UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Event: December 29, 2009
MASTERBEAT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 333-144982 26-0252191
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
222 East 31st Street - Main Level
New York, New York 10016
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 532-1813
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS CURRENT REPORT ON FORM 8-K CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES, PRINCIPALLY IN THE SECTIONS ENTITLED "DESCRIPTION OF
BUSINESS," "RISK FACTORS," AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACT CONTAINED IN THIS CURRENT REPORT ON FORM 8-K,
INCLUDING STATEMENTS REGARDING FUTURE EVENTS, OUR FUTURE FINANCIAL PERFORMANCE,
BUSINESS STRATEGY AND PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS,
ARE FORWARD-LOOKING STATEMENTS. WE HAVE ATTEMPTED TO IDENTIFY FORWARD-LOOKING
STATEMENTS BY TERMINOLOGY INCLUDING "ANTICIPATES," "BELIEVES," "CAN,"
"CONTINUE," "COULD," "ESTIMATES," "EXPECTS," "INTENDS," "MAY," "PLANS,"
"POTENTIAL," "PREDICTS," "SHOULD" OR "WILL" OR THE NEGATIVE OF THESE TERMS OR
OTHER COMPARABLE TERMINOLOGY. ALTHOUGH WE DO NOT MAKE FORWARD-LOOKING STATEMENTS
UNLESS WE BELIEVE WE HAVE A REASONABLE BASIS FOR DOING SO, WE CANNOT GUARANTEE
THEIR ACCURACY. THESE STATEMENTS ARE ONLY PREDICTIONS AND INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, INCLUDING THE RISKS OUTLINED
UNDER "RISK FACTORS" OR ELSEWHERE IN THIS CURRENT REPORT ON FORM 8-K, WHICH MAY
CAUSE OUR OR OUR INDUSTRY'S ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR
ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF
ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE
FORWARD-LOOKING STATEMENTS. MOREOVER, WE OPERATE IN A VERY COMPETITIVE AND
RAPIDLY CHANGING ENVIRONMENT. NEW RISKS EMERGE FROM TIME TO TIME AND IT IS NOT
POSSIBLE FOR US TO PREDICT ALL RISK FACTORS, NOR CAN WE ADDRESS THE IMPACT OF
ALL FACTORS ON OUR BUSINESS OR THE EXTENT TO WHICH ANY FACTOR, OR COMBINATION OF
FACTORS, MAY CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED
IN ANY FORWARD-LOOKING STATEMENTS.
CURRENT REPORT ON FORM 8-K
MASTERBEAT, INC.
TABLE OF CONTENTS
Page
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ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT....................... 1
ITEM 2.01 - COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS............... 1
SHARE EXCHANGE.................................................. 1
DESCRIPTION OF THE COMPANY...................................... 2
DESCRIPTION OF OUR BUSINESS..................................... 3
FINANCIAL INFORMATION........................................... 9
PROPERTIES...................................................... 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.................................................. 17
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS......................................................... 18
EXECUTIVE COMPENSATION.......................................... 21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.................................................... 22
LEGAL PROCEEDINGS............................................... 23
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........ 23
RECENT SALES OF UNREGISTERED SECURITIES......................... 23
DESCRIPTION OF SECURITIES....................................... 24
INDEMNIFICATION OF DIRECTORS AND OFFICERS....................... 24
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS................... 25
ITEM 4.01 - CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.................... 26
ITEM 5.01 - CHANGES IN CONTROL OF REGISTRANT................................. 26
ITEM 5.02 - DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY
ARRANGEMENTS OF CERTAIN OFFICERS................................. 27
ITEM 5.03 - AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE
IN FISCAL YEAR................................................... 27
ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS................................ 27
ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On December 18, 2009 Green Mountain Recovery, Inc. (the "Registrant"), a
Delaware corporation, entered into a Share Exchange Agreement (the "Exchange
Agreement") with Masterbeat, LLC ("MASTERBEAT") a California Limited Liability
Company the (the "Shareholders"). Pursuant to the terms of the Exchange
Agreement, the Shareholders agreed to transfer all of the issued and outstanding
limited liability units in MASTERBEAT to the Registrant in exchange for the
issuance of an aggregate of 8,500,000 shares of the Registrant's common stock to
the Shareholders, thereby causing MASTERBEAT to become wholly-owned subsidiary
of the Registrant (the "Share Exchange").
As of the date of the execution of the Exchange Agreement, there were no
material relationships between the Company or any of its affiliates and
MASTERBEAT, other than in respect of the Exchange Agreement.
The foregoing description of the Exchange Agreement does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Exchange Agreement, which is filed as Exhibit 2.1 hereto and incorporated
herein by reference.
ITEM 2.01 - COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
SHARE EXCHANGE
THE SHARE EXCHANGE
As discussed in Item 1.01, on December 18, 2009 the Registrant entered into the
Exchange Agreement with MASTERBEAT and the Shareholders. Pursuant to the terms
of the Exchange Agreement, the Shareholders agreed to transfer all of the issued
and outstanding limited liability company units in MASTERBEAT to the Registrant
in exchange for the issuance of an aggregate of 8,500,000 shares of the
Registrant's common stock to the Shareholders, thereby causing MASTERBEAT to
become wholly-owned subsidiary of the Registrant Pursuant to the provisions of
the Share Exchange, the principals of Registrant cancelled 1,000,000 shares of
common stock owned by them and executed a lock-up leak-out agreement with
respect to their remaining shares which agreement provides for the release of an
aggregate of 100,000 shares per month commencing 90 days from the closing date.
Upon the closing of the Share Exchange on December 29, 2009, the Members of
MASTERBEAT delivered all of their membership interests in MASTERBEAT to the
Registrant in exchange for 8,500,000 shares of common stock of the Registrant.
The Share Exchange resulted in MASTERBEAT, becoming a wholly-owned subsidiary of
the Registrant.
The shares of the Registrant's common stock issued in connection with the Share
Exchange were not registered under the Securities Act, in reliance upon the
exemptions from registration provided by Section 4(2) of the Securities Act of
1933 (the "Securities Act"). These securities may not be offered or sold absent
registration or an applicable exemption from the registration requirements.
Certificates representing these shares contain a legend stating the same.
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As of the date of the closing of the Exchange Agreement, there were no material
relationships between the Registrant or MASTERBEAT, or any of their respective
affiliates, directors or officers, or any associates of their respective
officers or directors.
CHANGES RESULTING FROM THE SHARE EXCHANGE
At this time, the Registrant intends to carry on the business of its wholly
owned subsidiary MASTERBEAT through its operating units Masterbeat.com;
posterprintship.com; and circuitticket.com as its sole line of business.
Masterbeat.com is an online digital music store offering millions of tracks for
legal paid download. Specializing in dance music, the website features
hard-to-obtain remixes from the major record labels (Universal Music Group, SONY
BMG, Warner Music Group, and EMI) as well as music from thousands of independent
labels, worldwide. Masterbeat.com also produces large scale dance events under
its "powered by Masterbeat.com" name. Posterprintship.com is a quick-turnaround
online printing store and circuitticket.com is an automated ticketing site, and
an event-planning concern.
CHANGES TO THE BOARD OF DIRECTORS AND OFFICERS
At the effective date of the Merger, each of Joseph Levi and Edward Korsinsky
resigned and Brett Henrichsen, Dick Wingate, Jon Biondo, and Theodore Green were
appointed to the Board.
ACCOUNTING TREATMENT; CHANGE OF CONTROL
The Share Exchange is being accounted for as a "reverse merger," since the
former stockholders of MASTERBEAT own a majority of the outstanding shares of
the Registrant's common stock immediately following the Share Exchange.
MASTERBEAT is deemed to be the accounting acquirer in the reverse merger.
