 | ) | (3,232,967 | ) | |||||||||||||||||||
Balance,
December 31, 2007
|
34,979,667 | 34,980 | 12,737,982 | (178,481 | ) | - | (3,232,967 | ) | 9,361,514 | |||||||||||||||||||
Issuance
of Common Stock in connection with Options Media Group
merger
|
1,000,000 | 1,000 | 5,716,273 | - | - | - | 5,717,273 | |||||||||||||||||||||
Issuance
of Warrant in connection with Options Media Group merger
|
- | - | 29,169 | - | - | - | 29,169 | |||||||||||||||||||||
Common
stock and warrants issued for cash, net of offering costs of
$87,500
|
1,425,000 | 1,425 | 2,911,075 | - | - | - | 2,912,500 | |||||||||||||||||||||
Common
stock and warrants issued per price protection clause
|
75,000 | 75 | (75 | ) | - | - | - | - | ||||||||||||||||||||
Common
stock and warrants issued to settle debt
|
305,500 | 306 | 610,694 | - | - | - | 611,000 | |||||||||||||||||||||
Common
stock issued for services
|
60,000 | 60 | 188,940 | - | - | - | 189,000 | |||||||||||||||||||||
Amortization
of deferred consulting - warrants
|
- | - | - | 178,481 | - | - | 178,481 | |||||||||||||||||||||
Stock
options expense
|
- | - | 2,695,528 | - | - | - | 2,695,528 | |||||||||||||||||||||
Unrealized
loss on marketable securities
|
- | - | - | - | (197,704 | ) | - | (197,704 | ) | |||||||||||||||||||
Net
loss, 2008
|
- | - | - | - | - | (12,025,539 | ) | (12,025,539 | ) | |||||||||||||||||||
Balance,
December 31, 2008
|
37,845,167 | $ | 37,846 | $ | 24,889,586 | $ | - | $ | (197,704 | ) | $ | (15,258,506 | ) | $ | 9,471,222 |
For
the period
|
||||||||
For
the
|
from
June 14, 2007
|
|||||||
Year
Ended
|
(Inception)
to
|
|||||||
December
31, 2008
|
December
31, 2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (12,025,539 | ) | $ | (3,232,967 | ) | ||
Add
back loss from discontinued operations, net
|
4,807,622 | - | ||||||
Loss
from continuing operations
|
(7,217,917 | ) | (3,232,967 | ) | ||||
Adjustments
to reconcile net loss from continuing operations to net cash used in
operating activities:
|
||||||||
Stock-based
compensation
|
2,695,528 | 954,167 | ||||||
Amortization
of debt discount
|
1,239,061 | 225,416 | ||||||
Equity
method pick up from investment
|
653,231 | - | ||||||
Amortization
of intangible assets
|
418,508 | 301,379 | ||||||
Provision
for bad debts
|
414,737 | 116,055 | ||||||
Depreciation
|
245,489 | 44,896 | ||||||
Common
stock issued for services
|
189,000 | - | ||||||
Amortization
of deferred consulting
|
178,481 | - | ||||||
Loss
on sales of investment in marketable securities
|
116,454 | - | ||||||
Write
off of deferred acquisition costs
|
96,954 | - | ||||||
Amortization
of debt issue costs
|
44,172 | 13,932 | ||||||
Loss
on settlement of debt
|
20,121 | - | ||||||
Loss
on disposal of property and equipment
|
13,635 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Increase
in accounts receivable
|
(4,144,746 | ) | (1,785,866 | ) | ||||
Increase
in prepaid expenses and other current assets
|
(38,414 | ) | (55,750 | ) | ||||
Increase
in other assets
|
(124,727 | ) | (31,064 | ) | ||||
Increase
in accounts payable
|
2,843,814 | 955,235 | ||||||
(Decrease)
increase in accrued expenses
|
(736,034 | ) | 219,163 | |||||
(Decrease)
increase in accrued interest
|
(19,225 | ) | 36,173 | |||||
Increase
in deferred revenue
|
9,972 | - | ||||||
Increase
in deferred rent
|
72,696 | - | ||||||
Net
cash used in operating activities
|
(3,029,210 | ) | (2,239,231 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Purchases
