Delaware
|
7200
|
98-0412432
|
(State
or other jurisdiction of
|
(Primary
Standard Industrial
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Classification
Code Number)
|
Identification
No.)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
CALCULATION
OF REGISTRATION FEE
|
||||||||||||||||
Title of Each
Class of Securities
to be Registered
|
Amount to be
Registered (1)
|
Proposed
Maximum
Offering Price
Per Share (2)
|
Proposed
Maximum
Aggregate
Offering Price
(2)
|
Amount of
Registration Fee(3)
|
||||||||||||
Common
stock, $0.0001 par value per share
|
14,241,995 | $ | 0.11 | $ | 1,584,422 | $ | 113.00 | |||||||||
Page
|
||
PROSPECTUS
SUMMARY
|
1
|
|
THE
OFFERING
|
2
|
|
SUMMARY
FINANCIAL DATA
|
3
|
|
RISK
FACTORS
|
5
|
|
FORWARD-LOOKING
STATEMENTS
|
13
|
|
DILUTION
|
14
|
|
PRIVATE
PLACEMENT
|
14
|
|
USE
OF PROCEEDS
|
14
|
|
CAPITALIZATION
|
15
|
|
MARKET
FOR COMMON STOCK
|
15
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
17
|
|
BUSINESS
|
35
|
|
MANAGEMENT
|
39 | |
PRINCIPAL
SHAREHOLDERS
|
52 | |
RELATED
PERSON TRANSACTIONS
|
56 | |
SELLING
SHAREHOLDERS
|
56 | |
DESCRIPTION
OF SECURITIES
|
58 | |
PLAN
OF DISTRIBUTION
|
59 | |
LEGAL
MATTERS
|
61 | |
EXPERTS
|
62 | |
ADDITIONAL
INFORMATION
|
62 |
Common
stock outstanding prior to the offering:
|
196,345,002 shares
|
|
Common
stock offered by the selling shareholders:
|
14,241,995
shares, which were outstanding prior to the offering. This does
not include any shares owned by our Chief Executive Officer, Mr. Douglas
Feirstein. Mr. Feirstein invested in our private placement,
which is described elsewhere in this prospectus, and received registration
rights with respect to the 333,334 shares of common stock
purchased. Mr. Feirstein has no intention of selling these
shares and is not a selling shareholder.
|
|
Common
stock outstanding immediately following
the
offering:
|
196,345,002 shares
|
|
Use
of proceeds:
|
We
will not receive any proceeds from the sale of the shares of common
stock.
|
|
Risk
Factors:
|
See
“Risk Factors” beginning on page __ of this prospectus for a discussion of
factors you should carefully consider before deciding to invest in shares
of our common stock.
|
·
|
a
total of 17,575,597 shares of common stock issuable upon the exercise
of outstanding stock
options;
|
·
|
a
total of 20,402,394 shares of common stock reserved for future
issuance under our 2008 Equity Incentive
Plan;
|
·
|
a
total of 17,633,336 shares of common stock issuable upon the exercise
of warrants; and
|
·
|
a
total of 400,000 shares of common stock issuable upon the conversion
of Series A Preferred
Stock.
|
Year Ended
December
31,
|
For the Period
From February
14, 2008
(Inception) to
December 31,
|
Quarter Ended
March 31
|
Quarter Ended
March 31
|
|||||||||||||
2009
|
2008
|
2010
|
2009
|
|||||||||||||
|
(Unaudited)
|
|||||||||||||||
Revenue
|
$ | 28,998,982 | $ | 1,561,444 | $ | 17,272,133 | $ | 1,195,638 | ||||||||
Gross
profit
|
$ | 18,440,784 | $ | 698,862 | $ | 10,936,473 | $ | 645,748 | ||||||||
Net
loss
|
$ | (4,055,129 | ) | $ | (3,209,608 | ) | $ | (2,479,923 | ) | $ | (1,355,692 | ) | ||||
Net
loss per share – basic and diluted
|
$ | (0.03 | ) | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.02 | ) | ||||
Weighted
average common shares (basic and diluted)
|
136,640,303 | 50,978,524 | 185,502,671 | 79,116,959 |
March 31,
2010
|
December 31,
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Cash
|
$
|
204,820
|
$
|
297,426
|
||||
|
||||||||
Working
capital (deficit)
|
$
|
(2,118,724)
|
$
|
(204,004)
|
||||
|
||||||||
Total
assets
|
$
|
14,055,470
|
$
|
15,087,437
|
||||
|
||||||||
Total
current liabilities
|
$
|
4,080,161
|
$
|
3,295,912
|
||||
|
||||||||
Accumulated
deficit
|
$
|
(9,751,996)
|
$
|
(7,272,073
|
)
|
|||
|
||||||||
Total
shareholders’ equity
|
$
|
9,975,309
|
$
|
11,791,525
|
|
·
|
economic
conditions including employment and unemployment
rates;
|
|
·
|
the
sale or purchase of gold by central banks and financial
institutions;
|
|
·
|
interest
rates;
|
|
·
|
currency
exchange rates;
|
|
·
|
inflation
or deflation;
|
|
·
|
fluctuation
in the value of the United States dollar and other
currencies;
|
|
·
|
speculation;
|
|
·
|
global
and regional supply and demand, including investment, industrial and
jewelry demand; and
|
|
·
|
the
political and economic conditions of major gold or other mineral-producing
countries throughout the world, such as Russia and South
Africa.
|
|
·
|
recent
adverse publicity concerning our
industry;
|
|
·
|
concerns
about transacting in precious metals items or jewelry without a physical
storefront or face-to-face interaction with
personnel;
|
|
·
|
the
extra shipping time associated with Internet or mail
orders;
|
|
·
|
pricing
that does not meet consumer
expectations
|
|
·
|
concerns
about loss due to theft and mail, delayed or damaged
shipments;
|
|
·
|
concerns
about the security of online transactions and the privacy of personal
information; or
|
|
·
|
the
inconvenience associated with dealing with a remote
purchaser.
|
|
·
|
create
greater awareness of our brand and our
program;
|
|
·
|
identify
the most effective and efficient level of spending in each market and
specific media vehicle;
|
|
·
|
determine
the appropriate creative message and media mix for advertising, marketing
and promotional expenditures; and
|
|
·
|
effectively
manage marketing costs (including creative and
media).
|
|
·
|
Changes
in laws, rules or regulations resulting in more burdensome governmental
controls, tariffs, restrictions, embargoes or export license
requirements;
|
|
·
|
Review
of our advertising by regulators;
|
|
·
|
Laws
which require that local citizens or residents own a majority of a
business;
|
|
·
|
Difficulties
in obtaining required export
licenses;
|
|
·
|
Volatility
in currency exchange rates;
|
|
·
|
Political
and economic instability;
|
|
·
|
Payment
terms different than those customarily offered in the
U.S.;
|
|
·
|
Difficulties
in managing representatives outside the
U.S.;
|
|
·
|
Compensation
limits on our senior executives;
and
|
|
·
|
Potentially
adverse tax consequences.
|
|
·
|
Our
failure to increase revenue in each succeeding
quarter;
|
|
·
|
Our
failure to achieve and maintain
profitability;
|
|
·
|
Our
failure to meet our revenue and earnings
guidance;
|
|
·
|
The
loss of Republic as a refiner;
|
|
·
|
Announcements
of our results as we diversify our reverse logistics
business;
|
|
·
|
The
sale of a large amount of common stock by our
shareholders;
|
|
·
|
Our
announcement of a pending or completed acquisition or our failure to
complete a proposed acquisition;
|
|
·
|
Adverse
court ruling or regulatory action;
|
|
·
|
Our
failure to meet financial analysts’ performance
expectations;
|
|
·
|
Changes
in earnings estimates and recommendations by financial
analysts;
|
|
·
|
Changes
in market valuations of similar
companies;
|
|
·
|
Short
selling activities;
|
|
·
|
Our
announcement of a change in the direction of our
business;
|
|
·
|
Our
inability to manage our international operations;
or
|
|
·
|
Announcements
by us, or our competitors, of significant contracts, acquisitions,
commercial relationships, joint ventures or capital
commitments.
|
As of
March 31, 2010
|
||||
Shareholders’
equity:
|
||||
Convertible
Series A preferred stock, $0.0001 par value; 25,000,000 shares authorized,
400,000 issued and outstanding
|
$
|
40
|
||
$
|
19,154
|
|||
Subscriptions receivable | (1,001,667 | ) | ||
Additional
paid-in capital
|
20,889,328
|
|||
Accumulated
deficit
|
(9,751,996
|
)
|
||
Accumulated
other comprehensive loss
|
(179,550
|
) | ||
Total
shareholders’ equity
|
$
|
9,975,309
|
Year
|
Quarter Ended
|
Stock Price
|
||||||
High
|
Low
|
|||||||
($)
|
($)
|
|||||||
2010
|
March
31
|
0.40
|
0.17
|
|||||
2009
|
March 31
|
0.33
|
0.17
|
|||||
June 30
|
0.31
|
0.15
|
||||||
September 30
|
0.18
|
0.08
|
||||||
December 31
|
0.18
|
0.10
|
||||||
2008
|
March 31
|
0.25
|
0.07
|
|||||
June 30
|
0.68
|
0.03
|
||||||
September 30
|
1.65
|
0.30
|
||||||
December 31
|
0.89
|
0.22
|
|
a)
|
Equity
if they (i) require physical settlement or net-share settlement, or
(ii) gives us a choice of net-cash settlement or settlement in our
own shares (physical settlement or net-share settlement), or
as
|
|
b)
|
Assets
or liabilities if they (i) require net-cash settlement (including a
requirement to net cash settle the contract if an event occurs and if that
event is outside our control), or (ii) give the counterparty a choice of
net-cash settlement or settlement in shares (physical settlement or
net-share settlement).
|
For the Three Months Ended March 31,
|
Change
|
Change
|
||||||||||||||
2010
|
2009
|
(Dollars)
|
(Percentage)
|
|||||||||||||
(Unaudited)
|
||||||||||||||||
Revenue
|
$ | 17,272,133 | $ | 1,195,638 | $ | 16,076,495 | 1,345 | % | ||||||||
Cost
of Revenue
|
6,335,660 | 549,890 | 5,785,770 | 1,052 | % | |||||||||||
Gross
Profit
|
10,936,473 | 645,748 | 10,290,725 | 1,594 | % | |||||||||||
Sales
and Marketing
|
10,723,204 | 872,984 | 9,850,220 | 1,128 | % | |||||||||||
General
and Administrative
|
2,682,395 | 1,100,012 | 1,582,383 | 144 | % | |||||||||||
Operating
Loss
|
(2,469,126 | ) | (1,327,248 | ) | (1,141,879 | ) | 86 | % | ||||||||
Interest
Income (Expense), net
|
- | (27,284 | ) | 27,284 | (100 | )% | ||||||||||
Other
Expense
|
(10,797 | ) | (1,160 | ) | (9,637 | ) | 831 | % | ||||||||
Net
Loss
|
$ | (2,479,923 | ) | $ | (1,355,692 | ) | $ | (1,124,231 | ) | 83 | % |
|
1.