Consequently, the assets and liabilities and the historical operations that will
be reflected in the financial statements for periods prior to the Share Exchange
will be those of and will be recorded on the historical cost basis of
Registrant. After completion of the Share Exchange the Registrant's Consolidated
Financial Statements will include the assets and liabilities of the Registrant
and the operations of the Registrant from the closing date of the Share
Exchange. No arrangements or understandings exist among present or former
controlling stockholders with respect to the election of members of the
Registrant's board of directors and, to our knowledge, no other arrangements
exist that might result in a change of control of the Company. Further, as a
result of the issuance of the shares of the Registrant's common stock pursuant
to the Share Exchange, a change in control of the Registrant occurred on the
date of consummation of the Share Exchange.
DESCRIPTION OF THE COMPANY
Unless otherwise indicated or the context otherwise required all references
herein to the "Registrant," the "Company," "we," "our" and "us" for periods
prior to the closing of the Share Exchange refer to Green Mountain Recovery,
Inc. and for periods subsequent to the closing of the Share Exchange refer to
Masterbeat and Green Mountain Recovery on a combined basis after the Merger.
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CORPORATE STRUCTURE
The Company was incorporated under the laws of the State of Delaware on May 17,
2007. From then until Merger, the Company was engaged in the business of
acquiring, managing and collecting portfolios of consumer receivables. Upon the
effectiveness of the Merger the Company succeeded to the business of Masterbeat
which will be continued as its sole line of business and on December 30, 2009,
the Company changed its name to MASTERBEAT CORPORATION.
DESCRIPTION OF OUR BUSINESS
MASTERBEAT is a digital music company. Though its website Masterbeat.com, the
Company makes dance music, remixes and electronica available to consumers on the
website.
The Company's signature web site is a digital music download store with the
domain name www.Masterbeat.com. The store provides customers around the world
with 24-7 access to the highest quality digital music files available.
Presently, the site differentiates itself from the competition by focusing on
dance music, a powerful vertical market with a loyal consumer following. The
Company has professional relationships with all four major record labels, as
well as thousands of independent labels. Masterbeat has over 4 million songs for
sale, and is currently the only digital service provider to carry "lossless"
(uncompressed, CD quality) files from Warner Music Group and Universal Music
Group.
MASTERBEAT produces several large scale dance events branded as "powered by
Masterbeat.com", further promoting recognition and loyalty while creating
additional revenue streams for the company. MASTERBEAT'S largest and most
popular event is produced annually in Los Angeles for New Year's Eve. Now in its
tenth year, the event features international superstar DJ's, performances and
concerts by live artists and had a global audience of over 5,000 at its December
31, 2008 event. Future events will be netcasted and/or broadcasted to further
monetize these projects.
An off-shoot of MASTERBEAT'S event marketing, www.posterprintshop.com was
conceived to reduce overhead for company dance events by printing all signage
and printed materials in-house. However, the site appealed to outside consumers
desirous of quick turnaround times, a simple user interface and experience, and
a courteous and responsive customer service department.
In order to reduce ticket fees and surcharges for its events, MASTERBEAT created
www.circuiticket.com, a full service ticketing site capable of sequencing,
tracking, printing, and delivering high quality ticket stubs for a wide array of
events, parties, festivals, concerts and other gatherings.
Both printship.com and circuitticket.com are available to and utilized by third
parties.
MARKET FOR PRODUCTS
In the past, the recorded music market has consisted of albums and single tracks
recordings distributed in traditional formats and sold in record stores. The
early 21st century ushered in licensed digital distribution services that
provide electronic files for use on computers, mp3 players, and cell phones.
Global spending on recorded music is estimated to be approximately $30 Billion
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annually. Consumer demand for music is higher than ever. Total music consumption
in the US rose by one third between 2003 and 2007 and Nielsen Soundscan reported
overall sales at an all-time high in the US in 2008. Single track downloads
(Masterbeat.com's specialty) were up 24 percent in 2008 to 1.4 billion units
globally and continue to drive the online market.
Masterbeat.com has formed partnerships across the music industry to drive
traffic to the site from various sources. Alliances with local, national,
internet and satellite radio stations allow us to post weekly `charts' and
playlists of top hits along with offerings from popular DJ's. These partners
drive traffic to the site as customers seek to purchase the latest and most
popular tracks. Goom Radio has expressed its intention to choose Masterbeat.com
to be its fulfillment partner in 2010 and this affiliation should drive
additional traffic to the Company's site for music purchase.
Masterbeat.com has also joined with LinkShare, the world's largest affiliate
program, to drive traffic to the site with banner and text links. A commission
is paid to affiliates who refer new and paying customers to the site.
Masterbeat.com also developed its own affiliate network and revenue sharing
platform as a competitive alternative to LinkShare.
Growth in digital distribution and mobile music will drive spending in the
recorded music market, offsetting further declines in spending on physical
formats. Digital distribution will be driven by rising broadband subscribership,
the launch of new services, content availability and attractive pricing.
Physical formats will face growing competition from licensed digital
distribution.
Digital distribution is enabling the possibility that virtually any track could
become available as a single available for licensed download where only a
fraction of songs are available as a single in physical format. As a result, the
digital market enjoys a competitive advantage over the physical market because
it provides greater access to songs and serves that market more efficiently.
Moreover, digital's price point is far more attractive than the price point for
physical delivery and still leaves room for price increases on digital product
while maintaining a substantial advantage compared with prices for physical
product.
DOWNLOAD MANAGER
Masterbeat.com's new cross-platform (Windows & Mac) "download manager" allows
one click downloads of all customer purchases on Masterbeat.com to a location of
the user's choice, and automatic adding to iTunes or Windows Media Player
libraries.
CUSTOMIZABLE PLAYER
A fully customizable player widget can be embedded on any web site including
MySpace, Facebook and the various other social networking sites. The player can
be easily rebranded, features a moving ticker and rotating advertising panels
(all customizable by partner). The widget can feature from 10 - 100 tracks with
preview ability. The player can be further customized and shared by users,
spreading across the web virally. The widget can also be linked to any
Masterbeat.com affiliate account to earn revenue for the partner and our site.
CUSTOMERS
The market for customers of Masterbeat.com can be divided into four primary
segments:
EXISTING CUSTOMER BASE: Masterbeat.com currently benefits from an established
base of over 100,000 customers. This existing base of customers has grown since
the start of MASTERBEAT in 1996 and consists of people who have purchased
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MASTERBEAT CD's and attended MASTERBEAT events. Masterbeat.com has a
comprehensive mailing and email database of these customers and is able to
market to them directly, with permission.
FITNESS PROFESSIONALS: Another important segment for dance music, and thus
Masterbeat.com, is the fitness professional. Fitness professionals include
spinning instructors, personal trainers, health clubs, etc. Fitness
professionals have proven to be a loyal customer of the traditional MASTERBEAT
CD series.
DANCE ENTHUSIASTS: This is the largest segment of potential customers for
Masterbeat.com. This segment consists of general consumers, from all walks of
life, all around the globe, that enjoy the dance genre as one of their primary
music listening choices. Just like "Pop", "Rap", and "Top 40"; the "Dance" genre
enjoys a large dedicated fan base that listens to dance radio stations and
purchases dance-oriented music on a regular basis.
MAINSTREAM MUSIC CONSUMER: This segment consists of the millions of general
music consumers around the world that purchase all formats and genres of music.
We expect to receive a fair percentage of customers from this segment as we
become the leader in the dance music niche.
COMPETITION
There is very strong competition in the music industry for the consumer dollar.
Consumers have varied tastes and interests in music, usually preferring only one
or two genres of music and favoring a certain medium and channel to obtain their
music. The Internet is dramatically changing the way the general consumer
purchases their music, as more and more look online. Brand recognition, ease of
use and accessibility are key to earning the consumer's business and keeping it.