of property and equipment
|
(357,006 | ) | (464,371 | ) | ||||
Proceeds
from sales of property and equipment
|
13,000 | - | ||||||
Acquisition
of business, net of cash acquired
|
- | (5,120,540 | ) | |||||
Proceeds
from sales of investment in marketable securities
|
1,078,000 | - | ||||||
Deferred
acquisition costs
|
(10,619 | ) | (129,333 | ) | ||||
Net
cash provided by (used in) investing activities
|
723,375 | (5,714,244 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from issuance of notes payable
|
1,300,000 | 4,450,000 | ||||||
Principal
payments on notes payable
|
(5,423,573 | ) | - | |||||
Proceeds
from common stock and warrants issued for cash
|
2,912,500 | 6,998,547 | ||||||
Proceeds
from factor, net
|
2,550,720 | - | ||||||
Debt
issue costs
|
- | (91,438 | ) | |||||
Proceeds
from convertible promissory notes
|
- | 250,000 | ||||||
Proceeds
from issuance of common stock to founders
|
- | 16,600 | ||||||
Proceeds
from exercise of warrants
|
- | 6,000 | ||||||
Principal
payments on capital leases
|
(8,497 | ) | (751 | ) | ||||
Net
cash provided by financing activities
|
1,331,150 | 11,628,958 | ||||||
Cash
flows from discontinued operations:
|
||||||||
Cash
flows from operating activities
|
(1,933,382 | ) | - | |||||
Cash
flows from investing activities-acquisition
|
(1,885,624 | ) | - | |||||
Cash
flows from investing activities-divestiture
|
1,302,079 | - | ||||||
Net
cash used in discontinued operations
|
(2,516,927 | ) | - | |||||
Net
(decrease) increase in cash and cash equivalents
|
(3,491,612 | ) | 3,675,483 | |||||
Cash
and cash equivalents at beginning of period
|
3,675,483 | - | ||||||
Cash
and cash equivalents at end of period
|
$ | 183,871 | $ | 3,675,483 |
For
the period
|
||||||||
For
the
|
from
June 14, 2007
|
|||||||
Year
Ended
|
(Inception)
to
|
|||||||
December
31, 2008
|
December
31, 2007
|
|||||||
Supplemental
disclosure of cash flow information:
|
||||||||
Interest
paid
|
$ | 261,796 | $ | - | ||||
Income
taxes paid
|
$ | - | $ | - | ||||
Non-cash
investing and financing activities:
|
||||||||
Issuance
of common stock and warrants in business combination
|
$ | 5,746,442 | $ | 3,500,000 | ||||
Issuance
of common stock and warrants in debt settlement
|
$ | 611,000 | $ | - | ||||
Unrealized
loss on available-for-sale securities
|
$ | 197,704 | $ | - | ||||
Issuance
of common stock for deferred services rendered
|
$ | 189,000 | $ | - | ||||
Issuance
of shares of investment in marketable securities to settle accounts
payable
|
$ | 54,611 | $ | - | ||||
Issuance
of common stock in connection with issuance of senior secured notes
payable
|
$ | - | $ | 802,500 | ||||
Conversion
of convertible notes
|
$ | - | $ | 250,000 | ||||
Common
stock issued in settlement of accounts payable
|
$ | - | $ | 66,667 | ||||
Capital
lease obligation and related equipment
|
$ | - | $ | 29,358 |
Current
assets (including cash of $82,260)
|
$
|
1,802,751
|
||
Property
and equipment
|
63,197
|
|||
Other
assets
|
35,873
|
|||
Goodwill
|
7,909,571
|
|||
Other
intangibles
|
1,330,000
|
|||
Liabilities
assumed
|
(1,882,593
|
)
|
||
Deferred
tax liability
|
(556,000
|
)
|
||
Net
purchase price
|
$
|
8,702,799
|
Holdings
and
Desktop
|
||||
For
the year ended
|
||||
December
31, 2007
|
||||
Pro
forma revenues
|
$
|
11,896,788
|
||
Pro
forma (loss) income from operations
|
$ |
(3,671,555
|
)
|
|
Pro
forma net loss
|
$ |
(3,133,555
|
)
|
|
Pro
forma loss per share
|
$
|
(.012
|
)
|
|
Pro
forma diluted loss per share