|
The
number of leads generated from an
advertisement,
|
|
2.
|
The
rate at which those leads convert into actual packs submitted by members
of the public, referred to as Sellers,
and
|
|
3.
|
The
average revenue generated from the packs
received.
|
Year Ended
December 31, 2009
|
For the Period
from February 14,
2008 (Inception)
to December 31,
2008
|
Change
(Dollars)
|
Change
(Percentage)
|
|||||||||||||
Revenue
- Related Party
|
$
|
28,998,982
|
$
|
1,561,444
|
$
|
27,437,538
|
1,757
|
%
|
||||||||
Cost
of Revenue
|
10,558,198
|
862,582
|
9,695,616
|
1,124
|
%
|
|||||||||||
Gross
Profit
|
18,440,784
|
698,862
|
17,741,922
|
2,539
|
%
|
|||||||||||
Sales
and Marketing
|
16,267,244
|
1,428,591
|
14,838,653
|
1,039
|
%
|
|||||||||||
General
and Administrative
|
4,980,303
|
2,443,634
|
2,536,669
|
104
|
%
|
|||||||||||
Depreciation
and Amortization
|
70,163
|
38,884
|
31,279
|
80
|
%
|
|||||||||||
Operating
Loss
|
(2,876,926
|
)
|
(3,212,247
|
)
|
335,321
|
(10
|
)%
|
|||||||||
Interest
Income (Expense), net
|
(236,181
|
)
|
2,639
|
(238,820
|
)
|
(9,050
|
)%
|
|||||||||
Other
Expense
|
(942,022
|
)
|
-
|
(942,022
|
)
|
100
|
%
|
|||||||||
Net
Loss
|
$
|
(4,055,129
|
)
|
$
|
(3,209,608
|
)
|
$
|
845,521
|
26
|
%
|
Name
|
Age
|
Position
|
||
Douglas
Feirstein
|
39
|
Chief
Executive Officer and Director
|
||
Hakan
Koyuncu
|
34
|
President
and Vice Chairman of the Board
|
||
Daniel
Brauser
|
29
|
Chief
Financial Officer and Director
|
||
Michael
Brachfeld
|
39
|
Chief
Accounting Officer
|
||
Scott
Frohman
|
42
|
Chairman
of the Board
|
||
Grant
Fitzwilliam
|
42
|
Director
|
||
Charles
Pearlman
|
64
|
Director
|
||
Jason
Rubin
|
27
|
Director
|
|
·
|
Establishing
broad corporate policies and
|
|
·
|
Reviewing
the overall performance of
Money4Gold.
|
Name
|
Independent
|
Audit
|
Compensation
|
|||
Scott
Frohman
|
√
|
√
|
√
|
|||
Hakan
Koyuncu
|
||||||
Daniel
Brauser
|
||||||
Douglas
Feirstein
|
||||||
Grant
Fitzwilliam
|
√
|
Chairman
|
√
|
|||
Charles
Pearlman
|
√
|
√
|
Chairman
|
|||
Jason
Rubin
|
||||||
Formed
|
October
20, 2008
|
October
30,
2009
|
Name and
Principal Position
(a)
|
Year
(b)
|
Salary
($)(c)
|
Option
Awards
($)(f) (1)(2)(3)
|
Total
($)(j)
|
||||||||||
Douglas
Feirstein
|
2009
|
136,442 | 150,709 | 287,151 | ||||||||||
Chief
Executive Officer
|
2008
|
- | - | - | ||||||||||
Hakan
Koyuncu
|
2009
|
213,942 | 150,709 | 364,651 | ||||||||||
President
|
2008
|
94,231 | - | 94,231 | ||||||||||
Daniel
Brauser
|
2009
|
213,942 | 2,185,277 | 2,239,219 | ||||||||||
Chief
Financial Officer
|
2008
|
94,231 | - | 94,231 |
(1)
|
The
amounts in these columns represent the fair value of the award as of the
grant date as computed in accordance with FASB ASC Topic 718 and the
recently revised SEC disclosure rules. These rules also require
prior years amounts to be recalculated in accordance with the rule and
therefore any number previously disclosed in our Form 10-K
regarding compensation on this table or any other table may not
reconcile. These amounts represent awards that are paid in
options to purchase shares of our common stock and do not reflect the
actual amounts that may be realized by the Named Executive
Officers.
|
(2)
|
Includes
stock options to purchase 555,556 shares of our common stock at $0.27 per
share. These options vest each calendar quarter over four years
beginning March 31, 2010. These options were awarded outside of
the Plan.
|
(3)
|
For
Mr. Brauser, also includes options to purchase 7,500,000 shares of our
common stock at $0.27 per share. These options vest each
calendar quarter over four years beginning March 31,
2010. These options were awarded outside of the
Plan.
|
Douglas
Feirstein
|
Hakan
Koyuncu
|
Daniel
Brauser
|
|||||
Death
|
Three
Months
Base
Salary
|
Three
Months
Base
Salary
|
Three
Months
Base
Salary
|
||||
Total
Disability
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
||||
Without
Cause
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
||||
Good
Reason (1)
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
||||
Non-Renewal
By the Company
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
18
Months
Base
Salary
|
(1)
|
Good
Reason is defined in their Employment Agreements to be the resignation by
the officer due to the failure of Money4Gold to meet any of its
obligations under the Employment Agreement or any other Agreement and the
failure to cure such obligation within 30 days of notice of the
breach.
|
Name Of Plan
|
Number of shares
of common stock to
be issued upon exercise
of outstanding
securities (1)
(a)
|
Weighted-average
exercise price of
outstanding
securities
(b)
|
Number of shares remaining
available for future issuance
under equity compensation
plans (excluding the
shares reflected
in column (a))
(c)
|
|||||||||
Equity
compensation plans approved by security holders
|
— | — | — | |||||||||
Equity
compensation plans not approved by security holders
|
2,237,843 | $ | 0.31 | 2,592,091 |
(2)
|
|||||||
Equity
compensation plans not approved by security holders (3)
|
11,177,991 | 0.29 | ||||||||||
Total
|
13,415,834 | $ | 0.29 | 2,592,091 |
(1)
|
Consists
of stock options.
|
(2)
|
On
December 31, 2009, we were authorized to issue 8,000,000 shares under the
Plan, which includes restricted stock and options. Because we
have issued 3,170,066 shares of restricted stock, the number of
securities available for grant has been reduced. On March 10, 2010,
the number of shares authorized under the Plan was increased to
27,000,000.
|
(3)
|
Represents
options granted outside the Plan. Includes 10,000,002
options granted to executive officers and directors with an exercise price
of $0.28, vesting quarterly in equal increments over four
years.
|
Outstanding
Equity Awards At 2009 Fiscal Year-End
|
||||||||||||||
Name
(a)
|
Number of Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
|
Number of Securities
Underlying
Unexercised Options
(#)
Unexercisable
(c)(1)
|
Option
Exercise Price
($)
(e)
|
Option
Expiration Date
(f)
|
||||||||||
Douglas
Feirstein
|
0 | 555,556 | 0.27 |
12/22/2014
|
||||||||||
Hakan
Koyuncu
|
0 | 555,556 | 0.27 |
12/22/2014
|
||||||||||
Daniel
Brauser
|
0 | 8,055,556 | 0.27 |
12/22/2014
|
|
(1)
|
These
options vest each calendar quarter over four years beginning March 31,
2010.
|
Name
|
Number of
Options
|
Exercise Price per
Share
|
Expiration Date
|
||||||
Scott
Frohman (1)
|
196,429 | $ | 0.28 |
7/1/2014
|
|||||
Jason
Rubin (2)
|
294,643 | $ | 0.28 |
7/1/2014
|
|||||
Neil
McDermott (3)
|
147,321 | $ | 0.28 |
7/1/2014
|
|||||
Charles
Pearlman
|
263,158 | $ | 0.19 |
9/23/2014
|
|||||
Grant
Fitzwilliam
|
263,158 | $ | 0.19 |
9/30/2014
|
|||||
Daniel
Brauser
|
8,055,556 | $ | 0.27 |
12/22/2014
|
|||||
Michael
Brachfeld
|
277,778 | $ | 0.27 |
12/22/2014
|
|||||
Todd
Oretsky (4)
|
555,556 | $ | 0.27 |
12/22/2014
|
|||||
Hakan
Koyuncu
|
555,556 | $ | 0.27 |
12/22/2014
|
|||||
Douglas
Feirstein
|
555,556 | $ | 0.27 |
12/22/2014
|
(1)
|
Of
these options 4,464 were relinquished as a result of no longer serving as
Chairman of the Audit Committee.
|
(2)
|
Of
these options, 27,686 were relinquished as a result of no longer serving
as a member of the Audit Committee.
|
(3)
|
Resigned
March 10, 2010.
|
(4)
|
Resigned
February 2, 2010.
|
Name
|
Number
of
Shares
|
|||
Scott
Frohman (1)
|
196,429 | |||
Neil
McDermott (2)
|
147,321 | |||
Charles
Pearlman
|
263,158 | |||
Grant
Fitzwilliam
|
263,158 |
(1)
|
Of
these options 4,464 were relinquished as a result of no longer serving as
Chairman of the Audit Committee.
|
(2)
|
Former
director.
|
Name
(a)
|
Stock
Awards
($)(c)(1)
|
Option
Awards
($)(d)(1)
|
Total ($)(j)
|
|||||||||
Grant
Fitzwilliam (2)
|
47,368 | 45,391 | 92,759 | |||||||||
Scott
Frohman (3)
|
55,000 | 51,432 | 106,432 | |||||||||
Neil
McDermott (3)(4)
|
41,250 | 38,574 | 79,824 | |||||||||
Charles
Pearlman (2)
|
47,368 | 45,294 | 92,662 | |||||||||
Jason
Rubin (3)
|
- | 77,148 | 77,148 |
(1)
|
This
represents the fair value of the award as of the grant date in accordance
with FASB ASC Topic 718.
|
(2)
|
Represents
an award issued under the Plan as an initial grant for appointment to the
Board. These awards vest in annual installments over three
years.
|
(3)
|
Represents
an award issued under the Plan as an annual grant for Board or committee
service. These awards vest one year from the date of
grant.
|
|
(4) |
Mr.