Like many industries, it is possible for niche players to thrive in an industry
dominated by a few key companies. While sites such as iTunes may continue to
dominate the market for the general music consumer, a specialty site such as
Masterbeat.com can thrive and be extremely profitable catering to a special
audience and providing exclusive tracks and services not available elsewhere.
THE FOLLOWING ARE THE COMPANY'S PRESENT MAJOR COMPETITORS.
THE ITUNES MUSIC STORE is a US-based online digital media store operated by
Apple Inc. Opening on April 28, 2003, it is now is the number-one music vendor
in the United States and has sold several billion downloads since its inception.
AMAZON MP3 is a digital music store owned and operated by amazon.com. At launch,
Amazon offered "over 2 million songs from more than 180,000 artists and over
20,000 labels, including EMI Music and Universal Music Group", to customers
located in the United States only. In December 2007 Warner Music Group announced
that it would offer its catalogue on Amazon MP3 and in January 2008, SONY BMG
followed suit. The current catalogue is 9.6 million songs.
NAPSTER, INC. is an online music store offering a variety of purchase and
subscription models. The service currently has a music catalogue of over
8,000,000 songs, making it one of the largest online music stores.
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RHAPSODY an online music store run by RealNetworks and available in the US only.
Launched in December 2001, Rhapsody was the first music service to offer
streaming on-demand access to a large library of digital music. Rhapsody boasts
a catalogue of 5,000,000 songs.
7DIGITAL a privately-held digital media delivery company based in the United
Kingdom, offering downloadable music, video and movies to customers primarily
within major European markets.
BEATPORT a US-based online music store located in Denver, Colorado that
specializes in electronic, dance and remixed music. Similar to Masterbeat,
Beatport offers new releases, classic and exclusive tracks, all of which are
categorized by genre, such as house, trance, and techno music. Beatport does not
sell content from any of the major record labels.
EMPLOYEES
As of December 29, 2009 we had a total of three full time employees.
REPORTS TO SECURITY HOLDERS
We are required to file reports with the SEC under section 13(a) of the
Securities Act. The reports are being filed electronically. You may read copies
of any materials we file with the SEC at the SEC's Public Reference Room at 100
F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet site that will contain copies of the reports
we file electronically. The address for the SEC Internet site is
http://www.sec.gov.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING OUR
BUSINESS BEFORE PURCHASING ANY OF OUR SHARES OF COMMON STOCK. NO PURCHASE OF OUR
COMMON STOCK SHOULD BE MADE BY ANY PERSON WHO IS NOT IN A POSITION TO LOSE THE
ENTIRE AMOUNT OF HIS INVESTMENT. THE ORDER OF THE FOLLOWING RISK FACTORS IS
PRESENTED ARBITRARILY. YOU SHOULD NOT CONCLUDE THE SIGNIFICANCE OF A RISK FACTOR
BECAUSE OF THE ORDER OF PRESENTATION. OUR BUSINESS AND OPERATIONS COULD BE
SERIOUSLY HARMED AS A RESULT OF THESE RISKS.
WE HAVE A LIMITED OPERATING HISTORY, WHICH LIMITS THE INFORMATION AVAILABLE TO
YOU TO EVALUATE OUR BUSINESS.
There is a limited operating and financial information to evaluate historical
performance and the Company's future prospects. Following the closing of the
Merger, we face the risks and difficulties of an early-stage company including
the uncertainties of market acceptance, competition, cost increases and delays
in achieving business objectives. There can be no assurance that the Company
will succeed in addressing any or all of these risks or that it will achieve
future profitability and the failure to do so would have a material adverse
effect on the Company's business, financial condition and operating results.
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A GENERAL ECONOMIC DOWNTURN COULD RESULT IN CUSTOMERS NOT PURCHASING OUR
SERVICES.
Any decline in the general economy or concern about an imminent decline could
delay decisions by prospective customers to make initial evaluations of, or
investments, in the Company and its products. Any reduction of or delays in
expenditures could harm our business.
BECAUSE MASTERBEAT BECAME PUBLIC BY MEANS OF A "REVERSE MERGER" TRANSACTION, THE
COMPANY MAY NOT BE ABLE TO ATTRACT THE ATTENTION OF MAJOR BROKERAGE FIRMS.
There may be risks associated with MASTERBEAT'S becoming public through a
reverse merger transaction. Specifically, securities analysts of major brokerage
firms may not provide coverage of the Company since there is no incentive to
brokerage firms to recommend the purchase of the Company's common stock. No
assurance can be given that brokerage firms will, in the future, want to conduct
any secondary offerings on behalf of the Company.
WE HAVE A LARGE NUMBER OF AUTHORIZED BUT UNISSUED COMMON STOCK.
Our Articles of Incorporation authorize the issuance of 80,000,000 shares of
common stock and 20,000,000 shares of preferred stock. We presently have
10,000,000 shares of common stock issued and outstanding. Our Board of Directors
has the power to issue any or all of such additional shares without stockholder
approval. We may issue shares for the purpose of raising additional capital.
Potential investors should be aware that any such stock issuance may result in a
reduction of the book value or market price of our common stock of the then
outstanding shares. Furthermore, if we issue additional shares, such issuance
will reduce the proportionate ownership and voting power of the other
stockholders, and any new issuance of shares may result in a change of our
control.
RESALE OF OUR SHARES MAY BE DIFFICULT BECAUSE THERE IS A LIMITED MARKET FOR OUR
SHARES. THIS MAY REDUCE OR LIMIT THE POTENTIAL VALUE OF OUR SHARES.
There is presently a limited public market for our shares of common stock, and
no assurance that such a public market will continue in the future; that it will
be maintained or that it will be sufficiently active or liquid to allow
stockholders to easily dispose of their shares. The existence of a public market
with little or no activity or liquidity is likely to reduce or limit the
potential value of our shares.
COMPETITION MAY ADVERSELY IMPACT OUR FINANCIAL RESULTS.
The Company faces significant competition from companies such as Apple,
Amazon.com Napster.com, and Rhapsody.com which offer substantially similar
products and services which are better capitalized and have greater name
recognition. We expect our competitors will continue to leverage significant
financial resources to facilitate further growth.
TECHNOLOGY AND SERVICE LIMITATIONS MAY IMPACT REVENUES.
While the Company employs leading edge technology and is committed to the
continual development and deployment of new and improved technology, the
inability to respond quickly, to meet changing consumer demands or expand our
user base could result in significant reduction in our business operation.
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CONTROL BY MANAGEMENT.
Management currently owns a majority of the Company's issued and outstanding
shares of common stock. The Company's Management will continue to be in a
position to elect all or a majority of the Company's directors, appoint its
officers, and control the Company's affairs and operations.
DEPENDENCE ON MANAGEMENT.
The Company's future success will be significantly dependent on the Company's
management team. The Company's success will be particularly dependent upon Brett
Henrichsen the Company's principal executive officer. The loss of this
individual could have a material adverse effect on the Company. The Company does
not presently have key man life insurance for Mr. Henrichsen and his loss would
likely have an adverse effect on our business. The Company will attempt to
obtain key man insurance for Mr. Hernrichsen but there is no guarantee that we
will be able to obtain same or if we can obtain same that it will be at
favorable rates.
NO DIVIDENDS.
The Company has not paid any dividends to date. For the foreseeable future it is
anticipated that earnings generated from operations of the Company will be used
to finance the growth of the Company. Therefore, it is not expected that cash
dividends will be paid to stockholders in the near future.
PENNY STOCK RULES: POSSIBLE INABILITY TO SELL IN THE SECONDARY MARKET.