|
$
|
(.012
|
)
|
Current
assets (including cash of $41,424)
|
$ | 58,153 | ||
Property
and equipment
|
112,289 | |||
Other
assets (Software)
|
67,220 | |||
Goodwill
(adjusted for Earn Out)
|
8,020,450 | |||
Other
Intangibles
|
660,000 | |||
Liabilities
assumed
|
(258,750 | ) | ||
Deferred
tax liability
|
(264,000 | ) | ||
Net
purchase price
|
$ | 8,395,362 |
Holdings
and
Desktop
|
Options
Media
|
Holdings
|
||||||||||
For
the year ended
December
31, 2007
|
For
the year ended
December
31, 2007
|
For
the year ended
December
31, 2007
|
||||||||||
Pro
forma revenues
|
$ | 11,896,788 | $ | 1,819,060 | $ | 13,715,848 | ||||||
Pro
forma (loss) income from operations
|
$ | (3,671,555 | ) | $ | 353,323 | $ | (3,318,232 | ) | ||||
Pro
forma net loss
|
$ | (3,133,555 | ) | $ | (36,677 | ) | $ | (3,170,232 | ) | |||
Pro
forma loss per share
|
$ | (0.12 | ) | $ | (0.001 | ) | $ | (0.013 | ) | |||
Pro
forma diluted loss per share
|
$ | (0.12 | ) | $ | (0.001 | ) | $ | (0.013 | ) |
Consideration
received for sale:
|
||||
Cash
consideration
|
$ | 3,000,000 | ||
Note
receivable
|
1,000,000 | |||
12.5
million shares of OPMG
|
3,750,000 | |||
Total
consideration received
|
7,750,000 | |||
Less:
net book value of subsidiary sold:
|
||||
Original
purchase price (including Earn Out payments due)
|
8,395,362 | |||
Asset
contributed to Options Acquisition
|
350,000 | |||
Advances
to Options Acquisition
|
402,190 | |||
Corporate
allocation to Options Acquisition
|
661,156 | |||
Equity
method pick up from 1/1/08 to 6/23/08
|
(935,173 | ) | ||
Interest
expense on payable and promissory note settlement liability from 9/30/08
to 12/31/08
|
8,550 | |||
Net
book value of subsidiary sold, June 23, 2008
|
8,882,085 | |||
Loss
on sale of discontinued operations before income taxes
|
(1,132,085 | ) | ||
Income
tax provision
|
(2,439,597 | ) | ||
Loss
on sale of discontinued operations, net of income taxes
|
$ | (3,571,682 | ) |
Category
|
Depreciation
Term
|
|
Computer
equipment
|
3
years
|
|
Software
|
3
years
|
|
Furniture
and fixtures
|
3-5
years
|
|
Office
equipment
|
3-5
years
|
|
Capitalized
leases
|
5
years
|
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Accounts
receivable
|
$ | 7,545,311 | $ | 3,540,302 | ||||
Less:
Allowance for doubtful accounts
|
(425,000 | ) | (150,000 | ) | ||||
Accounts
receivable, net
|
$ | 7,120,311 | $ | 3,390,302 |
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Computer
equipment
|
$ | 725,158 | $ | 449,953 | ||||
Software
|
56,375 | 3,273 | ||||||
Furniture
and fixtures
|
46,069 | 66,872 | ||||||
Capitalized
leases
|
29,358 | 29,358 | ||||||
Office
equipment
|
22,443 | 7,471 | ||||||
879,403 | 556,927 | |||||||
Accumulated
amortization
|
(282,490 | ) | (44,896 | ) | ||||
Property
and equipment, net
|
$ | 596,913 | $ | 512,031 |
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Customer
relationships
|
$ | 540,000 | $ | 540,000 | ||||
Developed
technology
|
790,000 | 790,000 | ||||||
Domain
name
|
683 | 683 | ||||||
1,330,683 | 1,330,683 | |||||||
Accumulated
amortization
|
(720,570 | ) | (302,062 | ) | ||||
Intangible
assets, net
|
$ | 610,113 | $ | 1,028,621 |
Year
Ending December 31,
|
||||
2009
|
$ | 188,780 | ||
2010
|
158,000 | |||
2010
|
158,000 | |||
2011
|
105,333 | |||
Total
|
$ | 610,113 |
Securities in
loss positions
|
Aggregate
|
Aggregate
|
||||||||||
less
than 12 months
|
Cost
|
Unrealized
losses
|
Fair
Value
|
|||||||||
Options
Media Group Holdings, Inc.