McDermott resigned in 2010. In connection with his resignation, we vested
all of his options and restricted
stock.
|
Title
of Class
|
Name and Address of Beneficial Owner
|
Amount and
Nature of Beneficial
Owner
(1)
|
Percent of Class (1)
|
||||||
Directors
and Executive Officers:
|
|||||||||
Common Stock
|
Douglas
Feirstein
200
E. Broward Blvd., Ste. 1200
Ft.
Lauderdale, Florida 33301 (2)(3)(4)
|
59,872,256 | 30.5 | % | |||||
Common
Stock
|
Hakan
Koyuncu
200
E. Broward Blvd., Ste. 1200
Ft.
Lauderdale, Florida 33301 (2)(3)(4)
|
59,872,256 | 30.5 | % | |||||
Common
Stock
|
Daniel
Brauser
200
E. Broward Blvd., Ste. 1200
Ft.
Lauderdale, Florida 33301 (2)(3)(5)
|
61,281,979 | 31.0 | % | |||||
Common
Stock
|
Grant
Fitzwilliam
2856
NE 26th Street
Ft.
Lauderdale, Florida 33305 (3)
|
290,936 | * | ||||||
Common
Stock
|
Scott
Frohman
123
NW 13th Street, Ste. 300
Boca
Raton, Florida 33432 (3)
(6)
|
3,453,581 | 1.8 | % | |||||
Common
Stock
|
Charles
Pearlman
P.O
Box 460266
Ft.
Lauderdale, Florida 33346 (3)
|
288,158 | * | ||||||
Common
Stock
|
Jason
Rubin
12900
NW 38th Avenue
Miami,
Florida 33054 (3)(7)
|
10,322,583 | 5.2 | % |
Common
Stock
|
All
directors and executive officers
as
a group (8 persons)
|
77,241,404 | 38.8 | % | |||||
5%
Shareholders:
|
|||||||||
Common
Stock
|
Republic
Metals Corporation
12900
NW 38th Avenue
Miami,
Florida 33054 (8)
|
10,000,000 | 5.1 | % | |||||
Common
Stock
|
Michael
Brauser
595
S. Federal Highway, Ste. 600
Boca
Raton, Florida 33432 (9)
|
13,489,793 | 6.9 | % | |||||
Common
Stock
|
Barry
Honig
595
S. Federal Highway, Ste. 600
Boca
Raton, Florida 33432 (10)
|
11,353,587 | 5.8 | % | |||||
Former
Executive Officer and Director:
|
|||||||||
Common
Stock
|
Todd
Oretsky
547
N.E. 59 th
Street
Miami,
FL 33137 (11)
|
60,358,367 | 30.7 | % |
*
|
Less
than 1%
|
(1)
|
Applicable percentages
are based on 196,345,002 shares outstanding adjusted as required by
rules of the SEC. Including shares sold in our March – April
2010 private placement. 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 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, we
believe 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. The shares of common stock
beneficially owned by each of Messrs. Brauser, Feirstein, Koyuncu and
Oretsky include all shares of common stock subject to a Stockholders
Agreement which terminates when each member of the group beneficially owns
less than 100,000 shares. Under the Stockholders Agreement, the
group agreed to vote all of their shares of common stock together on any
action as determined by a majority of the members of the group still
owning 20,000 shares. The table includes shares of common
stock, options and warrants exercisable into shares within 60
days. The shares of common stock individually owned by them
are:
|
Mr. Brauser
|
9,715,335 | |||
Mr. Feirstein
|
26,508,503 | |||
Mr. Koyuncu
|
14,800,001 | |||
Mr. Oretsky
|
8,778,972 |
(2)
|
An
executive officer.
|
(3)
|
A
director.
|
(4)
|
Includes
69,445 stock options exercisable within 60
days.
|
(5)
|
Includes
333,334 shares of common stock issuable upon the exercise of
warrants. Includes 1,145,834 stock options which are
exercisable within 60 days.
|
(6)
|
Includes
261,616 stock options which are exercisable within 60
days.
|
(7)
|
Includes
10,000,000 shares held by Republic Metals Corporation, a corporation
whereby Mr. Rubin’s father is the founder and controls.
Mr. Rubin is Vice President and General Counsel of Republic.
Also includes 322,583 stock options which are exercisable within 60
days.
|
(8)
|
These
are the same 10,000,000 shares beneficially owned by Jason
Rubin.
|
(9)
|
Mr.
Brauser is the father of Daniel Brauser, our Chief Financial
Officer. Does not include shares held in a trust created by
Mr. Brauser, of which one of his adult sons is the trustee and all of
his four adult children including Daniel Brauser are the
beneficiaries. Mr. Michael Brauser disclaims beneficial
ownership of these securities, and this disclosure shall not be deemed an
admission of beneficial ownership of these securities for Section 16
of the Securities Exchange Act of 1934 or for any other
purposes. Mr. Brauser is a selling
shareholder. See the Selling Shareholder Table
below.
|
(10) |
Includes
shares held in a 401k plan whereby Mr. Honig is the trustee. This 401k
plan is a selling
shareholder.
|
(11)
|
Mr.
Oretsky resigned as an executive officer and director on February 2, 2010.
Mr. Oretsky’s shares are held by Jack Oretsky Holdings, LLC, a
limited liability company in which Mr. Oretsky, to our knowledge, is
the sole manager. Includes 555,556 stock options, which are
exercisable within 60 days.
|
Name
|
Number of
securities
beneficially
owned before
offering
|
Number of
securities
to be
offered
|
Number of
securities
owned after
offering
|
Percentage of
securities
beneficially
owned after
offering
|
||||||||||||
Brauser
Family Trust 2008 (1)
|
3,683,334 | 333,334 | 3,350,000 | 1.7 | % | |||||||||||
Michael
Brauser (2)
|
13,489,793 | 833,334 | 12,656,459 | 6.4 | % | |||||||||||
Chestnut
Ridge Partners, LP (3)
|
1,600,000 | 1,600,000 | 0 | 0 | ||||||||||||
Robert
Colman
|
666,667 | 666,667 | 0 | 0 | ||||||||||||
DBGJ
Irrevocable Trust (4)
|
166,667 | 166,667 | 0 | 0 | ||||||||||||
Goldstein
Enterprises LLC
|
666,667 | 666,667 | 0 | 0 | ||||||||||||
GRQ
Consultants, Inc. 401k (5)
|
11,353,587 | 1,333,334 | 10,020,253 | 5.1 | % | |||||||||||
Gerald
& Jane Kesselman
|
500,000 | 500,000 | 0 | 0 | ||||||||||||
Bruce
Moldow
|
700,000 | 250,000 | 450,000 | * | ||||||||||||
Michael
Moran (6)
|
6,322,110 | 166,667 | 6,165,443 | 3.1 | % | |||||||||||
Octagon
Capital Partners
|
1,000,000 | 1,000,000 | 0 | 0 | ||||||||||||
Plough
Penny Partners LP
|
666,667 | 666,667 | 0 | 0 | ||||||||||||
Proximity
Fund LP
|
2,000,000 | 2,000,000 | 0 | 0 | ||||||||||||
Reuben
Taub
|
716,667 | 666,667 | 50,000 | * | ||||||||||||
Wallygator,
LLC
|
333,334 | 333,334 | 0 | 0 | ||||||||||||
FaceTV
|
629,396 | 629,396 | 0 | 0 | ||||||||||||
Search
Response Agency Ltd.
|
611,079 | 611,079 | 0 | 0 | ||||||||||||
Global
Innovations, Inc.
|
1,818,182 | 1,818,182 | 0 | 0 |
* | Less than 1% | |
|
(1)
|
The
trustee of this trust is the brother of Daniel Brauser, our Chief
Financial Officer.
|
|
(2)
|
Michael
Brauser is the father of Daniel Brauser, our Chief Financial
Officer.
|
(3) | Kenneth Pasternack, as managing member of the general partner, holds voting and investment power over these shares. | |
|
(4)
|
The
trustee of this trust is the uncle of Daniel Brauser, our Chief Financial
Officer.
|
(5) | Barry Honig is the trustee of the 401k plan and holds voting and investment power over these shares. | |
|
(6)
|
Michael
Moran is our Vice President of
Operations.
|
|
·
|
The
transaction is approved by the corporation’s Board prior to the date the
shareholder became an interested
shareholder;
|
|
·
|
Upon
closing of the transaction which resulted in the shareholder becoming an
interested shareholder, the shareholder owned at least 85% of the shares
of stock entitled to vote generally in the election of directors of the
corporation outstanding excluding those shares owned by persons who are
both directors and officers and specified types of employee stock plans;
or
|
|
·
|
On
or after such date, the business combination is approved by the Board and
at least 66 2/3% of outstanding voting stock not owned by the interested
shareholder.
|
|
·
|
Ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
Block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
Purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
Privately
negotiated transactions;
|
|
·
|
Short
sales;
|
|
·
|
Broker-dealers
may agree with the selling shareholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
Writing
of options on the shares;
|
|
·
|
A
combination of any such methods of sale;
and
|
|
·
|
Any
other method permitted pursuant to applicable
law.