Rule 3a51-1 of the Exchange Act defines a "penny stock" as an equity security
that is not, among other things: a) a reported security (i.e., listed on certain
national securities exchanges); b) a security registered or approved for
registration and traded on a national securities exchange that meets certain
guidelines, where the trade is effected through the facilities of that national
exchange; c) a security listed on NASDAQ; d) a security of an issuer that meets
certain minimum financial requirements, i.e., "net tangible assets" in excess of
$2,000,000 (if the issuer has been continuously operating for less than three
years) or $5,000,000 (if the issuer has been continuously operating for more
than three years), or "average revenue" of at least $6,000,000 for the last
three years); or e) a security with a price of at least $5.00 per share for the
transaction in question or that has a bid quotation (as defined in the Rule) of
at least $5.00 per share. Under Rule 3a51-1, if the Company's Common Stock sells
below $5.00 per share, the Company's Common Stock will fall within the
definition of "penny stock."
If the Company's Common Stock is deemed to be a penny stock, trading therein
will be subject to the requirements of Rule 15g-9 and Section 15(g) under the
Exchange Act. Rule 15g-9 imposes additional sales practice requirements on
broker-dealers who sell non-exempt securities to persons other than established
customers. For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Pursuant to Section
15(g) and related Rules, brokers and/or dealers, prior to effecting a
transaction in penny stock, will be required to provide investors with written
disclosure documents containing information concerning various aspects involved
in the market for penny stocks as well as specific information about the penny
stock and the transaction involving the purchase and sale of that stock, e.g.,
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price quotes and broker-dealer and associated person compensation. Subsequent to
the transaction, the broker will be required to deliver monthly or quarterly
statements containing specific information about the penny stock. The foregoing
requirements will most likely negatively affect the ability of purchasers herein
to sell their shares in the secondary market.
POTENTIAL FUTURE SALES UNDER RULE 144 MAY DEPRESS THE MARKET PRICE FOR THE
COMMON STOCK.
In general, under Rule 144, a person who has satisfied a six month holding
period may sell within any three-month period a number of shares which does not
exceed one percent of the then outstanding shares of common stock. Rule 144 also
permits the sale of shares without any quantity limitation by a person who is
not considered to be our affiliate and who has beneficially owned the shares for
a minimum period of one year. Therefore, the possible sale of our currently
outstanding shares pursuant to Rule 144 may, in the future, have a depressive
effect on the price of our common stock in the over-the counter market.
FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
COMPANY OVERVIEW & PLAN OF OPERATIONS
Green Mountain Recovery, Inc. was incorporated under the laws of the State of
Delaware on May 17, 1999. Up until the entry into the Exchange Agreement
discussed in Item 1.01, the Registrant's business consisted of acquiring,
managing and collecting portfolios of consumer receivables. As a result of the
Share Exchange, Masterbeat became a wholly-owned subsidiary of the Registrant.
This transaction was accounted for as a "reverse merger" with Masterbeat deemed
to be the accounting acquirer and the Registrant as the legal acquirer.
Consequently, the assets and liabilities and the historical operations that will
be reflected in the financial statements for periods prior to the Share Exchange
will be those of MASTERBEAT and will be recorded at the historical cost basis of
MASTERBEAT. After completion of the Share Exchange, the Registrant's
consolidated financial statements will include the assets and liabilities of the
Registrant and MASTERBEAT, the historical operations of Masterbeat and the
operations of the Registrant and its subsidiary MASTERBEAT from the closing date
of the Share Exchange.
MASTERBEAT was formed on 2007 as a limited liability company under the laws of
California. MASTERBEAT is a digital music company providing dance music, remixes
and electronic music to consumers on the internet. Through the closing of the
Share Exchange, the Registrant succeeded to the business of MASTERBEAT as its
sole line of business.
RESULTS OF OPERATION
The following discussion and analysis provides information that we believe is
relevant to an assessment and understanding of our results of operation and
financial condition for the nine month period ended September 30, 2009 and the
fiscal year ended December 31, 2008. The following discussion should be read in
conjunction with the Financial Statements and related Notes appearing elsewhere
in this Form.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with, and is
qualified in its entirety by, our financial statements (and notes related
thereto) and other more detailed financial information appearing elsewhere in
this Current Report on Form 8-K. Consequently, you should read the following
discussion and analysis of our financial condition and results of operations
together with such financial statements and other financial data included
elsewhere in this Current Report on Form 8-K. Some of the information contained
in this discussion and analysis or set forth elsewhere in this Current Report on
Form 8-K, including information with respect to our plans and strategy for our
business, includes forward-looking statements that involve risks and
uncertainties. You should review the "Risk Factors" section of this Current
Report on Form 8-K for a discussion of important factors that could cause actual
results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
OVERVIEW
On December 18, 2009, the Registrant entered into the Exchange Agreement with
Masterbeat, LLC and the Shareholders. Pursuant to the terms of the Exchange
Agreement, the Shareholders agreed to transfer all of the issued and outstanding
limited liability company units in Masterbeat, LLC to the Registrant in exchange
for the issuance of an aggregate of 8,500,000 shares of the Registrant's common
stock to the Shareholders, thereby causing Masterbeat, LLC to become
wholly-owned subsidiary of the Registrant. Pursuant to the provisions of the
Share Exchange, the principals of Registrant cancelled 1,000,000 shares of
common stock owned by them and executed a lock-up leak-out agreement with
respect to their remaining shares which agreement provides for the release of an
aggregate of 100,000 shares per month commencing 90 days from the closing date.
Upon the closing of the Share Exchange on December 29, 2009, the Members of
Masterbeat, LLC delivered all of their membership interests in Masterbeat, LLC
to the Registrant in exchange for 8,500,000 shares of common stock of the
Registrant. The Share Exchange resulted in Masterbeat, LLC, becoming a
wholly-owned subsidiary of the Registrant. The transactions contemplated by the
Exchange Agreement are being accounted for as a "REVERSE ACQUISITION," since the
shareholders of Masterbeat, LLC own a majority of the outstanding shares of our
common stock immediately following the Transaction. Masterbeat, LLC is deemed to
be the acquirer in the Transaction.
GOING CONCERN
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. For the nine months ending
September 30, 2009, the Company incurred net losses of $803,885.
The Company's continued existence is dependent upon its ability to raise
capital. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
10
RESULTS OF OPERATION
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO SEPTEMBER 30,
2008
REVENUE
Our revenues for the nine months ended September 30, 2009 and September 30, 2008
were as follows:
Period Ended Period Ended
September 30, September 30, 2008 to 2009
2009 2008 % Change
-------- -------- --------
Revenue $623,934 $327,462 90.5%
Our revenue is derived primarily from online music download services
specializing in "Hip-Hop", dance and electronic music. The Company also hosts
parties and events, provides disc jockey services, acts as ticket agent for
events hosted by others and operates a website that provides photo enlargement
services and the printing of posters, signs and banners. Revenues for the nine
months ended September 30, 2009 were $623,934. This is an increase of $296,472
from the Company's revenues generated for the nine months ended September 30,
2008. Management believes this revenue growth will continue for the remainder of
fiscal year 2009 and into 2010 as it continues to implement its business
strategy and operational plans.
COST OF SALES
Our cost of sales for the nine months ended September 30, 2009 and September 30,
2008 were as follows:
Period Ended Period Ended
September 30, September 30, 2008 to 2009
2009 2008 % Change
-------- -------- --------
Cost of Sales $306,672 $145,320 111.0%
Cost of Sales for the nine months ended September 30, 2009 increased 111.0% from
fiscal 2008. The increase in cost of sales was in line with our increase in
revenue.
11
GROSS PROFIT
Gross profit is defined as net sales less cost of sales. Cost of sales consists
of product costs, cost of commissions and cost of services.