|
$ | 1,847,704 | $ | 197,704 | $ | 1,650,000 |
December
31,
|
||||
2008
|
||||
6%
Senior secured promissory notes payable - related party (due June 30,
2009)
|
$ | 400,000 | ||
Less:
Current maturities
|
(400,000 | ) | ||
Amount
due after one year
|
$ | - |
December
31, 2007
|
||||||||||||||||||||||||
Debt
Discount
|
||||||||||||||||||||||||
Original
|
Accumulated
|
Notes
Payable
|
||||||||||||||||||||||
Issue
|
Lender
|
Common
|
Amortization
of
|
net
of
|
||||||||||||||||||||
Principal
|
Discount
|
Fee
|
Stock
|
Debt
Discount
|
Debt
Discount
|
|||||||||||||||||||
8%
Senior secured promissory notes payable (due May 30, 2008)
|
$ | 5,000,000 | $ | (500,000 | ) | $ | (50,000 | ) | $ | (802,500 | ) | $ | 225,416 | $ | 3,872,916 | |||||||||
Less:
Current maturities
|
(5,000,000 | ) | 500,000 | 50,000 | 802,500 | (225,416 | ) | (3,872,916 | ) | |||||||||||||||
Amount
due after one year
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
Silicon
|
Crestmark
|
Totals
|
||||||||||
Total
accounts receivable factored in 2008
|
$ | 2,497,013 | $ | 4,643,160 | $ | 7,140,173 | ||||||
Factored
accounts receivable transferred from Silicon
|
- | (1,906,686 | ) | (1,906,686 | ) | |||||||
Accounts
receivable factored in 2008
|
$ | 2,497,013 | $ | 2,736,474 | $ | 5,233,487 | ||||||
Factoring
fees incurred in 2008
|
$ | 50,000 | $ | 45,296 | $ | 95,296 |
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Capital
lease obligations
|
$ | 20,110 | $ | 28,607 | ||||
Less:
Current maturities
|
(10,615 | ) | (9,290 | ) | ||||
Amount
due after one year
|
$ | 9,495 | $ | 19,317 |
For
the period
|
||||||||
For
the
|
from
June 14, 2007
|
|||||||
Year
Ended
|
(Inception)
to
|
|||||||
December
31, 2008
|
December
31, 2007
|
|||||||
Current
(benefit) provision: federal
|
$ | (1,310,732 | ) | $ | - | |||
Current
(benefit) provision: state
|
(376,573 | ) | 18,000 | |||||
Total
current provision
|
(1,687,305 | ) | 18,000 | |||||
Deferred
(benefit) provision: federal
|
- | (486,500 | ) | |||||
Deferred
(benefit) provision: state
|
- | (69,500 | ) | |||||
Total
deferred provision
|
- | (556,000 | ) | |||||
Total
provision (benefit) for income taxes from continuing
operations
|
$ | (1,687,305 | ) | $ | (538,000 | ) |
December
31, 2008
|
December
31, 2007
|
|||||||
Current
deferred taxes:
|
||||||||
Accounts
receivable
|
$ | 170,000 | $ | 46,422 | ||||
Amortization
of warrants
|
107,088 | 35,696 | ||||||
Total
current deferred tax assets
|
277,088 | 82,118 | ||||||
Long-term
deferred taxes:
|
||||||||
Depreciation
|
86,737 | - | ||||||
Organizational
costs
|
67,739 | - | ||||||
Deferred
compensation-stock options
|
1,186,581 | 108,370 | ||||||
Deferred
rent
|
29,078 | - | ||||||
Acquired
intangible assets-amortization
|
(268,046 | ) | (435,358 | ) | ||||
Investment
in OPMG
|
160,918 | - | ||||||
Net
operating loss carryforward
|
1,353,235 | 1,197,256 | ||||||
Total
long-term deferred tax assets, net
|
2,616,242 | 870,268 | ||||||
Total
deferred taxes
|
2,893,330 | 952,386 | ||||||
Less:
valuation allowance
|
(2,893,330 | ) | (952,386 | ) | ||||
Total
net deferred tax assets
|
$ | - | $ | - |
For
the period
|
||||||||
For
the
|
from
June 14, 2007
|
|||||||
Year
Ended
|
(Inception)
to
|
|||||||
December
31, 2008
|
December
31, 2007
|
|||||||
Federal
tax rate applied to earnings (loss) before income taxes
|
34.0 | % | 34.0 | % | ||||
Permanent
differences
|
1.0 | % | 0.0 | % | ||||
State
income taxes
|
6.0 | % | 5.0 | % | ||||
Change
in valuation allowance
|
-22.0 | % | -25.0 | % | ||||
Income
tax expense (benefit)
|
19.0 | % | 14.0 | % |
Weighted
|
||||||||||||||||
Weighted
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
No.