|
As
of March 31,
|
As
of December
31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Assets
|
||||||||
Current
Assets:
|
||||||||
Cash
|
$ | 204,820 | $ | 297,426 | ||||
Accounts
receivable - related party
|
466,745 | 1,083,487 | ||||||
Inventory
|
682,278 | 855,763 | ||||||
Prepaid
asset - related party - current portion
|
187,627 | 187,627 | ||||||
Prepaid
expenses and other current assets
|
419,967 | 667,605 | ||||||
Total
Current Assets
|
1,961,437 | 3,091,908 | ||||||
Fixed
Assets - net
|
215,250 | 75,908 | ||||||
Other
Assets:
|
||||||||
Goodwill
|
11,142,273 | 11,142,273 | ||||||
Intangible
assets - net
|
54,409 | 10,668 | ||||||
Intangible
asset - related party - net
|
184,868 | 199,455 | ||||||
Prepaid
asset - related party - net of current portion
|
406,525 | 453,432 | ||||||
Other
assets
|
90,708 | 113,793 | ||||||
Total
Other Assets
|
11,878,783 | 11,919,621 | ||||||
Total
Assets
|
$ | 14,055,470 | $ | 15,087,437 | ||||
Liabilities and Stockholders'
Equity
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 2,130,375 | $ | 1,432,428 | ||||
Accounts
payable - related party
|
73,971 | 45,984 | ||||||
Accrued
expenses
|
395,114 | 241,038 | ||||||
Deferred
revenue
|
1,480,701 | 1,576,462 | ||||||
Total
Current Liabilities
|
4,080,161 | 3,295,912 | ||||||
Stockholders'
Equity:
|
||||||||
Convertible
Series A preferred stock, ($0.0001 par value, 25,000,000 shares
authorized, 400,000 and
|
||||||||
3,400,000
issued and outstanding)
|
40 | 340 | ||||||
Common
stock, ($0.0001 par value, 300,000,000 shares authorized, 191,536,339 and
183,208,004 shares
|
||||||||
issued
and outstanding)
|
19,154 | 18,321 | ||||||
Subscriptions
receivable
|
(1,001,667 | ) | - | |||||
Additional
paid in capital
|
20,889,328 | 19,080,568 | ||||||
Accumulated
deficit
|
(9,751,996 | ) | (7,272,073 | ) | ||||
Accumulated
other comprehensive loss
|
(179,550 | ) | (35,631 | ) | ||||
Total
Stockholders' Equity
|
9,975,309 | 11,791,525 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 14,055,470 | $ | 15,087,437 |
For
the Three Months Ended March
31,
|
||||||||
2010
|
2009
|
|||||||
Revenue
|
$ | 17,272,133 | $ | 1,195,638 | ||||
Cost
of revenue
|
6,335,660 | 549,890 | ||||||
Gross
Profit
|
10,936,473 | 645,748 | ||||||
Sales
and marketing expenses
|
10,723,204 | 872,984 | ||||||
General
and administrative expenses
|
2,682,395 | 1,100,012 | ||||||
Loss
from Operations
|
(2,469,126 | ) | (1,327,248 | ) | ||||
Other
Income (Expense):
|
||||||||
Interest
income
|
- | 78 | ||||||
Interest
expense
|
- | (27,362 | ) | |||||
Loss
on foreign exchange
|
(10,797 | ) | - | |||||
Change
in fair value of derivative liability - embedded
conversion
|
- | (1,160 | ) | |||||
Total
Other Income (Expense) - Net
|
(10,797 | ) | (28,444 | ) | ||||
Net
Loss
|
$ | (2,479,923 | ) | $ | (1,355,692 | ) | ||
Net
loss per common share - basic and diluted
|
$ | (0.01 | ) | $ | (0.02 | ) | ||
Weighted
average number of shares outstanding during the period - basic and
diluted
|
185,502,671 | 79,116,959 | ||||||
Comprehensive
Loss, Net of Tax:
|
||||||||
Net
loss
|
$ | (2,479,923 | ) | $ | (1,355,692 | ) | ||
Foreign
currency translation adjustment
|
(143,919 | ) | - | |||||
Comprehensive
Loss
|
$ | (2,623,842 | ) | $ | (1,355,692 | ) |
For
the Three Months Ended March
31,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (2,479,923 | ) | $ | (1,355,692 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Change
in fair value of derivative liability - embedded conversion
feature
|
- | 1,160 | ||||||
Stock
based compensation expense
|
807,626 | 122,548 | ||||||
Amortization
of debt discount
|
- | 20,829 | ||||||
Amortization
of debt issuance costs
|
- | 3,750 | ||||||
Amortization
of prepaid asset - related party
|
46,907 | 65,459 | ||||||
Depreciation
and amortization
|
35,231 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Decrease
(increase) in:
|
||||||||
Accounts
receivable - related party
|
610,323 | 143,782 | ||||||
Inventory
|
163,444 | (29,368 | ) | |||||
Prepaid
and other current assets
|
229,139 | (60,541 | ) | |||||
Other
assets
|
(3,589 | ) | (12,831 | ) | ||||
Increase
(decrease) in:
|
||||||||
Accounts
payable
|
1,098,295 | 60,845 | ||||||
Accounts
payable - related party
|
(366,606 | ) | (59,406 | ) | ||||
Accrued
expenses
|
130,548 | 15,144 | ||||||
Deferred
Revenues
|
(77,018 | ) | - | |||||
Net
Cash Provided by (Used In) Operating Activities
|
194,377 | (1,084,321 | ) | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Cash
paid to purchase fixed assets
|
(159,476 | ) | (2,123 | ) | ||||
Net Cash Used in Investing
Activities
|
(159,476 | ) | (2,123 | ) |
For
the Three Months Ended March
31,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from media line of credit
|
- | 250,000 | ||||||
Proceeds
from convertible note payable
|
- | 250,000 | ||||||
Cash
paid as debt issue costs
|
- | (12,500 | ) | |||||
Proceeds
from issuance of common stock and warrants in private
placement
|
- | 80,000 | ||||||
Net Cash Provided By Financing
Activities
|
- | 567,500 | ||||||
Net
Increase (Decrease) in Cash
|
34,902 | (518,944 | ) | |||||
Effect
of Exchange Rates on Cash
|
(127,507 | ) | 334 | |||||
Cash
- Beginning of Period
|
297,426 | 778,436 | ||||||
Cash
- End of Period
|
$ | 204,820 | $ | 259,826 | ||||
SUPPLEMENTARY CASH FLOW
INFORMATION:
|
||||||||
Cash
Paid During the Period for:
|
||||||||
Interest
|
$ | - | $ | - | ||||
Taxes
|
$ | - | $ | - | ||||
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
|
||||||||
Sale
of stock for subscription receivable
|
$ | 1,001,667 | $ | - | ||||
Accrual
of covenant not to compete
|
$ | 50,000 | $ | - | ||||
Conversion
of preferred stock into common stock
|
$ | 300 | $ | 220 | ||||
Derivative liability arising from Convertible Note Payable | $ | - | $ | 69,429 |
a)
|
The
economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and
risks of the host contract,
|
b)
|
The
hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not remeasured at fair value under otherwise
applicable GAAP with changes in fair value reported in earnings as they
occur, and
|
c)
|
A
separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to certain
requirements (except for when the host instrument is deemed to be
conventional).
|
a)
|
Equity
if they (i) require physical settlement or net-share settlement, or
(ii) gives us a choice of net-cash settlement or settlement in our
own shares (physical settlement or net-share settlement), or
as
|
b)
|
Assets
or liabilities if they (i) require net-cash settlement (including a
requirement to net cash settle the contract if an event occurs and if that
event is outside our control), or (ii) give the counterparty a choice of
net-cash settlement or settlement in shares (physical settlement or
net-share settlement).
|
Three
Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Convertible
Preferred Stock
|
400,000 | 11,900,000 | ||||||
Common
Stock Purchase Warrants
|
21,800,003 | 8,400,000 | ||||||
Stock
Options
|
13,215,834 | 1,073,134 | ||||||
|
35,415,837 | 21,373,134 |
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active
market for an asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide
pricing information on an ongoing
basis.
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are
not active.
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants
would use in pricing the asset or
liability.
|
Level 1:
Quoted Prices
in
Active
Markets for
Identical
Assets
|
Level 2:
Quoted Prices
in
Inactive
Markets for
Identical
Assets
|
Level 3:
Significant
Unobservable
Inputs
|
Total at
December 31, 2009
|
Total
Impairment
For the Year Ended
December 31, 2009
|
||||||||||||||||
Goodwill
|
$
|
-0-
|
$
|
11,142,273
|
$
|
-0-
|
$
|
11,142,273
|
$
|
-0-
|
||||||||||
Total
|
$
|
-0-
|
$
|
11,142,273
|
$
|
-0-
|
$
|
11,142,273
|
$
|
-0-
|
For
the Three
Months
Ended
March 31,
2009
|
||||
Revenues
|
$
|
3,244,348
|
||
Net
Loss
|
(1,888,060
|
)
|
||
Basic
and Diluted Loss from Continuing Operations per Common
Share
|
$
|
(0.01
|
)
|
|
Weighted
Average Shares Outstanding - Basic and Diluted
|
153,993,391
|
Balance
at
March
31, 2010
|
Balance
at December 31, 2009
|
Estimated
Useful
Life
|
||||||||||
Leasehold
Improvements
|
$ | 115,281 | $ | 39,694 | * | |||||||
Security
Equipment
|
78,015 | 26,005 |
7years
|
|||||||||
Computers
|
18,228 | 6,024 |
3years
|
|||||||||
Furniture
and Fixtures
|
11,216 | 2,397 |
7years
|
|||||||||
Office
Equipment
|
3,386 | 3,386 |
3years
|
|||||||||
226,126 | 77,506 | |||||||||||
Less:
Accumulated Depreciation
|
(10,876 | ) | (1,598 | ) | ||||||||
Fixed
Assets, Net
|
$ | 215,250 | $ | 75,908 |
(a)
|
The
number of shares of common stock beneficially owned by Whalehaven and its
affiliates on a conversion date, repayment date, the date notice of
redemption is given, or the date notice of mandatory conversion is given,
as the case may be;
|
(b)
|
Any
common stock issuable in connection with the unconverted portion of the
Convertible Note; and
|
(c)
|
The
number of shares of common stock issuable upon the conversion or repayment
of the Convertible Note with respect to which the determination of this
provision is being made, would result in beneficial ownership by
Whalehaven and its affiliates of more than 4.99% of the outstanding shares
of our common stock on such date.
|
Expected
dividends
|
0
|
%
|
||
Expected
volatility
|
133.72
|
%
|
||
Expected
term – embedded conversion option
|
0.24 years
|
|||
Risk
free interest rate
|
0.26
|
%
|
Expected
dividends
|
0
|
%
|
||
Expected
volatility
|
151.16
|
%
|
||
Expected
term – embedded conversion option
|
0.17 years
|
|
||
Risk
free interest rate
|
0.21
|
%
|
·
|
Currency
fluctuations, devaluations, conversion and expropriation
restrictions;
|
|
|
·
|
Confiscatory
taxation or other adverse tax policies;
|
|
·
|
Political
and economic instability;
|
|
·
|
Inflation;
|
|
·
|
Trade
restrictions and economic embargoes imposed by the United States and other
countries;
|
·
|
Expropriation
and nationalization of our assets or of our customers in that
country;
|
|
|
·
|
Governmental
activities that limit or disrupt markets, payments, or limit the movement
of funds;
|
|
·
|
Governmental
activities that may result in the deprivation of contract
rights;
|
|
·
|
Civil
unrest, acts of terrorism, force majeure, war or other armed conflict;
and
|
|
·
|
Natural
disasters including those related to earthquakes, hurricanes, tsunamis and
flooding.