The following table presents net sales, cost of sales and gross profit for the
nine months ended September 30, 2009 and September 30, 2008:
For the Period Ended September 30,
--------------------------------------------------
2009 2008
---------------------- ----------------------
% of % of $ %
Amount Net Sales Amount Net Sales Change Change
------ --------- ------ --------- ------ ------
Net sales $623,934 100.0% $327,462 100.0% $299,472 90.5%
Cost of sales 306,672 49.15% 145,320 44.38% 161,352 111.0%
-------- ----- -------- ----- --------
Gross profit $317,262 50.85% $182,142 55.62% $138,120 74.2%
======== ===== ======== ===== ========
Gross profit for the nine months ended September 30, 2009 increased $135,120
compared to the nine months ended September 30, 2008, and gross profit as a
percentage of revenue increased 74.2% for the nine months ended September 30,
2009 compared to the nine months ended September 30, 2008. The increase in the
gross profit margin was due to additional revenues resulting from increased
audio downloads and services as well as increased photo enlargement and printing
services.
12
OPERATING EXPENSES
Operating expenses for the nine months ended September 30, 2009 and September
30, 2008 were as follows:
For the Period Ended September 30,
--------------------------------------------------
2009 2008
---------------------- ----------------------
% of % of $ %
Amount Net Sales Amount Net Sales Change Change
------ --------- ------ --------- ------ ------
Depreciation and Amortization $ 61,438 9.8% $ 59,598 18.2% $ 1,840 3.1%
General and Administrative 1,041,947 167.0% 1,225,525 374.2% (183,578) (15.0)%
Professional Fees 5,736 1.0% 12,410 3.8% (6,674) (53.8)%
---------- ----- ---------- ----- ----------
Total Operating Expenses $1,109,121 177.8% $1,297,533 396.2% $ (188,412) (14.5)%
========== ===== ========== ===== ==========
General and administrative expenses consist primarily of salaries and benefits
for our executive and administrative personnel, facilities costs, advertising
expense and fees for outside consulting services.
PROVISION FOR INCOME TAXES
For the Period Ended September 30,
--------------------------------------------------
2009 2008
---------------------- ----------------------
% of % of $ %
Amount Net Sales Amount Net Sales Change Change
------ --------- ------ --------- ------ ------
Income Taxes 12,026 1.9% 11,346 3.5% 680 6.0%
====== === ====== === ===
LIQUIDITY AND CAPITAL RESOURCES
Since Masterbeat's inception, it has financed operations primarily through the
contributions of its members. As of September 30, 2009, Masterbeat has
approximately $34,360 in cash and cash equivalents. We estimate that our
existing cash, combined with additional member contributions or borrowings, will
13
be sufficient to fund current operations. If our plans or assumptions change or
prove to be inaccurate, we may be required to seek additional capital through
public or private debt or equity financings. If we need to raise additional
funds, we may not be able to do so on terms favorable to us, or at all. If we
cannot raise sufficient funds on acceptable terms, we may have to curtail our
level of expenditures and our rate of expansion.
OPERATING ACTIVITIES
The Company used cash flow in operating activities of $801,984 for the nine
months ended September 30, 2009. This cash flow is primarily attributable to a
net loss of $803,885 and a decrease in accounts payable of $116,230.
INVESTING ACTIVITIES
The Company generated a deficit in cash flow from investing activities of
$16,770 for the period ended September 30, 2009. This deficit is primarily
attributable to acquisition of computer related assets to upgrade the technology
infrastructure to support the audio download website.
FINANCING ACTIVITIES
The Company generated cash flow from financing activities of $866,617 for the
period ended September 30, 2009. This additional cash is primarily attributable
to member contributions of $1,034,956.
OFF-BALANCE SHEET ARRANGEMENTS
None
CRITICAL ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less. At various times during the fiscal year, the
Company's cash and cash equivalents in bank balances may exceed the Federally
insured limits.
USE OF ESTIMATES
The presentation 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 statement. Actual
results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalent, accounts receivable, other
assets, accounts payable and other liabilities approximate their fair value
because of the short maturity of these instruments.
14
ACCOUNTS RECEIVABLE
Accounts receivable consist mainly of unprocessed credit card sales from music
downloads, event ticket sales and online poster sales. The Company establishes
an allowance for uncollectable accounts receivable based on the age of
outstanding invoices and management's evaluation of the collectability of
outstanding balances.
FIXED ASSETS
Fixed assets, consisting mainly of computer equipment, software and office
equipment and furniture, are stated at cost, net of accumulated depreciation
which is calculated using the straight-line method over the estimated useful
lives generally ranging from 5 to 7 years.
LONG-LIVED ASSETS
FASB ASC 360-10 (Prior Authoritative Literature: Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets), requires that we evaluate our long-lived assets for
financial impairment on a regular basis. We evaluate the recoverability of
long-lived assets not held for sale by measuring the carrying amount of the
assets against the estimated undiscounted future cash flows associated with
them. If such evaluations indicate that the future discounted cash flows of
certain long-lived assets are not sufficient to recover the carrying value of
such assets, the assets are adjusted to their fair values. The useful lives
assigned to the Company's internal-use website were based on management's
assessment of when standard maintenance and software updates would no longer
allow the website to perform at a level consistent with market expectations and
competitor's offerings.
REVENUE RECOGNITION
We recognize revenue when persuasive evidence of an arrangement exists, the fee
is fixed or determinable, collectability is reasonably assured and delivery has
occurred. Revenues transacted from on-line platforms relating to audio download
and poster printing services are recognized at the point of sale.
Agent revenues are recognized in accordance with FASB ASC 605-45 (Prior
authoritative literature: EITF 99-19, "Reporting Revenue Gross as a Principal
versus Net as an Agent"). Agent revenues are derived from ticket sales where we
are not the merchant of record and where the prices of our services are fixed at
the point of sale. Agent revenue is comprised of service fees and customer
processing fees and are reported at the net amounts received, without any
associated cost of revenue.
Amounts billed to customers in sales transactions related to shipping and
handling are classified as revenue in accordance with FASB ASC 605-45 (Prior
authoritative literature EITF 00-10, "ACCOUNTING FOR SHIPPING AND HANDLING FEES
AND COSTS"). The actual cost to the Company is recognized as an operating
expense.
15
SHIPPING AND HANDLING COSTS
The Company includes its shipping and handling costs in selling, general and
administrative expenses. Those costs were $29,133 and $37,686 for the nine
months ended September 30, 2009 and 2008, respectively.
INCOME TAXES
As a LLC, the Company is treated as a partnership for federal and state income
tax purposes and accordingly, income and expenses flow through to the individual
members' income tax returns. However, the Company is subject to a California
minimum annual tax of $800 and an annual LLC fee based on gross receipts. The
LLC fees for the third quarter and nine months ended September 30, 2009 and 2008
were not significant.
RECENT AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Codification ("ASC") 805 (Prior authoritative literature:
Statement of Financial Accounting Standards ("SFAS") No. 141(R), Business
Combinations, which replaces SFAS No. 141). ASC 805 establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill acquired. The
statement also establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business combination. ASC 805
is effective for calendar year companies on January 1, 2009. The Company has
adopted this ASC effective January 1, 2009 but has not consummated any business
combinations as of September 30, 2009.
In March 2008, the FASB issued ASC 815-10 (Prior authoritative literature: SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities, and
amendment of SFAS No. 133). This statement will require additional disclosures
about how and why we use derivative financial instruments, how derivative
instruments and related hedged items are accounted for under ASC 815 (Prior
authoritative literature: SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended and interpreted), and how derivative
instruments and related hedged items affect our financial position, results of
operations, and cash flows. ASC 815-10 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008;
however early adoption is encouraged, as are comparative disclosures for earlier
periods. The Company adopted this ASC effective January 1, 2009 which did not
have a material impact on its financial statements.