of
|
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||||
Shares
|
Price
|
Term
|
Value
|
|||||||||||||
Balance
Outstanding, 12/31/07
|
500,000 | $ | 2.00 | |||||||||||||
Granted
|
902,050 | 2.53 | ||||||||||||||
Exercised
|
- | |||||||||||||||
Forfeited
|
- | |||||||||||||||
Expired
|
- | |||||||||||||||
Balance
Outstanding, 12/31/08
|
1,402,050 | $ | 2.34 | 4.1 | $ | - | ||||||||||
Exercisable,
12/31/08
|
1,402,050 | $ | 2.34 | 4.1 | $ | - |
For
the period
|
||||||||
For
the
|
from
June 14, 2007
|
|||||||
Year
Ended
|
(Inception)
to
|
|||||||
Assumptions
|
December
31, 2008
|
December
31, 2007
|
||||||
Expected
life (years)
|
5 | 5 | ||||||
Expected
volatility
|
52.77% - 80 | % | 80 | % | ||||
Risk-free
interest rate
|
2.66% - 4.78 | % | 4.25% - 4.42 | % | ||||
Dividend
yield
|
0.00 | % | 0.00 | % |
Weighted
|
||||||||||||||||
Weighted
|
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
No.
of
|
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||||
Shares
|
Price
|
Term
|
Value
|
|||||||||||||
Balance
Outstanding, 12/31/07
|
4,331,000 | $ | 1.06 | |||||||||||||
Granted
|
1,970,000 | 2.16 | ||||||||||||||
Exercised
|
- | |||||||||||||||
Forfeited
|
(1,225,046 | ) | 1.01 | |||||||||||||
Expired
|
- | |||||||||||||||
Balance
Outstanding, 12/31/08
|
5,075,954 | $ | 1.50 | 4.0 | $ | - | ||||||||||
Exercisable,
12/31/08
|
1,203,454 | $ | 1.08 | 3.7 | $ | - |
Year
ending December 31,
|
||||
2009
|
$ | 11,537 | ||
2010
|
9,762 | |||
Total
minimum lease payments
|
21,299 | |||
Less:
Amount representing interest
|
(1,189 | ) | ||
Present
value of net minimum lease payments
|
$ | 20,110 |
Year
ending December 31,
|
||||
2009
|
$ | 472,789 | ||
2010
|
487,971 | |||
2011
|
472,970 | |||
2012
|
421,379 | |||
2013
|
378,034 | |||
Later
years
|
349,284 | |||
$ | 2,582,427 |
For
the period
|
||||||||
For
the
|
from
June 14, 2007
|
|||||||
Year
Ended
|
(Inception)
to
|
|||||||
December
31, 2008
|
December
31, 2007
|
|||||||
Customer
1
|
10.2 | % | 0.0 | % | ||||
Customer
2
|
0.0 | % | 34.3 | % | ||||
Customer
3
|
0.0 | % | 32.9 | % | ||||
Totals
|
10.2 | % | 67.2 | % |
December
31,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Customer
1
|
20.8 | % | 0.0 | % | ||||
Customer
2
|
0.0 | % | 39.8 | % | ||||
Customer
3
|
0.0 | % | 25.4 | % | ||||
Customer
4
|
0.0 | % | 11.0 | % | ||||
Totals
|
20.8 | % | 76.2 | % |