|
Risk-free
interest rate
|
0.37
|
%
|
||
Expected
dividend yield
|
0
|
%
|
||
Expected
volatility
|
189.44
|
%
|
||
Expected
life
|
3
years
|
|||
Expected
forfeitures
|
0
|
%
|
Warrants
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
||||||||||
Outstanding
– December 31, 2009
|
21,800,003 | $ | 0.35 | 2.3 | ||||||||
Granted
|
— | |||||||||||
Exercised
|
— | |||||||||||
Forfeited
or Cancelled
|
(— | ) | ||||||||||
Outstanding
– March 31, 2010
|
21,800,003 | $ | 0.37 |
2.0
|
||||||||
Exercisable
– March 31, 2010
|
17,633,336 | $ | 0.41 |
1.9
|
Risk-free
interest rate
|
1.55%
- 2.82
|
%
|
||
Expected
dividend yield
|
0
|
%
|
||
Expected
volatility
|
108%
- 122.7
|
%
|
||
Expected
term
|
5
years
|
|||
Expected
forfeitures
|
0
|
%
|
Risk-free
interest rate
|
1.36
|
%
|
||
Expected
dividend yield
|
0
|
%
|
||
Expected
volatility
|
153.55
|
%
|
||
Expected
life
|
5
years
|
|||
Expected
forfeitures
|
0
|
%
|
Risk-free interest rate
|
2.31-2.51
|
%
|
||
Expected dividend yield
|
0
|
%
|
||
Expected volatility
|
162.60-180.87
|
%
|
||
Expected
life
|
5
years
|
|||
Expected
forfeitures
|
0
|
%
|
Risk-free
interest rate
|
2.49
|
%
|
||
Expected
dividend yield
|
0
|
%
|
||
Expected
volatility
|
190.48
|
%
|
||
Expected
life
|
5
years
|
|||
Expected
forfeitures
|
0
|
%
|
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Balance
at December 31, 2009
|
13,215,834 | $ | 0.45 | 4.8 | ||||||||||||
Granted
|
— | — | ||||||||||||||
Forfeited
or Cancelled
|
— | — | ||||||||||||||
Balance
at March 31, 2010
|
13,215,834 | $ | 0.45 | 4.6 | $ | — | ||||||||||
Exercisable
at March 31, 2010
|
2,076,645 | $ | 0.33 | 4.4 | $ | — |
Number of Options
|
Weighted Average
Grant Date
Fair Value
|
|||||||
Outstanding
– December 31, 2009
|
12,595,364 | $ | 0.27 | |||||
Granted
|
— | $ | — | |||||
Vested
|
(1,456,175 | ) | $ | 0.27 | ||||
Cancelled
or Forfeited
|
(— | ) | $ | — | ||||
Outstanding
– March 31, 2010
|
11,139,189 | $ | 0.27 |
United States
|
Canada
|
Europe
|
Consolidated
|
|||||||||||||
Revenue
for the three months ended March 31, 2010
|
$
|
8,046,582
|
$
|
4,481,401
|
$
|
4,744,150
|
$
|
17,272,133
|
||||||||
Total
Assets at March 31, 2010
|
12,856,929
|
433,319
|
765,222
|
14,055,470
|
||||||||||||
Revenue
for the three months ended March 31, 2009
|
$
|
1,012,389
|
183,249
|
—
|
$
|
1,195,638
|
||||||||||
Total
Assets at December 31, 2009
|
15,087,437
|
—
|
—
|
15,087,437
|
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 297,426 | $ | 778,436 | ||||
Accounts
receivable - related party
|
1,083,487 | 285,707 | ||||||
Inventory
|
855,763 | 32,209 | ||||||
Prepaid
asset - related party - current portion
|
187,627 | 187,627 | ||||||
Prepaid
expenses and other current assets
|
667,605 | 810 | ||||||
Total
Current Assets
|
3,091,908 | 1,284,789 | ||||||
Fixed
Assets - net
|
75,908 | - | ||||||
Other
Assets:
|
||||||||
Goodwill
|
11,142,273 | - | ||||||
Intangible
assets - net
|
10,668 | 65,167 | ||||||
Intangible
asset - related party - net
|
199,455 | 257,814 | ||||||
Prepaid
asset - related party - net of current portion
|
453,432 | 641,059 | ||||||
Other
assets
|
113,793 | 21,234 | ||||||
Total
Other Assets
|
11,919,621 | 985,274 | ||||||
Total
Assets
|
$ | 15,087,437 | $ | 2,270,063 | ||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 1,432,428 | $ | 243,315 | ||||
Accounts
payable - related party
|
45,984 | 568,198 | ||||||
Accrued
expenses
|
241,038 | 27,233 | ||||||
Deferred
revenue
|
1,576,462 | - | ||||||
Total
Current Liabilities
|
3,295,912 | 838,746 | ||||||
Stockholders'
Equity:
|
||||||||
Convertible
Series A preferred stock, ($0.0001 par value, 25,000,000 shares
authorized, 3,400,000 and 14,100,000 issues and
outstanding)
|
340 | 1,410 | ||||||
Common
stock, ($0.0001 par value, 300,000,000 shares authorized, 183,208,004 and
78,776,432 shares issued and outstanding)
|
18,321 | 7,879 | ||||||
Additional
paid in capital
|
19,080,568 | 4,631,636 | ||||||
Accumulated
deficit
|
(7,272,073 | ) | (3,209,608 | ) | ||||
Accumulated
other comprehensive loss
|
(35,631 | ) | - | |||||
Total
Stockholders' Equity
|
11,791,525 | 1,431,317 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 15,087,437 | $ | 2,270,063 |
For the Period from
|
||||||||
February 14, 2008
|
||||||||
For the Year Ended
|
(Inception) to
|
|||||||
December 31, 2009
|
December 31, 2008
|
|||||||
Revenue -
related party
|
$ | 28,998,982 | $ | 1,561,444 | ||||
Cost
of revenue
|
10,558,198 | 862,582 | ||||||
Gross
profit
|
18,440,784 | 698,862 | ||||||
Sales
and marketing expenses
|
16,267,244 | 1,428,591 | ||||||
General
and administrative expenses
|
4,980,303 | 2,443,634 | ||||||
Depreciation
and amortization
|
70,163 | 38,884 | ||||||
Loss
from operations
|
(2,876,926 | ) | (3,212,247 | ) | ||||
Other
income (expense):
|
||||||||
Interest
income
|
1,419 | 2,639 | ||||||
Interest
expense
|
(237,600 | ) | - | |||||
Loss
on foreign exchange
|
(11,318 | ) | - | |||||
Registration
rights penalty
|
(218,400 | ) | - | |||||
Loss
on settlement of debt
|
(550,175 | ) | - | |||||
Impairment
of intangible assets
|
(48,500 | ) | - | |||||
Change
in fair value of derivative liability - embedded conversion
feature
|
(55,399 | ) | - | |||||
Warrant
expense arising from repricing of investor warrants
|
(58,230 | ) | - | |||||
Total
other income (expense) - net
|
(1,178,202 | ) | 2,639 | |||||
Net
Loss
|
$ | (4,055,129 | ) | $ | (3,209,608 | ) | ||
Net
loss per common share - basic and diluted
|
$ | (0.03 | ) | $ | (0.06 | ) | ||
Weighted
average number of common shares outstanding during the year/period - basic
and diluted
|
136,640,303 | 50,978,524 | ||||||
Comprehensive
loss, net of tax:
|
||||||||
Net
Loss
|
$ | (4,055,129 | ) | $ | (3,209,608 | ) | ||
Foreign
currency translation adjustment
|
(35,631 | ) | - | |||||
Comprehensive
loss
|
$ | (4,090,760 | ) | $ | (3,209,608 | ) |
Accumulated
|
Total
|
|||||||||||||||||||||||||||||||
Preferred Stock, $0.0001 Par Value
|
Common Stock, $0.0001 Par Value
|
Additional
|
Accumulated
|
Other Comprehensive
|
Stockholders'
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid in
Capital
|
Deficit
|
Loss
|
Equity
|
|||||||||||||||||||||||||
Issuance
of member units to founders for cash - HD Capital, LLC
|
- | $ | - | - | $ | - | $ | 50,000 | $ | - | $ | - | $ | 50,000 | ||||||||||||||||||
Issuance
of shares to founders for services - Money4Gold, Inc.
|
- | - | 967,965 | 97 | 2,940 | - | - | 3,037 | ||||||||||||||||||||||||
Issuance
of shares in share exchange between HD Capital, LLC and Money4Gold,
Inc.
|
- | - | 11,828,413 | 1,183 | (1,183 | ) | - | - | - | |||||||||||||||||||||||
Issuance
of shares in share exchange between M4GWY and Money4Gold,
Inc.
|
- | - | 1 | - | - | - | - | - | ||||||||||||||||||||||||
Conversion
of common stock series B to series A - Money4Gold, Inc.