In April 2008, the FASB issued ASC 350-30 (Prior authoritative literature: FASB
Staff Position No. 142-3, Determination of the Useful Life of Intangible
Assets). ASC 350-30 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under ASC 350 (Prior authoritative literature: SFAS
No. 142, "Goodwill and Other Intangible Assets") and also requires expanded
disclosure related to the determination of intangible asset useful lives. ASC
350-30 is effective for fiscal years beginning after December 15, 2008. Early
adoption is prohibited. The Company adopted this ASC effective January 1, 2009;
see Note 6 for information regarding useful lives of the Company's intangible
assets.
16
In May 2009, the FASB issued FASB ASC 855-10 (prior authoritative literature,
SFAS No. 165, "Subsequent Events"). FASB ASC 855-10 established general
standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued. FASB ASC 855-10
is effective for interim or annual financial periods ending after June 15, 2009.
The Company adopted this ASC effective the current quarter ended September 30,
2009; see Note 8 for a discussion of subsequent events through March 17, 2010.
In June 2009, the FASB issued FASB ASC 105-10 (prior authoritative literature,
SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles--a replacement of SFAS No. 162). FASB
ASC 105-10 replaces SFAS 162 and establishes the FASB Accounting Standards
Codification as the source of authoritative accounting principles recognized by
the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with GAAP. FASB ASC 105-10 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. As such, the Company is required to adopt this standard in
the current period. Adoption of FASB ASC 105-10 did not have a significant
effect on the Company's financial statements.
In June 2009, the FASB issued guidance under ASC 860 (Prior authoritative
literature: SFAS No. 166, "Accounting for Transfers of Financial Assets"), which
will require more information about transfer of financial assets, including
securitization transactions, and where entities have continuing exposure to the
risks related to transferred financial assets. It eliminates the concept of a
"qualifying special-purpose entity", changes the requirements for derecognizing
financial assets and requires additional disclosures. This ASC will be effective
for fiscal years beginning after November 15, 2009. The Company will adopt the
provision of this ASC effective January 1, 2010 and is currently evaluation the
impact, if any, on its financial statements.
PROPERTIES
The Company's offices are located at 222 East 31st Street, Main Level, New York,
New York 10016 and 6121 Santa Monica Blvd., Studio A, Hollywood, California
91038. The Company's main office is at 222 East 31st Street, New York, NY in the
suite of Jon Biondo, the Company's Secretary and a member of the Board and is
provided without charge. The Company's office in Hollywood, California is in the
third year of a five year lease at an annual base rental of $114,000.00.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 29, 2009, the ownership of each
executive officer and director of the Registrant, and of all executive officers
and directors of the Registrant as a group, and of each person known by the
Registrant to be a beneficial owner of 5% or more of its common stock. Except as
otherwise noted, each person listed below is a sole beneficial owner of the
shares and has sole investment and voting power as to such shares. No person
listed below has any options, warrants or other right to acquire additional
securities of the Registrant except as may be otherwise noted.
17
Name and Address Shares of Common Stock Percent of
of Beneficial Owner Beneficially Owned class
------------------- ------------------ -----
Jon C. Biondo (1) 3,677,100 36.77%
c/o The Biondo Law Firm, P.C.
222 East 31st Street
New York, NY 10016
Brett C. Henrichsen 2,649,620 26.50%
6121 Santa Monica Blvd.
Studio A
Hollywood, CA 90038
Ryan Coutu 736,015 7.36%
c/o The Biondo Law Firm, P.C.
222 East 31st Street - Main Level
New York, NY 10016
Joseph Levi 648,500 6.49%
1576 E. 21st Street
Brooklyn, NY 11210
Eduard Korsinsky 648,500 6.49%
1669 E. 18th Street
Brooklyn, NY 11229
All Directors, Executive Officers
and 5% Shareholders (5 persons) 8,359,735 83.60%
----------
(1) Does not include an aggregate of 723,435 shares held by three Trusts of
which Mr. Biondo is the sole Trustee.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The respective positions and ages of the directors and executive officers of the
Company as of December 29, 2009 are shown in the following tables. Each director
of the Registrant has been elected to hold office until the next annual meeting
of stockholders and thereafter until his successor is elected and has qualified.
Vacancies in the existing Board of Directors of the Registrant are filled by
majority vote of the remaining Directors.
There are no agreements or understandings for any officer or director to resign
at the request of another person, and no officer or director is acting on behalf
of or will act at the direction of any other person.
Name Age Position
---- --- --------
Dick Wingate 57 non-executive Chairman of the Board
Brett Henrichsen 38 Chief Executive Officer
Theodore S. Green 57 Director
Jon Biondo 37 Secretary, Director
18
DICK WINGATE
With more than three decades of experience in the music and interactive media
industries, Dick Wingate recently became Head of East Coast Client Relations for
TAG Strategic, LLC a digital entertainment consulting firm, where he consults
with new clients in business development, content licensing and distribution
strategy.
Prior to his affiliation with TAG Strategic, he served as President, Media
Development & Chief Content Officer for Nellymoser Inc., a leading provider of
rich media mobile services, overseeing content, licensing and business
development strategies, and worked closely with major media companies and
wireless service providers such as ABC, Sony/BMG, Warner Music, AT&T, Virgin
Mobile and MTV. As CCO, Mr. Wingate was also responsible for direct licensing of
content and for content partnerships and programming for Nellymoser's music
services.
Mr. Wingate has also served as President, Content & Programming for Digital
Transaction Machines, Inc., an interactive systems provider for in-store
delivery of digital products for clients including McDonald's and 7-Eleven and
his in depth experience in the recording industry includes positions as SVP,
Marketing, Arista Records (BMG); SVP, A&R PolyGram Records; Director of Talent
Acquisition, Epic Records; and Director of Product Management, Columbia Records.
Mr. Wingate is a featured speaker at numerous industry events, and he is a
member of the National Academy of Recording Arts and Sciences and an advisory
board member of numerous companies.
Mr. Wingate obtained a BA in communication from Brown University in 1974.
BRETT HENRICHSEN
Brett Henrichsen is an internationally celebrated club dj and is the founder of
the Masterbeat brand and co-founder of Masterbeat.com. Brett is one of a select
group of Billboard reporting DJ's.
While a marketing specialist and systems engineer at IBM, Mr. Henrichsen devised
and created a CD compilation series in an effort to provide the dance music
consuming public with previously unavailable promotional remixes. The popularity
of the Masterbeat compilation series allowed Mr. Henrichsen to start an
independent record label, Trax Recording, which produced several Billboard
chart-topping hits. Simultaneously with the success of these CD compilations,
Mr. Henrichsen worked in the international DJ community, performing in
stadium-sized events including Carnival in Rio de Janeiro, and Mardi Gras in
Sydney. Mr. Henrichsen holds residencies at several prominent dance clubs in New
York, San Francisco and Los Angeles.
Mr. Henrichsen obtained a BS in Business Administration from the University of
Utah in 1994.
THEODORE (TED) S. GREEN
Ted Green is currently a Director of China MediaExpress, a publicly traded
company that operates the largest television advertising network on inter-city
express buses in China. From 2003 to 2006, Mr. Green was the CEO and Co-Owner of
Anchor Bay Entertainment, which at such time was the subsidiary of IDT
19
Entertainment, Inc. that focused on the production, marketing and distribution
of various media. Prior to that, in 2001, Mr. Green established Greenlight
Consulting Inc., a project-based consulting practice focused on the media and
entertainment industry. Greenlight Consultant's clients include Sony Music and
Vivendi-Universal as well as numerous other regional media organizations. Prior
to founding Greenlight Consulting, in 2000, Mr. Green was President and Chief
Operating Officer of MaMaMedia, Inc., an Internet company that created
activity-based learning products for children and their families. From 1992 to
2000, Mr. Green was the founder and President of Sony Wonder, the division of
Sony BMG Music Entertainment responsible for the production and distribution of
media geared toward youthful audiences and also for all home video distribution.