|
- | - | 637,429 | 64 | (64 | ) | - | - | - | |||||||||||||||||||||||
Issuance
of shares for non-compete intangible and future services
|
- | - | 3,187,143 | 319 | 1,229,681 | - | - | 1,230,000 | ||||||||||||||||||||||||
Issuance
of shares in reverse acquisition treated as a
recapitalization
|
14,100,000 | 1,410 | 52,350,002 | 5,235 | (9,375 | ) | - | - | (2,730 | ) | ||||||||||||||||||||||
Issuance
of common stock and warrants in private placement
|
- | - | 8,000,000 | 800 | 2,399,200 | - | - | 2,400,000 | ||||||||||||||||||||||||
Cash
paid as direct offering costs
|
- | - | - | - | (113,688 | ) | - | - | (113,688 | ) | ||||||||||||||||||||||
Contributed
capital by former stockholder used to repay a liability
|
- | - | - | - | 2,730 | - | - | 2,730 | ||||||||||||||||||||||||
Stock
based compensation expense
|
- | - | 1,805,479 | 181 | 1,071,395 | - | - | 1,071,576 | ||||||||||||||||||||||||
Net
loss for the period ended December 31, 2008
|
- | - | - | - | - | (3,209,608 | ) | - | (3,209,608 | ) | ||||||||||||||||||||||
Balance,
December 31, 2008
|
14,100,000 | 1,410 | 78,776,432 | 7,879 | 4,631,636 | (3,209,608 | ) | - | 1,431,317 | |||||||||||||||||||||||
Issuance
of common stock and warrants in private placement
|
- | - | 4,425,003 | 442 | 814,558 | - | - | 815,000 | ||||||||||||||||||||||||
Cash
paid as direct offering costs
|
- | - | - | - | (42,804 | ) | - | - | (42,804 | ) | ||||||||||||||||||||||
Shares
issued in connection with MGE acquisition
|
- | - | 74,876,432 | 7,488 | 10,492,512 | - | - | 10,500,000 | ||||||||||||||||||||||||
Conversion
of preferred stock to common
|
(10,700,000 | ) | (1,070 | ) | 10,700,000 | 1,070 | - | - | - | - | ||||||||||||||||||||||
Shares
issued in connection with repricing
|
- | - | 3,258,337 | 326 | (326 | ) | - | - | - | |||||||||||||||||||||||
Warrant
expense arising from repricing of investor warrants
|
- | - | - | - | 58,230 | - | - | 58,230 | ||||||||||||||||||||||||
Accrued
dividends on series B convertible redeemable preferred
stock
|
- | - | - | - | - | (7,336 | ) | - | (7,336 | ) | ||||||||||||||||||||||
Shares
issued to settle accounts payable
|
- | - | 639,256 | 64 | 128,874 | - | - | 128,938 | ||||||||||||||||||||||||
Reclassification of
derivative liability from repayment of convertible note
payable
|
- | - | - | - | 124,827 | - | - | 124,827 | ||||||||||||||||||||||||
Conversion
of series B convertible redeemable preferred stock and accrued
dividends
|
- | - | 1,695,754 | 170 | 257,166 | - | - | 257,336 | ||||||||||||||||||||||||
Conversion
of media line of credit for shares of common stock
|
- | - | 5,834,306 | 583 | 1,049,593 | - | - | 1,050,176 | ||||||||||||||||||||||||
PPM
shares issued for related party accounts payable
|
- | - | 333,333 | 33 | 49,967 | - | - | 50,000 | ||||||||||||||||||||||||
Expense
arising from issuance of 2008 private placement penalty
shares
|
- | - | 720,000 | 72 | 218,328 | - | - | 218,400 | ||||||||||||||||||||||||
Stock
based compensation expense
|
- | - | 1,949,151 | 194 | 1,298,007 | - | - | 1,298,201 | ||||||||||||||||||||||||
Foreign
currency translation expense
|
- | - | - | - | - | - | (35,631 | ) | (35,631 | ) | ||||||||||||||||||||||
Net
loss for the year ended December 31, 2009
|
- | - | - | - | - | (4,055,129 | ) | - | (4,055,129 | ) | ||||||||||||||||||||||
Balance,
December 31, 2009
|
3,400,000 | $ | 340 | 183,208,004 | $ | 18,321 | $ | 19,080,568 | $ | (7,272,073 | ) | $ | (35,631 | ) | $ | 11,791,525 |
For the Period from
|
||||||||
February 14, 2008
|
||||||||
For the Year Ended
|
(Inception) to
|
|||||||
December 31, 2009
|
December 31, 2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss
|
$ | (4,055,129 | ) | $ | (3,209,608 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Registration
rights penalty
|
218,400 | - | ||||||
Loss
on settlement of debt
|
550,175 | - | ||||||
Impairment
of intangible assets
|
48,500 | - | ||||||
Change
in fair value of derivative liability - embedded conversion
feature
|
55,399 | - | ||||||
Warrant
expense arising from repricing of investor warrants
|
58,230 | - | ||||||
Gain
on settlement of accounts payable
|
(21,561 | ) | - | |||||
Stock
based compensation expense
|
1,298,201 | 1,074,613 | ||||||
Amortization
of debt discount
|
69,429 | - | ||||||
Amortization
debt issuance costs
|
27,591 | - | ||||||
Amortization
of prepaid asset - related party
|
187,627 | 109,449 | ||||||
Depreciation
and amortization
|
70,163 | 38,884 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
in:
|
||||||||
Accounts
receivable - related party
|
(803,514 | ) | (285,707 | ) | ||||
Inventory
|
(825,902 | ) | (32,209 | ) | ||||
Prepaid
expenses and other current assets
|
(677,503 | ) | (810 | ) | ||||
Other
assets
|
(93,697 | ) | (21,234 | ) | ||||
Increase
(decrease) in:
|
||||||||
Accounts
payable
|
697,525 | 243,315 | ||||||
Accounts
payable - related party
|
(275,563 | ) | 568,198 | |||||
Accrued
expenses
|
(31,560 | ) | 27,233 | |||||
Deferred
revenue
|
1,580,634 | - | ||||||
Net
Cash Used In Operating Activities
|
(1,922,555 | ) | (1,487,876 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Cash
paid to acquire intangible assets
|
(4,207 | ) | (70,000 | ) | ||||
Cash
paid to purchase fixed assets
|
(78,787 | ) | - | |||||
Net
Cash Used in Investing Activities
|
(82,994 | ) | (70,000 | ) |
For the Period from
|
||||||||
February 14, 2008
|
||||||||
For the Year Ended
|
(Inception) to
|
|||||||
December 31, 2009
|
December 31, 2008
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from line of credit
|
296,044 | - | ||||||
Repayment
of line of credit
|
(290,203 | ) | - | |||||
Proceeds
from media line of credit
|
500,000 | - | ||||||
Proceeds
from convertible note payable
|
250,000 | - | ||||||
Repayment
of other notes payable
|
(194,785 | ) | - | |||||
Cash
paid as debt issue costs
|
(27,591 | ) | - | |||||
Proceeds
from stock issued to founders
|
- | 50,000 | ||||||
Proceeds
from sale of Series B Preferred Stock
|
250,000 | - | ||||||
Proceeds
from issuance of common stock and warrants in private
placement
|
815,000 | 2,400,000 | ||||||
Cash
paid for direct offering costs
|
(42,804 | ) | (113,688 | ) | ||||
Net
Cash Provided By Financing Activities
|
1,555,661 | 2,336,312 | ||||||
Net
(Decrease) Increase in Cash and Cash Equivalents
|
(449,888 | ) | 778,436 | |||||
Effect
of Exchange Rates on Cash and Cash Equivalents
|
(31,122 | ) | - | |||||
Cash
and Cash Equivalents - Beginning of Period
|
778,436 | - | ||||||
Cash
and Cash Equivalents - End of Period
|
$ | 297,426 | $ | 778,436 | ||||
SUPPLEMENTARY
CASH FLOW INFORMATION:
|
||||||||
Cash
Paid During the Period for:
|
||||||||
Interest
|
$ | 140,580 | $ | - | ||||
Taxes
|
$ | - | $ | - | ||||
ACTIVITIES:
|
||||||||
Stock
issued for prepaid refinery services and non compete intangible asset -
related party
|
$ | - | $ | 1,230,000 | ||||
Derivative
liability arising from convertible note payable debt
discount
|
$ | 69,429 | $ | - | ||||
Conversion
of preferred stock into common stock
|
$ | 1,070 | $ | - | ||||
Satisfaction
of accounts payable with common stock
|
$ | 128,938 | $ | - | ||||
Accrual
of dividends on series B preferred stock
|
$ | 7,336 | $ | - | ||||
Common
shares issued in connection with repricing
|
$ | 326 | $ | - | ||||
Related
party accounts payable converted into private placement
shares
|
$ | 50,000 | $ | - | ||||
Conversion
of media line of credit to common stock
|
$ | 500,000 | $ | - | ||||
Conversion
of series B preferred stock and accrued dividends to common
stock
|
$ | 257,336 | $ | - | ||||
Reclassification
of derivative liability from payment of convertible note
payable
|
$ | 124,827 | $ | - |
|
a)
|
The
economic characteristics and risks of the embedded derivative instrument
are not clearly and closely related to the economic characteristics and
risks of the host contract,
|
|
b)
|
The
hybrid instrument that embodies both the embedded derivative instrument
and the host contract is not remeasured at fair value under otherwise
applicable GAAP with changes in fair value reported in earnings as they
occur, and
|
|
c)
|
A
separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument subject to certain
requirements (except for when the host instrument is deemed to be
conventional).
|
|
a)
|
Equity
if they (i) require physical settlement or net-share settlement, or
(ii) gives us a choice of net-cash settlement or settlement in our
own shares (physical settlement or net-share settlement), or
as
|
|
b)
|
Assets
or liabilities if they (i) require net-cash settlement (including a
requirement to net cash settle the contract if an event occurs and if that
event is outside our control), or (ii) give the counterparty a choice of
net-cash settlement or settlement in shares (physical settlement or
net-share settlement).
|
For the Year Ended
December 31, 2009
|
For the Period from
February 14, 2008
(inception) to
December 31, 2008
|
|||||||
Convertible
Preferred Stock
|
3,400,000 | 1,410,000 | ||||||
Common
Stock Purchase Warrants
|
17,816,670 | 8,000,000 | ||||||
Stock
Options – Vested
|
442,270 | — | ||||||
21,658,940 | 9,410,000 |
Level 1:
|
Quoted
prices in active markets for identical assets or liabilities. An active
market for an asset or liability is a market in which transactions for the
asset or liability occur with sufficient frequency and volume to provide
pricing information on an ongoing
basis.
|
Level 2:
|
Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs
include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are
not active.
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants
would use in pricing the asset or
liability.
|
Level 1:
Quoted Prices
in Active
Markets for
Identical
Assets
|
Level 2:
Quoted Prices
in Inactive
Markets for
Identical
Assets
|
Level 3:
Significant
Unobservable
Inputs
|
Total at
December 31, 2009
|
Total
Impairment
For the Year Ended
December 31, 2009
|
||||||||||||||||
Goodwill
|
$ | -0- | $ | 11,142,273 | $ | -0- | $ | 11,142,273 | $ | -0- | ||||||||||
Total
|
$ | -0- | $ | 11,142,273 | $ | -0- | $ | 11,142,273 | $ | -0- |
Consideration
transferred at fair value:
|
||||
Common
stock
|
$ | 10,500,000 | ||
Net
liabilities assumed:
|
||||
Current
liabilities
|
(642,273 | ) | ||
Goodwill
– at fair value
|
$ | 11,142,273 |
For the
Year Ended
December 31, 2009
|
For the
Year Ended
December 31, 2008
|
|||||||
Revenues
|
$
|
31,730,595
|
$
|
2,722,369
|
||||
Net
Loss
|
$
|
(4,764,953)
|
$
|
(3,647,704)
|
||||
Net
Loss per
Common
Share - Basic and Diluted
|
|
$
|
(0.03)
|
$
|
(0.03)
|
|||
Weighted
Average Common Shares Outstanding - Basic and
Diluted
|
|
162,488,057
|
125,854,956
|
Balance at Balance at
December 31, 2009
|
Estimated
Useful Life
|
|||||||
Leasehold
Improvements
|
$ | 39,694 |
*
|
|||||
Security
Equipment
|
26,005 |
7years
|
||||||
Computers
|
6,024 |
3years
|
||||||
Furniture
and Fixtures
|
2,397 |
7years
|
||||||
Office
Equipment
|
3,386 |
3years
|
||||||
77,506 | ||||||||
Less:
Accumulated Depreciation
|
(1,598 | ) | ||||||
Fixed
Assets, Net
|
$ | 75,908 | ||||||
Non-Compete
|
Other
|
Total
|
||||||||||
Gross
value at December 31, 2008
|
|
$
|
291,865
|
|
$
|
70,000
|
|
$
|
361,865
|
|||
Accumulated
amortization at December 31, 2008
|
|
(34,051
|
)
|
(4,833
|
)
|
(38,884
|
)
|
|||||
Net
value at December 31, 2008
|
|
$
|
257,814
|
$
|
65,167
|
$
|
322,981
|
|||||
Gross
value at December 31, 2009
|
|
$
|
291,865
|
$
|
74,207
|
$
|
366,072
|
|||||
Accumulated
amortization at December 31, 2009
|
|
(92,410
|
)
|
(15,039
|
)
|
(107,449
|
)
|
|||||
Less:
Impairment charge
|
|
—
|
(48,500
|
)
|
(48,500
|
)
|
||||||
Net
value at December 31, 2009
|
|
$
|
199,455
|
$
|
10,668
|
$
|
210,123
|
Future
Amortization
Expense
|
||||
2010
|
$ | 64,359 | ||
2011
|
62,588 | |||
2012
|
58,854 | |||
2013
|
24,322 | |||
Total
|
$ | 210,123 |
|
(a)
|
The
number of shares of common stock beneficially owned by Whalehaven and its
affiliates on a conversion date, repayment date, the date notice of
redemption is given, or the date notice of mandatory conversion is given,
as the case may be;
|
|
(b)
|
Any
common stock issuable in connection with the unconverted portion of the
Convertible Note; and
|
|
(c)
|
The
number of shares of common stock issuable upon the conversion or repayment
of the Convertible Note with respect to which the determination of this
provision is being made, would result in beneficial ownership by
Whalehaven and its affiliates of more than 4.99% of the outstanding shares
of our common stock on such date.
|
Expected
dividends
|
0 | % | ||
Expected
volatility
|
133.72 | % | ||
Expected
term – embedded conversion option
|
0.24 years
|
|||
Risk
free interest rate
|
0.26 | % |
Expected
dividends
|
0 | % | ||
Expected
volatility
|
151.16 | % | ||
Expected
term – embedded conversion option
|
0.17 years
|
|||
Risk
free interest rate
|
0.21 | % |
|
(a)
|
We
issued 1,000,000 warrants to Whalehaven to purchase our common stock,
exercisable at $0.01 per share, with cashless exercise provisions. These
warrants had a five-year life and vested only if the Convertible Note had
not been repaid by September 4,
2009;
|
|
(b)
|
The
principal value of the Convertible Note would be increased to $275,000 if
it was not repaid by September 4,
2009;
|
|
(c)
|
We
agreed to repay the Convertible Note in full upon raising $500,000 through
the sale of equity securities.
|
Expected
dividends
|
0 | % | ||
Expected
volatility
|
154.10 | % | ||
Expected
term – embedded conversion option
|
5 years
|
|||
Risk
free interest rate
|
1.9 | % | ||
Expected
forfeitures
|
100 | % |
Expected
dividends
|
0 | % | ||
Expected
volatility
|
153.55 | % | ||
Expected
term – embedded conversion option
|
1.14 years
|
|||
Risk
free interest rate
|
0.60 | % |
Expected
dividends
|
0 | % | ||
Expected
volatility
|
162.57 | |||
Expected
term – embedded conversion option
|
0.92 years
|
|||
Risk
free interest rate
|
0.60 | % |
Expected
dividends
|
0 | % | ||
Expected
volatility
|
171.28 | % | ||
Expected
term – embedded conversion option
|
0.75 years
|
|||
Risk
free interest rate
|
0.43 | % |
For the Year Ending December 31,
|
Total
|
|||
2010
|
$ | 241,963 | ||
2011
|
274,030 | |||
2012
|
200,019 | |||
2013
|
81,312 | |||
2014
|
68,641 | |||
Total
|
$ | 865,965 |
|
·
|
Currency
fluctuations, devaluations, conversion and expropriation
restrictions;
|
|
·
|
Confiscatory
taxation or other adverse tax
policies;
|
|
·
|
Political
and economic instability;
|
|
·
|
Inflation;
|
|
·
|
Trade
restrictions and economic embargoes imposed by the United States and other
countries;
|
|
·
|
Expropriation
and nationalization of our assets or of our customers in that
country;
|
|
·
|
Governmental
activities that limit or disrupt markets, payments, or limit the movement
of funds;
|
|
·
|
Governmental
activities that may result in the deprivation of contract
rights;
|
|
·
|
Civil
unrest, acts of terrorism, force majeure, war or other armed conflict;
and
|
|
·
|
Natural
disasters including those related to earthquakes, hurricanes, tsunamis and
flooding.
|
|
(a)
|
eighteen
months base salary at the then current rate, to be paid from the date of
termination until paid in full in accordance with our usual
practices;
|
|
(b)
|
Any
accrued benefits under any employee benefit plan in effect at the time of
termination; and
|
|
(c)
|
Payment,
on a prorated basis, of any bonus or other payments earned in connection
with any bonus plan to which Mr. Feirstein was a participant as of
the date of termination.
|
|
(a)
|
eighteen
months base salary at the then current rate, to be paid from the date of
termination until paid in full in accordance with our usual
practices;
|
|
(b)
|
Any
accrued benefits under any employee benefit plan in effect at the time of
termination; and
|
|
(c)
|
Payment,
on a prorated basis, of any bonus or other payments earned in connection
with any bonus plan to which Mr. Koyuncu was a participant as of the
date of termination.
|
|
(a)
|
eighteen
months base salary at the then current rate, to be paid from the date of
termination until paid in full in accordance with our usual
practices;
|
|
(b)
|
Any
accrued benefits under any employee benefit plan in effect at the time of
termination; and
|
|
(c)
|
Payment,
on a prorated basis, of any bonus or other payments earned in connection
with any bonus plan to which Mr. Brauser was a participant as of the
date of termination.
|
|
·
|
To
pay $32,500 per month for a period of six months for the consulting
services of Mr. Oretsky to assist us with our continued international
expansion,
|
|
·
|
To
pay $50,000 over a three-month period as consideration for a covenant
not-to-compete for a 21 month
period,
|
|
·
|
To
pay $46,667 over a three month period representing severance,
and
|
|
·
|
To
immediately vest Mr. Oretsky’s options to purchase 555,556 shares of our
common stock (such options shall remain exercisable through February 1,
2011).
|
250,000 shares
|
June 30,
2009
|
|
250,000 shares
|
December 31,
2009
|
|
250,000 shares
|
March 31,
2010
|
|
250,000 shares
|
June 30,
2010
|
|
250,000 shares
|
December 31,
2010
|
|
250,000 shares
|
June 30,
2010
|
|
(a)
|
20%
of the amount they invested in the September 2008 PP;
or
|
|
(b)
|
$100,000,
|
|
(a)
|
Issue
additional shares such that the per share price paid in the
September 2008 PP would equal the per share price paid in the
February 2009 PP;
|
|
(b)
|
Exchange
the related common stock purchase warrants with an exercise price of $0.50
per share for common stock purchase warrants with an exercise price of
$0.40 per share; and
|
|
(c)
|
Issue
additional common stock purchase warrants with an exercise price of $0.40
per share such that the aggregate number of common stock purchase warrants
equals the aggregate number of shares of common stock purchased by the
investor under the September 2008
PP.
|
Expected
dividends
|
0 | % | ||
Expected
volatility
|
153.55 | % | ||
Expected
term – embedded conversion option
|
2.29
years
|
|||
Risk
free interest rate
|
0.60 | % |
Expected
dividends
|
0 | % | ||
Expected
volatility
|
153.55 | % | ||
Expected
term – embedded conversion option
|
2.29
years
|
|||
Risk
free interest rate
|
0.60 | % |
Risk-free
interest rate
|
0.37 | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
volatility
|
189.44 | % | ||
Expected
life
|
3
years
|
|||
Expected
forfeitures
|
0 | % |
Risk-free
interest rate
|
1.38 | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
volatility
|
155.99 | % | ||
Expected
life
|
3
years
|
|||
Expected
forfeitures
|
0 | % |
Warrants
|
Weighted
Average Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
|||||
Outstanding
– February 14, 2008
(inception)
|
|||||||
Granted
|
8,000,000
|
0.50
|
|||||
Exercised
|
––
|
––
|
|||||
Forfeited
|
––
|
––
|
|||||
Outstanding
– December 31, 2008
|
8,000,000
|
$
|
0.50
|
2.67
|
|||
Granted
|
22,375,003
|
0.32
|
|||||
Exercised
|
—
|
—
|
|||||
Forfeited
or Cancelled
|
(8,575,000
|
)
|
0.41
|
||||
Outstanding
– December 31, 2009
|
21,800,003
|
$
|
0.35
|
2.3
|
|||
Exercisable
– December 31, 2009
|
17,816,670
|
$
|
0..35
|
2.3
|
Risk-free
interest rate
|
1.55% - 2.82 | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
volatility
|
108% - 122.7 | % | ||
Expected
term
|
5
years
|
|||
Expected
forfeitures
|
0 | % |
Risk-free
interest rate
|
1.36 | % | ||
Expected
dividend yield
|
0 | % | ||
153.55 | % | |||
Expected
life
|
5
years
|
|||
Expected
forfeitures
|
0 | % |
Risk-free interest rate
|
2.31-2.51 | % | ||
Expected dividend yield
|
0 | % | ||
Expected volatility
|
162.60-180.87 | % | ||
Expected
life
|
5
years
|
|||
Expected
forfeitures
|
0 | % |
Risk-free
interest rate
|
2.49 | % | ||
Expected
dividend yield
|
0 | % | ||
Expected
volatility
|
190.48 | % | ||
Expected
life
|
5
years
|
|||
Expected
forfeitures
|
0 | % |
Number of
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Life
(in Years)
|
Aggregate
Intrinsic Value
|
|||||||||||||
Outstanding
– February 14, 2008 (inception)
|
––
|
––
|
||||||||||||||
Granted
|
1,073,134 | $ | 0.48 | |||||||||||||
Exercised
|
–– | $ | –– | |||||||||||||
Forfeited
|
–– | $ | –– | |||||||||||||
Balance
at December 31, 2008
|
1,073,134 | $ | 0.48 | 4.8 | — | |||||||||||
Granted
|
12,392,700 | 0.28 | ||||||||||||||
Forfeited
or Cancelled
|
(250,000 | ) | 0.30 | |||||||||||||
Balance
at December 31, 2009
|
13,215,834 | $ | 0.45 | 4.8 | $ | — | ||||||||||
Exercisable
at December 31, 2009
|
483,937 | $ | 0.40 | 4.0 | $ | — |
Number of Options
|
Weighted Average
Grant Date
Fair Value
|
|||||
Outstanding
– February 14, 2008 (inception)
|
—
|
—
|
||||
Granted
|
1,073,134
|
0.45
|
||||
Vested
|
(200,000
|
) |
0.48
|
|||
Cancelled
or Forfeited
|
—
|
—
|
||||
Outstanding
– December 31,
2008
|
873,134
|
$
|
0.44
|
|||
Granted
|
12,392,700
|
$
|
0.27
|
|||
Vested
|
(283,937
|
)
|
$
|
0.35
|
||
Cancelled
or Forfeited
|
(250,000
|
)
|
$
|
0.52
|
||
Outstanding
– December 31, 2009
|
12,731,897
|
$
|
0.28
|
Year ended December 31,
|
||||||||
|
2009
|
2008
|
||||||
Domestic
loss
|
$ | (4,142,930 | ) | $ | (3,059,608 | ) | ||
Foreign
income (loss)
|
87,801 | (150,000 | ) | |||||
Consolidated
Net loss
|
$ | (4,055,129 | ) | $ | (3,209,608 | ) |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Non-current
deferred tax assets:
|
||||||||
Tax
loss carryover
|
$ | 1,483,000 | $ | 748,000 | ||||
Valuation
allowance
|
(1,483,000 | ) | (748,000 | ) | ||||
Net
deferred tax assets
|
$ | - | $ | - |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Expected
tax expense (benefit) - federal
|
(1,303,000 | ) | (1,031,000 | ) | ||||
Expected
tax expense (benefit) - state
|
(224,000 | ) | (176,000 | ) | ||||
Registration
rights penalty
|
82,000 | — | ||||||
Loss
on settlement of debt
|
207,000 | — | ||||||
Change
in fair value of derivative liability - embedded conversion
feature
|
21,000 | — | ||||||
Warrant
expense arising from repricing of investor warrants
|
22,000 | — | ||||||
Gain
on settlement of accounts payable
|
(8,000 | ) | — | |||||
Stock
based compensation
|
341,000 | 404,000 | ||||||
Amortization
of debt discount
|
26,000 | — | ||||||
Amortization
of stock issued for prepaid asset - related party
|
71,000 | 54,000 | ||||||
Meals
and entertainment
|
30,000 | 1,000 |
December 31,
|
||||||||
2009
|
2008
|
|||||||
Change
in Valuation Allowance
|
735,000 | 748,000 | ||||||
Actual
tax expense (benefit)
|
$ | - | $ | - |
United States
|
Canada
|
Europe
|
Consolidated
|
|||||||||||||
Revenue
for the year ended December 31, 2009
|
$ | 9,959,648 | $ | 5,749,353 | $ | 13,289,981 | $ | 28,998,982 | ||||||||
Total
Assets at December 31, 2009
|
13,143,253 | 558,884 | 1,385,300 | 15,087,437 | ||||||||||||
Revenue
for the period from February 14, 2008 (Inception) to December 31,
2008
|
$ | 1,561,444 | — | — | $ | 1,561,444 | ||||||||||
Total
Assets at December 31, 2008
|
2,270,063 | — | — | 2,270,063 |
SEC
registration fees
|
$ | 113 | ||
Printing
expenses
|
$ | 1,000 | ||
Accounting
fees and expenses
|
$ | 3,000 | ||
Legal
fees and expenses
|
$ | 30,000 | ||
Blue
sky fees
|
$ | 1,000 | ||
Miscellaneous
|
$ | 500 | ||
Total
|
$ | 35,613 |
Name
or Class
of
Investor
|
Date
Sold
|
No. of
Securities
|
Consideration
|
|||
Vendor
(1)
|
May
26, 2010
|
629,396
shares of common stock
|
Settlement
of outstanding payable
|
|||
Vendor
(1)
|
May
26, 2010
|
611,079