Mr. Green was responsible for all creative, production, operations, finance,
marketing and business efforts. Beginning in 1989, Mr. Green was the Executive
Vice President of Administration and Operations for ATCO Records, a music
industry label co-owned with The Warner Music Group.
Mr. Green obtained a BS from Cornell University in 1974 and received his JD from
Columbia University School of Law in 1977.
JON BIONDO
Jon Biondo is one of the co-founders of Masterbeat.com. Mr. Biondo is the
President of the Biondo Law Firm, P.C., a boutique trusts and estates law firm,
wealth management company, and full-service real estate brokerage firm in
Manhattan.
In the mid-nineties, Mr. Biondo served in the chambers of Southern District
Federal Judge Harold Baer, New York State Supreme Court Justice Walter
Schackman, and in the criminal division of the United States Attorney's Office
in Manhattan. From 1998-2001 Mr. Biondo served as Associate General Counsel,
Director of Corporate Communications, and Co-Director of Internet Operations at
Income Tax Preparation firm Gilman & Ciocia.
Mr. Biondo recently co-founded Youth of Malawi, a 501(c)(3) corporation
dedicated to enriching the lives of orphans in East Africa. Mr. Biondo served as
the pro bono counsel for the United Nations Youth Symphony Orchestra. Mr. Biondo
plays host each year to the "Fire Island Dance Festival", the star-studded
signature event of the "Broadway Cares" organization, which has raised tens of
millions of dollars in the fight against HIV and AIDS.
Mr. Biondo received his BA in French from Tufts University in 1993 and his law
degree from Fordham in 1997.
FAMILY RELATIONSHIPS
There is no family relationship between any of our directors or executive
officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of our officers, directors, promoters or control persons has been involved
in the past five (5) years in any of the following:
20
(1) Any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceedings or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, or any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; or
(4) Being found by a court of competent jurisdiction (in a civil action),
the SEC or the U.S. Commodity Futures Trading Commission to have
violated a federal or state securities laws or commodities law, and
the judgment has not been reversed, suspended, or vacated.
DIRECTORSHIPS
None of the Registrant's executive officers or directors is a director of any
company with a class of equity securities registered pursuant to Section 12 of
the Securities exchange Act of 1934 (the "Exchange Act") or subject to the
requirements of the Exchange Act or any company registered as an investment
company under the Investment Company Act of 1940.
CODE OF ETHICS
The Registrant has not yet adopted a code of ethics. The Registrant intends to
adopt a code of ethics in the near future.
EXECUTIVE COMPENSATION
The following table sets forth executive compensation for fiscal years ended
2008 and 2007.
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
$_____ -- -- -- -- -- -- $_______(1)
N/A $_____ -- -- -- -- -- -- $_______(1)
$_____ -- -- -- -- -- -- $_______(1)
$_____ -- -- -- -- -- -- $_______(1)
$_____ -- -- -- -- -- -- $_______(1)
$_____ -- -- -- -- -- -- $_______(1)
21
EMPLOYMENT AGREEMENTS
The Company has not entered into employment agreements with its executive
officers.
STOCK OPTION PLANS
No member of Registrant's management has been granted any stock option or stock
appreciation right.
DIRECTOR COMPENSATION
The Registrant's directors are not paid any salary as compensation for services
they provide as directors of the Registrant. Except as identified in the chart
below, no additional amounts are payable to the Registrant's directors for
committee participation or special assignments.
The following table sets forth the compensation of our directors for the fiscal
year ended December 31, 2009:
Fees Non-Equity
Earned Incentive Nonqualified
Paid in Stock Option Plan Compensation All Other
Name Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
---- ------- --------- --------- --------------- ----------- --------------- --------
N/A -- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
DIRECTOR AGREEMENTS
The Company has not entered into directors agreements with its directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
In November 2009, the Company entered into a consulting agreement with TAG
Strategic LLC pursuant to which TAG is to provide services to the Company for
successive six month renewable terms at compensation of $10,000 per month. Dick
Wingate, Chairman of the Company's Board of Directors is a principal of TAG
Strategic LLC.
Jon Biondo, Secretary and a Director loaned the Company the sum of $100,000 and
Mr. Biondo's parents loaned the Company the sum of $200,000. The loan from Mr.
Biondo's parents is due on January 25, 2010. The loan from Mr. Biondo is due on
June 1, 2010.
Other than as stated above, there were no material transactions, or series of
similar transactions, during our Company's last fiscal year, or any currently
proposed transactions, or series of similar transactions, to which our Company
was or is to be a party, in which the amount involved exceeded the lesser of
22
$120,000 or one percent of the average of the small business issuer's total
assets at year-end for the last three completed fiscal years and in which any
director, executive officer or any security holder who is known to us to own of
record or beneficially more than five percent of any class of our common stock,
or any member of the immediate family of any of the foregoing persons, had an
interest.
LEGAL PROCEEDINGS
The Registrant is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated. No director, officer or affiliate of
the Registrant, and no owner of record or beneficial owner of more than 5.0% of
the securities of the Registrant, or any associate of any such director, officer
or security holder is a party adverse to the Registrant or has a material
interest adverse to the Registrant in reference to pending litigation.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION A limited public trading market currently exists for the
Company's securities which are presently traded on the over-the-counter bulletin
board ("OTCBB") under the symbol MSTO. There is no assurance that such market
will continue, or that a shareholder will be able to liquidate his or her
investment.
HOLDERS As of December 29, 2009 there were 10,000,000 shares of common stock
issued and outstanding and approximately 65 shareholders of record.
TRANSFER AGENT AND REGISTRAR
Action Stock Transfer Corp. 7069 South Highland Drive, Suite 300, Salt Lake
City, Utah 84121, telephone number (801) 274-1088.
DIVIDENDS The Registrant has not declared or paid any cash dividends on its
common stock since inception. There are no restrictions on the common stock that
limit our ability of us to pay dividends if declared by the Board of Directors.
The holders of common stock are entitled to receive dividends when and if
declared by the Board of Directors, out of funds legally available therefore and
to share pro-rata in any distribution to the stockholders. Generally, the
Registrant is not able to pay dividends if after payment of the dividends, it
would be unable to pay its liabilities as they become due or if the value of the
Registrant's assets, after payment of the liabilities, is less than the
aggregate of the Registrant's liabilities and stated capital of all classes
RECENT SALES OF UNREGISTERED SECURITIES
On December 29, 2009 pursuant to the closing of the Agreement for Share Exchange
dated December 18, 2009, by and between the Registrant, MASTERBEAT and the
Shareholders of MASTERBEAT, the Registrant issued 8,500,000 shares of common
stock. As set forth under Item 2.01 of this Current Report on Form 8-K, which
disclosure is incorporated herein by reference, in return for the issuance of
8,500,000 shares of its common stock, the Registrant received all of the issued
and outstanding limited liability interests of MASTERBEAT, thereby making
MASTERBEAT, a wholly-owned subsidiary of the Registrant. For the above share
issuances the shares were not registered under the Securities Act in reliance
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upon the exemption from registration provided in Section4(2) of the Securities
Act. No underwriters were used, nor were any brokerage commissions paid in
connection with the above share issuances.
DESCRIPTION OF SECURITIES
The Registrant is authorized to issue 80,000,000 shares of common stock and
20,000,000 shares of preferred stock. Prior to the closing of the share exchange
on December 29, 2009, there were 2,500,000 shares of common stock issued and
outstanding and -0- shares of preferred stock. Subsequent to the closing of the
share exchange on December 29, 2009, there were 10,000,000 shares of common
stock and -0- shares of preferred stock issued and outstanding and -0- shares of
preferred stock issued and outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote per share. The holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared by the board of directors out of legally available funds. However, the
current policy of the board of directors is to retain earnings, if any, for
operations and growth. Upon liquidation, dissolution or winding-up, the holders
of common stock are entitled to share ratably in all assets that are legally
available for distribution. The holders of common stock have no preemptive,
subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of any series of preferred stock, which
may be designated solely by action of the board of directors and issued in the
future.
PREFERRED STOCK
The Board of Directors is expressly granted the authority to issue shares of the
Preferred Stock, in one or more series, and to fix for each such series such
voting powers, full or limited, and such designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of such series (a "Preferred Stock Designation") and as may be permitted
by statute (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the voting power of all of the
then outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), voting together as
a single class, without a separate vote of the holders of the Preferred Stock,
or any series thereof, unless a vote of any such holders is required pursuant to
any Preferred Stock Designation.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, the Company's Bylaws provide that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or in the
right of the Company, by reason of the fact that such person is or was a
director /officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
company / partnership, joint venture, trust or other enterprise, against
expenses including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
the action, suit or proceeding if such person acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the" best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
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Additionally, as permitted by Delaware law, the Company's Bylaws also provide
that the Company may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Company to procure a judgment in the Company's favor by
reason of the fact that such person is or was a director, officer employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise against expenses including amounts paid in
settlement and attorneys fees actually and reasonably incurred by such person in
connection with the defense or settlement of the action or suit if such person
acted in good faith and in a manner which such person reasonably believed to be
in or not opposed to the best interests of the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Li & Company PC ("LI") has served as our independent auditor in connection with
the audits of our fiscal years ended December 31, 2008 and 2007 (from May 17,
2007, date of inception), and review of the subsequent interim period through
September 30, 2009. In connection with this Share Exchange, our board of
directors recommended and approved the appointment EFP Rottenberf (EFP) as the
independent auditor for the Company.
During the fiscal years ended December 31, 2008 and 2007 (from May 17, 2007,
date of inception) and through the date hereof, neither us nor anyone acting on
our behalf consulted EFP with respect to (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements,
and neither a written report was provided to us or oral advice was provided that
concluded was an important factor considered by us in reaching a decision as to
the accounting, auditing or financial reporting issue; or (ii) any matter that
was the subject of a disagreement or reportable events set forth in Item
304(a)(1)(v) of Regulation S-K.
On and effective February 26, 2010, EFP Rotenberg ("Rotenberg") resigned as our
independent auditor. There were no disagreements with Rotenberg on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
On February 26, 2010, concurrent with Rotenberg's resignation as our independent
auditor,our board elected to appoint Lake & Associates(Lake) as our independent
auditor.
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ITEM 4.01 CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Resignation of Previous Independent Registered Public Accounting Firm
On and effective February 26, 2010, EFP Rotenberg ("Rotenberg") resigned as our
independent auditor. Rotenberg's resignation was due to the change in services
they were engaged to provide from independent audit services to internal
accounting and bookkeeping services.
There were no disagreements with Rotenberg on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure that would have caused Rotenberg to make references in any report to
such disagreements.
Since Rotenberg had originally been engaged as our independent auditors on
December 29, 2009 they had not previously issued any reports on the Company's
financial statements.
(b) Engagement of New Independent Registered Public Accounting Firm
On February 26, 2010, concurrent with Rotenberg's resignation as our independent
auditor,our board elected to appoint Lake & Associates(Lake) as our independent
auditor.
During the fiscal years ended December 31, 2009 and 2008 and from January 1,
2010 to February 26, 2010, neither the Company nor anyone acting on its behalf
consulted Lake with respect to (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial statements, and
neither a written report was provided to the Company nor oral advice was
provided that Lake concluded was an important factor considered by the Company
in reaching a decision as to the accounting, auditing or financial reporting
issue; or (ii) any matter that was the subject of a disagreement or reportable
event set forth in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K.
Prior to our engaging Lake they did not provide our company with either written
or oral advice that was an important factor considered by our company in
reaching a decision to retain Lake & Associates as our auditors.
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT
Reference is made to the disclosure set forth under Item 2.01 of this report,
which disclosure is incorporated herein by reference. On December 29, 2009, we
consummated the reverse acquisition with Masterbeat, LLC, through which the unit
holders of Masterbeat delivered to us all the issued and outstanding limited
liability company units of Masterbeat. As merger consideration for the
Masterbeat shares, we delivered to them 8,500,000 shares of our newly-issued
common stock.
In connection with this change in control, and as explained more fully in Item
2.01 above and in Item 5.02 below, effective on December 29, 2009, Joseph Levi
and Edward Korsinsky resigned as our President and Secretary. Concurrently,
Brett Henrichsen was appointed as our Chief Executive Officer and President and
Jon Biondo as Secretary and Treasurer.
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ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF
CERTAIN OFFICERS
Upon the closing of the reverse acquisition, as of December 29, 2009, Messrs
Joseph Levi and Edward Korsinsky submitted their resignation letters pursuant to
which they resigned from all offices of the Company that they hold and from
their position as our directors effective immediately.
For certain biographical and other information regarding the newly appointed
officers and directors, see the disclosure under Item 2.01 of this report, which
disclosure is incorporated herein by reference.
ITEM 5.03 AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR
On December 30, 2009, our board approved an amendment to our Certificate of
Incorporation to change our name to "Masterbeat Corporation" and change our
authorized capital to 80,000,000 common shares and 20,000,000 preferred shares.
On December 30, 2009 we filed a Certificate of Amendment of the Certificate of
Incorporation to the Secretary of State of State of Delaware and notified the
Financial Industry Regulatory Authority ("FINRA") of the reverse acquisition and
the name change.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
(i) Audited financial statements of MASTERBEAT, LLC for the period from
inception (December 31, 2007) to December 31, 2008
(ii) Unaudited financial statements MASTERBEAT, LLC for the nine month
period ended September 30, 2009 and three months ended September 30,
2009
(b) Pro Forma Financial Information.
(i) Unaudited Pro forma condensed combined financial statement as of
September 30, 2009 and December 31, 2008
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(c) Exhibits.
The exhibits listed in the following Exhibit Index are filed as part of this
Current Report on Form 8-K/A.
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Reorganization among Masterbeat LLC, all of
the holders of MASTER Limited Liability Interests, and Green
Mountain Recovery, Inc., dated December 18, 2009. (Incorporated by
reference to Form 8-K filed with the Securities and Exchange
Commission on December 23, 2009).
3.1(a) Certificate of Incorporation (incorporated by reference from
Registration Statement on Form SB-2 filed with the Securities and
Exchange Commission on July 31, 2007).
3.1(b) Certificate of Amendment of Certificate of Incorporation filed with
the Delaware Department of State (incorporated by reference to Form
8-K filed with the Securities and Exchange Commission on January 6,
2010).
3.2 Bylaws (incorporated by reference from Registration Statement on
Form SB-2 filed with the Securities and Exchange Commission on July
31, 2007).
10.3 Form of Lockup/Leakout Agreement between the Company and its prior
officers and directors. (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on January 6,
2010).
99.1 Audited financial statements of MASTERBEAT, LLC for the period from
inception (December 31, 2007) to December 31, 2008
99.2 Unaudited financial statements MASTERBEAT, LLC for the nine month
period ended September 30, 2009 and three months ended September
30, 2009
99.3 Unaudited Pro forma condensed combined financial statement as of
September 30, 2009 and December 31, 2008
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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 hereunto duly authorized.
MASTERBEAT CORPORATION
Date: March 19, 2010
/s/ Brett Herichsen
---------------------------------
By: Brett Henrichsen, CEO
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