shares of common stock
|
Settlement
of outstanding payable
|
|||
Vendor
(1)
|
|
June
15, 2010
|
|
1,818,182
shares of common stock
|
|
Settlement
of outstanding
payable
|
Exhibit
|
Incorporated by Reference
|
Filed or
Furnished
|
||||||||
No.
|
Exhibit Description
|
Form
|
Date
|
Number
|
Herewith
|
|||||
2.1
|
Share
Exchange Agreement dated July 23, 2008 **
|
8-K
|
7/29/08
|
2.1
|
||||||
2.2
|
Share
Exchange Agreement dated May 5, 2009 **
|
10-Q
|
8/19/09
|
2.2
|
||||||
3.1
|
Certificate
of Incorporation
|
10-QSB
|
6/7/06
|
3.I
|
||||||
3.2
|
Certificate
of Amendment – Increase in Capital
|
10-QSB
|
6/7/06
|
3.1
|
||||||
3.3
|
Certificate
of Amendment – Effective Profitable Software
|
10-QSB
|
6/7/06
|
3.1
|
||||||
3.4
|
Certificate
of Amendment – Money4Gold Holdings, Inc.
|
8-K
|
7/29/08
|
3.1
|
||||||
3.5
|
Certificate
of Amendment – Increase in Capital
|
10-K
|
3/31/10
|
3.5
|
||||||
3.6
|
Certificate
of Correction
|
10-Q
|
11/19/08
|
3.2
|
||||||
3.7
|
Certificate
of Amendment – Increase in Capital
|
10-Q
|
8/19/09
|
3.3
|
||||||
3.8
|
Certificate
of Amendment – Upstream Worldwide, Inc.
|
Filed
|
||||||||
3.9
|
Amended
and Restated Bylaws
|
10-Q
|
5/20/09
|
3.3
|
||||||
5.1
|
Legal
Opinion of Harris Cramer LLP
|
Filed
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10.1
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Agreement
with Republic Metals Corporation
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10-K
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4/15/09
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10.1
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10.2
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Services
Agreement with LeadCreations.com, LLC
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10-K
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4/15/09
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10.5
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10.3
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Letter
Agreement with LeadCreations.com, LLC
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10-Q
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11/16/09
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10.3
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10.4
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Employment
Agreement with Douglas Feirstein *
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10-Q
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8/19/09
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10.4
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10.5
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Amendment
to Douglas Feirstein Employment Agreement dated December 1,
2009*
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10-K
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3/31/10
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10.5
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10.6
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Employment
Agreement with Daniel Brauser *
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8-K
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7/29/08
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10.2
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10.7
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Amendment
to Daniel Brauser Employment Agreement dated May 5, 2009*
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10-Q
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8/19/09
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10.7
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10.8
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Amendment
to Daniel Brauser Employment Agreement dated December 1,
2009*
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10-K
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3/31/10
|
10.8
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10.9
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Employment
Agreement with Hakan Koyuncu *
|
8-K
|
7/29/08
|
10.1
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||||||
10.10
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Amendment
to Hakan Koyuncu Employment Agreement dated May 5, 2009*
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10-Q
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8/19/09
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10.6
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10.11
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Amendment
to Hakan Koyuncu Employment Agreement dated December 1, 2009
*
|
10-K
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3/31/10
|
10.11
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||||||
10.12
|
Employment
Agreement with Todd Oretsky *
|
10-Q
|
8/19/09
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10.5
|
||||||
10.13
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Amendment
to Todd Oretsky Employment Agreement dated December 1, 2009
*
|
10-K
|
3/31/10
|
10.13
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||||||
10.14
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Oretsky
Severance, Consulting and Release Agreement*
|
10-K
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3/31/10
|
10.14
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||||||
10.15
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2008
Equity Incentive Plan*
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10-Q
|
5/20/09
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4.1
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10.16
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Amendment to the 2008 Equity Incentive Plan |
10-Q
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5/14/10
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10.2
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10.17
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Stockholders
Agreement
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10-Q
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8/19/09
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10.3
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10.18
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Accounts
Payable Credit Agreement – LeadCreations
|
10-K
|
3/31/10
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10.20
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||||||
10.19
|
Form
of Securities Purchase Agreement – 2010 Private Placement
|
10-Q
|
5/14/10
|
10.3
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||||||
10.20
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Form
of Registration Rights Agreement – 2010 Private Placement
|
10-Q
|
5/14/10
|
10.4
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21.1
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List
of Subsidiaries
|
10-K
|
3/31/10
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21.1
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23.1
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Consent
of Berman & Company, P.A.
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Filed
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23.2
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Consent
of Harris Cramer LLP
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Filed***
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(i)
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the
representations and warranties contained in any agreements filed with this
prospectus were made for the purposes of allocating contractual risk
between the parties and not as a means of establishing
facts;
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(ii)
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the
agreement may have different standards of materiality than standards of
materiality under applicable securities
laws;
|
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(iii)
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the
representations are qualified by a confidential disclosure schedule that
contains nonpublic information that is not material under applicable
securities laws;
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(iv)
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facts
may have changed since the date of the agreements;
and
|
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(v)
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only
parties to the agreements and specified third-party beneficiaries have a
right to enforce the agreements.
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(i)
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To
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
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(ii)
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To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the Calculation of Registration Fee table in
the effective registration
statement.
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(iii)
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To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
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(i)
|
If
the registrant is relying on Rule
430B:
|
(ii)
|
If
the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
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(b)
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Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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(c)
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The
undersigned registrant hereby
undertakes:
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UPSTREAM
WORLDWIDE, INC.
|
||
By:
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/s/ Douglas
Feirstein
|
|
Douglas
Feirstein
|
||
Chief
Executive Officer
(Principal
Executive Officer)
|
Signatures
|
Title
|
Date
|
||
/s/ Daniel Brauser
|
||||
Daniel
Brauser
|
Chief
Financial Officer (Principal Financial Officer) and
Director
|
June
22, 2010
|
||
/s/ Michael
Brachfeld
|
||||
Michael
Brachfeld
|
Chief Accounting
Officer (Principal Accounting Officer)
|
June
22, 2010
|
||
/s/ Scott Frohman
|
||||
Scott
Frohman
|
Director
|
June
22, 2010
|
||
/s/
Douglas Feirstein
|
||||
Douglas
Feirstein
|
Director
|
June
22, 2010
|
||
/s/
Grant Fitzwilliam
|
||||
Grant
Fitzwilliam
|
Director
|
June
24, 2010
|
||
Hakan
Koyuncu
|
Director
|
/s/ Charles Pearlman
|
||||
Charles
Pearlman
|
Director
|
June
22, 2010
|
||
Jason
Rubin
|
Director
|
3.8
|
Certification
of Amendment - Upstream Worldwide,
Inc.
|
5.1
|
Legal
Opinion of Harris Cramer
LLP
|
23.1
|
Consent
of Berman & Company,
P.A.
|
23.2
|
Consent
of Harris Cramer LLP
|